It is “perfectly reasonable” for advisers and providers to question where accountability eventually lies ahead of pension freedoms which ostensibly transfer choice and responsibility to consumers, Martin Wheatley has said.
Speaking at the National Association of Pension Funds’ investment conference in Edinburgh today (11 March), the FCA chief executive acknowledged industry anxiety, particularly over potential future liability and how far providers must warn consumers against poor choices.
Ultimately, he acknowledged, some transfer of responsibility had to take place from industry to consumers, with the issue then becoming one of adequate warnings and product regulation.
Mr Wheatley cited speculation savers will “head to Las Vegas, buy fast cars or otherwise calculate how to run down their pension pots in days and months, rather than years”, and quoted figures from Saga that cruise bookings have already risen by some 8 per cent ahead of April.
“But the reality is that this is all simply part of the process that flows from the benefit of freedom. Some responsibility, by definition, has to bump across from industry to customers.
“Otherwise you simply return to difficult conversations around why policy makers should, in effect, decide how savers draw their money. So to what extent does that responsibility bump across?
“Who, ultimately, is to blame if – ten to 15 years on from now – those people regret whatever choice they’ve made, or complain they weren’t properly guided?
“And actually at that point, it becomes difficult to sensibly argue that individual consumers shouldn’t accept responsibility... will advisers and providers want to take the regulatory risk they see and so on and so forth?”
In relation to industry concerns over where their liabilities end, Mr Wheatley said this is where “policy making responsibility kicks back in for the FCA”. He said “important guidance” had already been issued on “where liability begins and ends for firms”.
During two FTAdviser retirement freedom events last month, advisers questioned the FCA on retrospective regulation and ombudsman claims which they feared might arise from advice given now in relation to pension freedoms.
In particular, advisers were concerned about clients seeking to withdraw cash to buy housing or transfer from safe DB pension schemes.
Maggie Craig, head of policy for savings, investments and distribution, said advisers should exercise “judgement” on a case-by-case basis when deciding whether to walk away from contentious cases or insistent clients.
In terms of how to ensure poor outcomes are kept to a minimum, Mr Wheatley flagged up the second line of defence risk warnings to be issued by providers and the Pension Wise guidance guarantee.
“The core challenge here of course, is successful delivery of the guidance guarantee, along with retirement risk warnings.
“Clearly some important challenges here to manage. But whether you believe in freedom of choice, public paternalism or in some combination of the two, the presence of risk is, frankly, unavoidable.”
On the risk warnings to be issued by product providers, FTAdviser revealed earlier this week that a number are planning to go beyond the base questions and risks outlined in the FCA paper on the topic, with Old Mutual in particular saying it is set to issue extensive factsheets for clients.
Speaking to FTAdviser, Adrian Walker of Old Mutual Wealth said the regulator’s guidance cited the example of ‘future funding risk’ - the fact that if a flexible access option is utilised the annual allowance will fall to £10,000 in most cases - as an area that is not mentioned in the guidance.
In its guidance the FCA said it will not provide a template of the content or format of what the ‘second line of defence’ warnings should look like, leaving it up to providers to design the wordings, although alerts can follow a templated format.
peter.walker@ft.com
