Addressing the National Association of Pension Funds (NAPF) investment conference in Edinburgh on 11 March, Wheatley (pictured) said consumers will be liable for their decisions in retirement as long as the industry complies with the set out conduct rules and standards.
The regulator has stipulated providers need to signpost people to the government’s guidance service Pension Wise, as well as to regulated advisers, and need to give personalised risk warnings to people wanting to access their pension pots.
Wheatley acknowledged the industry’s “anxiety” over liability issues and how far it needs to go to warn consumers or prevent them from making choices that are against their best interests.
He said: “Certainly, under the system as it will be, there will be no ability to prevent all of the people, all of the time from making ‘sub-optimal’ decisions.
“Some savers, come 55, will invariably head to Las Vegas, buy fast cars or otherwise calculate how to run down their pension pots in days and months, rather than years.
“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.”
He suggested the regulator’s protections and support, including a charge cap on auto-enrolment default funds and industry risk warnings, will mean savers “will be in a position to make what are, clearly, life-influencing decisions on future income, with some confidence that the structure behind their choice is sound”.
The main challenge will be the successful delivery of the guidance guarantee along with retirement risk warnings by the industry, he said.
The FCA will not regulate the provision of Pension Wise; it will set the standards, monitor compliance and collect the levy to fund its provision.
“Come April 6, what you will have is a structure under which customers will, on seeking access to their pensions, immediately be recommended to seek guidance – via Pension Wise or financial advice.
“After which, when a decision has been made, the system will effectively have a further check, if necessary triggering a personalized risk warning. Allowing a final opportunity for people to assess the wisdom of their choice.
“Effectively then, what we’re describing here is a division of responsibility between consumers, firms and policy makers that is a long way from today’s annuity-based system.”
