FCA chief: everybody has a role to play in achieving good outcomes

Speaking at the National Association of Pension Funds’ annual investment conference yesterday, Martin Wheatley, chief executive of the FCA, said the industry, regulators and consumers shared responsibility for achieving good retirement incomes in the face of massive pensions policy reform and social change.

“On the one hand here you have customers entering retirement today with policies affected… by multiple waves of reform and change,” said Wheatley.

“So policymakers 20 years from now, particularly in countries like the US and the UK, look likely to be dealing with the effect of a world that appears to struggle to save, or make decisions based on far-off events.”

Wheatley said an increasingly mobile workforce was reducing pressure on employers to offer competitive pension plans to their employees.

This combined with increasing workforce disengagement has led to schemes that may not provide members with sufficient income in retirement.

Who, ultimately, is to blame if… those people regret whatever choice they’ve made, or complain they weren’t properly guided?

Martin Wheatley, FCA

“Clearly, the situation you have at the moment, where something like £30bn of contract and bundled trust-based assets in workplace pension schemes are estimated to be at risk of being poor value for money, is an unsustainable one,” he said.

A focus on good governance is key to overcoming this, Wheatley said, citing value for money and guidance and support for independent governance committees as crucial.

Accountability

However, employers and consumers should also consider the level of responsibility consumers should take in safeguarding their own futures.

“It is perfectly reasonable I think for firms to question where accountability lies if you end up in a situation, say, where X or Y percentage of consumers refuse to listen to any guidance or risk-warnings given,” he said.

“Who, ultimately, is to blame if… those people regret whatever choice they’ve made, or complain they weren’t properly guided?”

The issue of responsibility is especially pertinent around the topic of liberation scams, Wheatley said, as many consumers have delayed withdrawing their pots and may be drawn in by false promises of high returns, especially in the current environment.

“One of the most important [challenges] for me [is] the possibility that some customers in this first tranche to benefit from the new freedoms will be targeted by criminal enterprise,” he said. “Scams and fraud, we know, tend to proliferate at the moment of maximum uncertainty.”

He added: “For the pension industry, the upcoming switch in regime looks something akin to a Y2K moment.”