The FCA has published its 2015 business plan
Part of the plan is to award itself a £35m increase in budget, meaning it expects to spend £482m of our money – making sure our money is well managed.
Whether this is value for money is open to question. Infact the National Audit Office is reviewing value for money at the FCA as we speak. I hope that they will come up with a definition which is rather less woolly than that found in section 5 of the document!
But whatever the financial cost of the FCA, there is certainly value in this document. There are many sections which demonstrate that the Regulator has taken on the full import of the Pension Freedoms awarded us by our generous Chancellor.
Take these comments about the Social Factors surrounding an ageing population and older consumers (as an instance).
“The pension reforms aim to increase consumer choice and encourage saving for retirement. The majority of customers have historically had minimal experience of making proactive decisions regarding retirement income and when faced with uncertainty on their life expectancy and behavioural biases, they may not make decisions that are in their best long-term interests. April 2015 will also see the continued roll-out of auto enrolment to include businesses with fewer than 50 employees, so more people will start saving for retirement.
The pace of medical advances and lifestyle changes makes it increasingly difficult for consumers to determine the most appropriate life and pension products to meet their needs, including potentially funding long term care. This is evidenced by our recent market study into the retirement income market, which found that consumers tend to consistently under-estimate longevity, as well as inflation and investment risks.
Firms may develop decumulation products or services that could highlight certain product features or the price at the expense of other important information, or be difficult to compare due to hidden costs and fees and include barriers to exiting. There is also a risk that these could result in increasingly complex products or a mix of products that require ongoing servicing and potentially higher costs, which some financial advisers may recommend in a bid to generate higher fees. It may be challenging for people with different degrees of wealth at retirement to find products that suit their needs. Those with smaller funds will likely have fewer options and it is important that consumers are not disadvantaged by this lack of choice.
We know that the annuities market is not working well for many consumers, and that the proportion and number of people with defined contribution schemes is rising, due in part to the withdrawal of defined benefit schemes and the roll-out of auto enrolment. These factors increase the potential to amplify the risks in this area as more people seek to purchase annuities or other fixed income products and rely on the income they provide for their retirement.
Recent research indicates that around two in five people in the UK are not confident in their ability to maintain a comfortable living standard in retirement, with a similar proportion not currently saving for retirement, or having no intention to do so. “
These paragraphs show a Regulator fully engaged with the key issues of those in retirement. Taken out of context you might expect these words to have been written by Age UK or the ILC.
They should give courage to those charged both with the regulation and the delivery of the aspirations of the Pension Schemes Act 2105.
The FCA’s aim to move to a more consumer- focussed regulation where products and services are considered for their capacity to meet people’s various needs is evidenced throughout this document.
The Financial Conduct Authority will be worth every penny if it can encourage a culture that sees progress in terms of making things better, not just stopping things getting worse.