The chief executive of the Financial Conduct Authority, Nikhil Rathi, has asked whether the UK should consider using pension savings to help would-be homeowners save for a deposit.
Rathi suggested the UK could take a leaf out of the book of countries such as Australia, New Zealand, the United States, Singapore and South Africa – which all allow people to leverage their pension savings to buy a first home.
In a speech, Rathi said: “Some have suggested we consider, carefully, similar approaches in some circumstances here in the UK.
“This would rely on individuals having engaged with their pensions and saved in the first place, which speaks to my earlier points around investment culture and advice.
“And there would be trade-offs. We would need to take into account the ability of savers to replace those withdrawn funds, the impact on house prices, and whether those individuals – and the UK economy – might be better served by investment in a wider range of productive assets.”
In the speech at JP Morgan Pensions and Savings Symposium on March 28, Rathi also said the landscape for pensioners would be very different going forward with many expected to still be renting into retirement.
He added: “But ultimately, the journey to financial security must start long before retirement – with early, clear, and practical understanding of saving, borrowing, investing and risk.
“We cannot expect confident consumers to appear at 55 if we’ve not engaged them at 25.
“Improving financial capability must be a core part of the approach, and I will say more soon about how we can help tackle the impediment that poor financial education is to our country and society.”
Rathi said a priority for the pensions industry was to address the “dysfunctional relationship with risk, and build a healthier national investment culture”.
With homeownership currently declining, Rathi pointed out that the UK pension market assumes “high levels of owner-occupation”.
He cited research by the Equity Release Council which forecasts that 39 per cent of current renters believe they will still be renting in retirement.
Advice/guidance
Rathi told the symposium the regulator’s advice guidance boundary review would “trigger an advice revolution”.
He added: “Targeted support could be a ‘stepping stone’ along the support journey, not replacing holistic advice. Taking full advantage of the flexibility the outcomes-focused Consumer Duty now gives us.
“We are working closely with the Financial Ombudsman Service to address concerns that they may treat targeted support as though firms were providing personalised advice.
“That will not happen. Targeted support is distinct.”
He said targeted support alongside new pensions dashboards, which are set to be introduced over the next 18 months, could work hand in hand.
He called this work “transformative” for both consumers and the economy.
The speech came after the body launched its latest five year strategy, in which it set out it plans to take a more “flexible approach” to regulation with “less intensive” supervision for firms who are “seeking to do the right thing”.
tara.o’connor@ft.com
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