Outside construction of the RPC building.

Do not-so smart pension reforms mean FCA wants pensioners to be ScamSmart?

24 March 2015

Less than two weeks after Martin Wheatley's speech identifying April's 'big bang' pension reforms as "[t]he defining challenge of our time" ...

… the FCA has launched a website called 'ScamSmart' dedicated to helping retail investors identify fraudulent investment scams.  Martin Wheatley's keynote speech and the launch of the ScamSmart website indicate the level of concern in the FCA about the impact of the reforms on UK pensioners. The strength of these concerns is confirmed in today's Business Plan which includes plans for the FCA to carry out a thematic review (with, presumably, intense supervisory and enforcement work to follow) into the suitability of pensions and retail investment advice.

The defining challenge of our time

In his speech on the forthcoming reforms Martin Wheatley distanced the FCA from responsibility for April's pension reforms, emphasising their "political" origins. For Martin Wheatley, the FCA's role is merely "delivery, delivery, delivery" of these politically-motivated changes.  There is palpable apprehension about fallout from the reforms.  The speech suggests that the FCA is very uncomfortable with the shift in responsibility from industry to consumers, "an equation of responsibility that, frankly, we've never seen before" and which poses "the most significant questions faced in a generation" (original emphasis).

The FCA will no longer be in a position to protect consumers fully because "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." However, the FCA remains unwilling to shed its innate paternalism and Martin Wheatley spent the rest of the speech emphasising the role of PensionWise (which, he noted, will be regulated by HMT rather than the FCA) in offering guidance to consumers and the responsibility of firms in protecting consumers from "pension liberation scams".


The FCA's concerns about pension liberation scams are so serious that it has launched a dedicated website at scamsmart.fca.org.uk.  However, the website is little more than a warning not to accept cold calls and a portal to existing FCA resources.  These include relevant items from the FCA news archive, links to external websites to find an independent adviser and a repackaging of the under-publicised FCA Warning List with some accompanying tips on staying safe.

It would be interesting to see market research into how many advisers know of, and regularly check, the FCA's Warning Notices, let alone vulnerable retail customers receiving fraudulent and unlawful financial promotions. The reality is that the ScamSmart website will be insufficient to protect the vulnerable from investment scams. The FCA is all too aware of this and is likely considering strong enforcement action against authorised firms to reinforce the message that investment firms should think very carefully before advising their clients to exercise their new pension freedoms.

The FCA message about the 'big bang' pension reforms can perhaps be summarised as 'we didn't call for these changes, we are very worried about them and you had better be very confident in any advice to consumers recommending that they free their pensions'. While reforms present great opportunity for the investment industry, the regulatory risks for those providing pensions investment advice are about to increase. The political drive to share responsibility between consumers, firms and policy makers is positive for firms – indicating a recognition that pensioners will have to take at least some responsibility themselves for the actions they take on retirement.  But firms are not regulated by politicians and so they should proceed with caution.