In a letter to Labour MP Angela Eagle, published June 18, Guy Opperman showed his support for a charge cap on investment pathway funds.
Mr Opperman said: “The FCA have committed to review how well these products are working in 2021 and to make a decision on whether those defaults should be capped.
“I support that approach.”
However, he warned that it is too early to impose a cap as it would be hard to determine what level the cap should be set at.
He added: “To cap now would be premature - otherwise we risk setting a cap too high which is ineffective, or too low which excessively limits choice.”
As part of its latest work on retirement the Financial Conduct Authority proposed pension providers offer their non-advised customers in decumulation a choice of default investment pathways to meet their retirement objectives.
The FCA proposed four pathways after it found many consumers were solely focused on taking tax-free cash from their pensions and were "insufficiently engaged" with deciding how to invest funds that moved into drawdown.
The pathways include an option for consumers who have no plans to touch their money in the next five years and for those who plan to use their money to set up a guaranteed income within the next five years.
The regulator also proposed an option for consumers who plan to start taking money as a long-term income within the next five years and those who plan to take out all their money within the next five years.
In February, the FCA warned that it would introduce a charge cap for investment pathways if the market doesn’t regulate itself.
Pritheeva Rasaratnam, head of pensions and funds policy at the regulator, told the Work and Pensions select committee that it would be a challenge to impose a cap from day one but the regulator had not dismissed the idea.
She said: "This a market that doesn’t exist yet, and there is a real danger if you introduced a cap at the wrong level, there could be unintended consequences.
"We want to see how the market develops, where the charges are lying, and we will do a review one year after investment pathways come in, and we will be looking very carefully at charges at that stage.
"A cap isn’t out of the question at that stage."
The FCA is planning to publish its final rules on this topic by the end of July 2019.