Financial Conduct Authority  

FCA concerned about pensions in economic downturn

FCA concerned about pensions in economic downturn

Pension losses were on the agenda at the regulator's board meeting in October, as the Financial Conduct Authority readied itself for a potential economic downturn. 

In minutes published on the watchdog's website last week (December 6) the FCA board discussed its primary concerns in the event of an economic downturn. 

Amongst the regulator's top five concerns was the risk consumers would crystallise pension losses, therefore leading to a permanent lower lifetime income. 

The board also warned consumers would be increasingly exposed to inappropriate investment risk should the economy take a turn for the worst. 

The FCA has been increasingly vocal in recent months about its expectations of firms and their resilience in the financial services market and at its October board meeting discussed its response should a "significant number" of firms fail in the event of an economic downturn. 

The regulator's plan of action included "proactive" communication plans to set its expectations of firms treating customers fairly and a campaign of "assertive" supervision. 

The FCA also detailed an oversight group to be set up to allow ongoing monitoring and a rapid response to issues arising in a downturn. 

There was concern at the time of the FCA board meeting that the UK could be entering a recession in the third quarter of the year after experiencing negative growth of -0.2 per cent in Q2 but data published in early November showed the economy grew 0.3 per cent in the quarter.

This meant the UK avoided a potential recession but when compared with the same quarter a year ago, UK GDP only grew by 1 per cent — the slowest year-on-year growth since Q1 2010.

According to the ONS the service and construction sectors provided positive contributions while output in the production sector was flat.

Private consumption, government consumption and net trade also contributed positively to GDP growth.

rachel.mortimer@ft.com 

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