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FCA policy chief: We can’t force people to save

FCA policy director David Geale

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.”



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Robert Milligan 20th April 2018 at 11:38 am

    Absolutely Correct,,, it is fundamentally “Not” the regulator nor in-deed the Governments remit to force it, or make it mandatory for people to use the Tax breaks open to them through-out their working lives. Its the individual’s own aspirations which should be the grounds upon which, (if necessary utilising the help of an IFA) to set aside assets which can provide the income in retirement, whether you use Tax incentives upfront or fund for tax free income post retirement is bespoke to one’s own financial situation. We need to stop the Product Providers pontificating on the Tax incentives paid to them directly from HMRC to fund their own employed remuneration, Stop the nanny state interfering with financial planning and set a date in the future from which no State benefits will be paid. Then we would see, responsible financial “Set A Side” from an individuals earnings to have a family, buy a home and save for an happy retirement.

    • You have a right to your opinion but I respectfully disagree entirely with your idea to abolish the welfare state. People are not always in a position to fend for themselves

  2. There’ll be more documentation for them to consider though. Of that we can be fairly certain.

  3. This all rather misses the elephant in the room.

    Before touching on the big grey thing, it is the Government’s role to force people to save, whether it’s their own money or someone else’s (employers mainly) and this is what they do.

    However, it IS the regulator’s role to make the environment for saving as optimal as possible. How well does it do?

    Not well I’m afraid. Two reasons. Firstly, regulators act under the false premise that creating more rules modifies the behaviour of bad faith actors. Secondly, regulation has created a great deal of complexity whilst at the same time managing to create uncertainty.

    The result is increased cost and reduced availability of advice by placing unnecessary burdens on advisers acting in good faith. At the same time it has singularly failed to pick up on, and address in a timely manner, the big ticket items such PPI, DB transfers, etc.

    Curiously it’s much easier to get a loan or credit card than to save. The latter is much harder and much more expensive. This works fine for advisers and richer clients, not so well for the masses.

    None of this is deliberate, it’s all done with the best of intentions. It’s a grand idea for everyone to be driving around in BMWs, Mercedes and Jaguars. It’s another thing to ban lesser vehicles, pricing people out of the market, and then blaming the car companies.

    The answer is quite simple but politically unacceptable so the status quo is likely to remain. However, the current environment is great for advisers so I suggest everyone keeps quiet, picks the clients they want, charges what they want, and makes a jolly good living. Worrying about saving is not the job of advisers – when the regulator wants to make it easier and worthwhile to help the wider public I have no doubt we’ll all respond positively…

    • It is indeed considerably easier to run up huge unsecured debts that enable the financially feckless to buy stuff they don’t really need than it is to obtain a secured loan such as a mortgage.

      I knew a guy with virtually no assets beyond the clothes on his back to accumulate a credit card debt of £75,000 that he had no prospect of ever repaying. When it became apparent that he couldn’t even service that amount of debt, he just shrugged his shoulders and went bankrupt.

      This ever-worsening state of affairs could be addressed were the powers that be to limit unsecured borrowing to a (low) multiple of nett monthly income. But the political will just isn’t there, presumably because of the brake that such a measure would impose on retail spending.

      Whether such a move falls within the purview of government or the FCA I have no idea, though I expect that if the latter were to raise it with the former, it would be told in no uncertain terms to forget the idea and carry on doing what it does best, namely creating ever more rules (despite Andrew Bailey having admitted that such a strategy doesn’t work) and complexity with which to regulate the entire FS community ~ the honest majority on the same basis as the dishonest minority ~ according to the lowest common denominator. The concept of proportionate and targetted regulation never gets a look in. Hence, the provision of financial advice can never be affordable for those of modest means. Such people just don’t understand why this particular commodity costs so much more than what they think it ought to, so they stay away.

  4. You have a right to your opinion but I respectfully disagree entirely with your idea to abolish the welfare state. People are not always in a position to fend for themselves

  5. “We cant force people to save” …….
    Just think on those words for a few seconds

    No David you can’t, and you are dead right

    But want you do, do is force an industry through a very compact sausage machine, of rules and regulations that make it nigh on impossible for us to “advise” (not force) people to save, cost effectively, en-mass, and seamlessly….

    David can I suggest you turn that telescope around as always you are looking through the wrong end !

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