The FCA’s policy director has said that the regulator will not “force individuals to save their own money” as it lines up a new joint pensions strategy with The Pensions Regulator.
Speaking at a seminar outlining the FCA’s approach to the new strategy, for which it is currently seeking industry feedback, David Geale said that the regulator is unlikely to ask for sweeping new powers or intervene heavily in the pension arena, acknowledging that some consumers cannot be prevented from making bad decisions.
In a video of the speech released by the FCA yesterday, Geale says: “We cannot remove all risk of harm to consumers. This isn’t a perfect world. Macroeconomic conditions will affect investment performance, and that will affect people’s income in retirement. Some consumers will continue to prioritise cash today rather than saving for tomorrow and longer-term security.
“We need to recognise that some risk in pensions is actually a good thing if you want to try to achieve the returns that may be possible. When we look at things like investment risk, it may be just as risky to have no investment risk.
“Our final strategy will not necessarily contain a big list of new interventions…We may also not be able to deliver what you want us to deliver, it may not be within our power to do everything you would like us to do.
“As regulators we cannot force individuals to save more of their own money…but we can ensure they understand the implications of what they do save and what they don’t save.”
Geale added that while it was still “early days” on the effect of the freedoms, FCA stats had shown significant increases in drawdown sales and individuals opting to take cash payments out of their pension.
However, he said that hybrid products had not come onto the market as rapidly as the FCA predicted.
“With our competition hat on, we have yet to see the full range of innovation we may have expected in terms of product development. The innovation we have seen has been around tools to help people, which is a good thing, but perhaps we were expecting a little bit more around product as well, thinking about combinations of flexibility and guarantees for mass market consumers.”