On the go: Dealing with Brexit is the Financial Conduct Authority’s overarching concern, its business plan for 2019-20 reveals, but pensions are still high on its agenda.
The plan highlights continuing problems, including the fact that consumers are often unable to decide how to use their retirement savings, while younger people face challenges in building up their savings.
“Demographic changes, scams and poor pension transfer advice also present challenges to consumers, regulators and the sector,” the plan notes.
Work in all these areas is ongoing, including the pensions dashboard and Retirement Outcomes Review. The FCA is also looking for better outcomes on defined benefit transfers.
It said that Brexit will no doubt continue to place considerable demands on the watchdog and on companies, but added that its approach "will always focus on delivering our statutory objectives".
Tom McPhail, head of policy at Hargreaves Lansdown, said: “Much of the FCA’s regulatory agenda on pensions looks like business as usual, with no surprises or new policy announcements; everything set out in their business plan for the retirement market has already been flagged up elsewhere.”
But he added: “We are seeing the FCA consulting on a significant extension to the remit of independent governance committees. The overall impression is of an increasingly confident regulator willing to set its own agenda to shape the activities of the financial services market in a changing world.”
Mr McPhail noted that, with regard to the Retirement Outcomes Review, the retirement pathways address an important consumer need.
“However, we worry the proposed remedies may not achieve the outcomes the FCA intends. They may perpetuate customer disengagement and paper over the income withdrawal risks, leaving investors potentially exposed to as much or even more risk than if the pathways hadn’t been introduced,” he added.
Mr McPhail sees risk in the extension of the IGC remit to encompass drawdown, which he said “is a significant evolution in the governance of consumers’ relationship with product providers. Once you’ve crossed the line beyond using IGCs purely for auto-enrolment, into the realm of what are at least nominally elective purchases, where does that stop?”
With drawdown now a more popular choice than buying annuities, and hundreds of thousands of consumers often charged complex management fees, the area is ripe for reform.
