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Pension competition and financial crime: What are the key risks facing the FCA this year?

The FCA has listed a lack of competitive pressure in the pensions market, creaking IT infrastructure and the “significant threat” of financial crime as key risks facing the regulator over the next 12 months.

The FCA’s business plan for 2015/16, published this morning, lays out the major potential challenges it could be required to deal with between now and April 2016.

While the Government has launched retirement guidance service Pension Wise to provide retirees with information about their options, the FCA remains concerned the increased complexity of the post-April world could reduce competitive tensions in the market.

It says: “[Pension Wise] will not give advice on products or providers, so there will be a need for high-quality financial advice and guidance to be available from a range of sources, including face-to-face and online sources, which consumers may turn to as more options become available to them. 

“There is a further risk that, without appropriate information and guidance to empower consumers, greater choice and the offering of more complex products in the pensions market will reduce consumers’ confidence and appetite to shop around and so weaken competitive pressure on providers to offer good value in this market, as highlighted in our market study on retirement income.”

The regulator also acknowledges there is an “increased risk of scams at the point of liberalisation”.

It adds: “Much of our work in this area in the short-term will focus on those vulnerable consumer groups of pensionable age, due to the particular risks this group may face in coming years.”

On technology, the FCA warns a failure to invest and maintain IT systems presents a risk to consumers.

It says: “A significant amount of ongoing technological investment is required to enter or continue being present in a market. The complexity and cost of such systems encourages firms to modify existing systems to deliver new functionality rather than replace them.

“As a consequence, systems may become increasingly complex, less resilient and potentially less secure.

“This gives rise to a number of risks, for example, a failure in a firm’s IT systems can significantly harm consumers.  Outages can lead to consumers being unable to complete transactions, incurring fees on late payments and having a domino effect on transaction counterparties.”

The FCA also raises concerns about the risks posed by financial crime to the UK financial system.

It says: “We will maintain our focus on fraud that affects consumers.  Firms appear to have stronger mechanisms to identify consumer fraud, therefore we consider that more regulatory resources will be needed to improve money laundering, bribery and corruption.”

Other key risks identified by the regulator include firms with large back-books acting against consumers’ best interests, poor culture and practice in credit affordability assessments, and unfair contract terms.

The FCA will also continue to “monitor closely” potential conduct risks emerging from house price growth.

You can read the FCA’s business plan in full here.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Eh? Gamekeeper turned poacher?

    FCA: “Firms appear to have stronger mechanisms to identify consumer fraud, therefore we consider that more regulatory resources will be needed to improve money laundering, bribery and corruption.”

  2. I have rarely read such a meaningless load of tosh. Ask any decent set of 6th Form students, with out any knowledge of the industry, and they would probably have come up with the same load of jibber jabber outlines above. After about 30 years of regulation one would have expected a rather more pointed analysis. Of course there is no real competition in the financial market. This has been apparent for at least 20 years – this is why so many people are piling into the industry in order to make mountains of cash.
    And the comment on financial crime almost made my ribs ache with laughter. They can only ever see it when it is stuffed under their noses. Why they get paid so much is a total mystery.

  3. “What’s the biggest risk facing the FCA this year” ?

    I will tell you in in one word Mr Wheatley !

    Anarchy !!

    If the Tooth Fairy grants my wish from last night, the whole of the financial services will, with one voice tell you and yours to get stuffed with a massive vote of no confidence as you are all, not fit for purpose (MAS, FOS, & FSCS included)

  4. A for April or A for anarchy. Ether way, that is what “Pension Freeedoms” are looking like to me.

  5. DH

    You’re one of the ever increasing number who have worked it out or have known all along – Regulation, Wheatley and his mates – its all a big façade !

    Broke record – The Emperor’s New Clothes and all that !

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