Financial wellbeing goes beyond one size fits all

I recently saw an article challenging readers to ‘say how old you are, without saying it’.

The answers made me laugh: dial-up internet; landline phones; Star Wars was just Star Wars. 

At the risk of ageing myself, I remember those things.

It got me thinking about how quickly the world changes, and how different my experiences have been to my parents’.

I’m sure some of my decisions have puzzled them – just as my children’s decisions may puzzle me.

But I can’t tell them what to do. Their worlds – and experiences, choices and needs – are different to mine.

I can only guide them.

That’s the approach we’re taking at the FCA, too.

We are helping consumers navigate their financial lives in a constantly changing world where there’s no such thing as one size fits all. 

This guides our new 5-year strategy, which we are using to deepen trust, support growth, improve lives, and rebalance the inherent risks and trade-offs. 

New challenges

With change comes challenge – and we’re up against 2 big ones now.

The first is the pensions landscape.

We know some consumers are not saving enough or are accessing their savings too quickly.

Others don’t have a plan[1] for taking money out of their pot, or don’t realise there’s a choice to make. 

More than 10 million[2] people say they’re simply too busy or confused to think about it.

Pension-related decisions are as critical as they are complex.

But recent research[2] shows that over half of UK adults don’t understand enough about pensions to make these decisions.

We are working to ensure the system delivers for consumers and the economy. This includes:

• Introducing targeted support, so consumers have greater access to support that bolsters their decision making.
• Working to make pensions dashboards a reality, which will make it easier for consumers to find and understand their savings and improve retirement outcomes.

There is no silver bullet here – no quick fix to solve under-saving and under-engagement – but we are playing our part.

A home of one's own?

The other challenge at present is the declining rate of homeownership. 

I was fortunate enough to purchase my first home in my mid-thirties. Late[3], if you ask my parents’ generation – perhaps early if you ask my sons’. 

Today, more people are taking longer to buy a house. Many struggle to buy at all. 

Not because they don’t want to: 55% of non-homeowners do[4]. 

Saving for a deposit is difficult: 42% expect it to take at least 5 years.

Many people will rent through retirement. The proportion of retired consumers living in the rental sector is expected to more than double by 2041[5].

Whether renting or paying off a mortgage, retirement costs are unlikely to be met by savings alone.

In this moment of regulatory reform, we’re taking a step back and considering where a different approach may be needed.

We’ve already set out a wide-ranging set of ideas to change our mortgage lending rules, with the aim of opening the possibility of homeownership to more people.

We want to support people who rent to be able to buy a home if they want to.

We’ve clarified our requirements to ensure firms use the flexibility in our rules to support good customer outcomes.

More regulatory initiatives will follow.  

But regulation can only do so much. True reform needs commitment across the whole system. Innovation and smarter use of data also have a crucial role to play in widening access. 

At the other end of the spectrum, we are actively considering how we can support later life lending. 

Mortgage products targeted at older borrowers are becoming increasingly common, and many lenders now accept earned income up to the age of 75 in their affordability assessments.

Creating more opportunities for responsible risk-taking will also accelerate the trend. 

Looking into later life, how might households use their housing wealth to meet retirement goals, needs and potential care costs?  

Advice and support will be vital to help consumers navigate options.  

But across pensions, investments and mortgages, advice is often siloed. 

We recognise that further thought and engagement is needed, but the aim is clear: an industry supporting consumers to fully understand their options for funding later life, receiving timely and appropriate support and advice, with products that deliver positive outcomes, offering fair value.

Risk versus reward

You need to look no further than page 1 of our new 5-year strategy[6] for a really clear articulation of our focus on rebalancing risk.

Having set higher standards in financial services – as we have through the Consumer Duty – now is the time to look again at our collective attitude to risk.

We have an opportunity to reset our rulebook. Not through deregulation, but through smarter regulation. Stripping away unnecessary burdens to allow firms to innovate, grow and really deliver for their customers.

Our upcoming framework for targeted support is a good example. It’s a different balance of risk: the cost of doing nothing against the risk of doing something.

As it stands, too few invest – 61% of consumers[7] with £10,000 in investible assets hold most of it in cash.

But £1,000 deposited into a fixed-rate savings account 10 years ago would be worth about £1,300 today[8]. If it had been invested into the S&P World Index, it would have grown to nearly £3,000.

It’s crucial though that consumers who might have the appetite to invest, and want to move from cash to investing, have greater support available so that they can make informed decisions.  

Targeted support is revolutionary. We’ve worked differently, the regulatory framework is new, and we hope it will really make a difference in helping consumers navigate their financial lives. 

But it’s important to recognise that a new regulatory framework by itself will not change the UK’s broader investment culture. This needs to be the start of a national conversation, to help consumers make informed decisions and the decisions that are right for them. 

We are also looking at where other changes can be made, either to rules, or to the way that industry works, to help consumers make informed decisions.

And we support the industry’s work, including that of TISA, in reviewing risk warnings and ensuring consumers have a fair impression about investing.

Rather than use phrases like ‘capital at risk’ – which aren’t in our rules – I encourage you to be bold. 

Take advantage of the flexibility our rules allow for. Are there other ways to communicate and help consumers make informed decisions, as we expect under the Consumer Duty[9]? 

We want to work with you. Let us know if there are any other myths that need to be addressed, or busted, in order to deliver good outcomes for consumers. 

At the heart of this is an important question: Where should the balance of risk fall?

We can express a view, but regulators shouldn’t set the national risk appetite alone. This conversation must be a public one, shaped by engagement and open debate.

Which is why we are being public about the trade-offs, not just with homeownership or investing but across all our work.

That way, we can build consensus and ensure a more certain and predictable regulatory framework for the future.

However, there is no question: to bolster growth – of firms, the financial services sector and the UK economy – we need you to do more than manage risk.

We need you to take it, within the framework that the rules provide.

Preparing for the future

I have already talked about this being a moment in time for us to look at our rules and make changes, for the better.

This isn’t just about developing new regulation.

We have said that we will only make new consumer protection rules where really needed – and only if Consumer Duty isn’t enough. Our focus on how the Duty is working in practice remains. 

We have said before that the Duty is not once and done. And neither is our focus on it.

We have seen some great examples of change.

A YouGov poll at the Duty’s 2-year anniversary found an 11% increase in consumers who believe banks provide clear, understandable information – signalling greater trust and confidence in the system.

We have seen firms look to simplify their documentation, partnering with organisations such as Plain Numbers.

Some have begun to cross-check new customers against external vulnerability registers to ensure tailored support from day one. 

Some changes feel, well, human.

Like one trade association’s ‘Tell us Once’ service, which allows consumers to notify several firms of a person’s death simultaneously to ease the stress of an already difficult situation. 

I’d be remiss not to touch on insurance, which is a key component of resilience. 

We want to see a market that helps consumers, provides peace of mind and supports growth. A thriving insurance sector is good for both consumers and the economy – but our Financial Lives Survey data shows that consumer confidence is low. 

Alongside others, we are working to empower decision-making, improve trust, and ensure fair, effective service and claims handling. 

There has been real progress, including lower motor insurance costs. We set out detailed findings of the areas for further work, as well as improvements made, in a package of reports in July. But more work remains. 

We will set out next steps in response to the super-complaint lodged by Which? by year-end, including an update on the work we have been doing as announced in our July reports.

Conclusion

In the end, the only constant is change. 

With change comes choice. While we can’t see into the future, we can choose to prepare for it – even when it feels puzzling.

How?

By making sure our regulatory framework is future-proof.

And staying consistent in what we’re working toward: good outcomes for consumers, and better help for them as they navigate their financial lives. 

This work, together with the government’s financial inclusion strategy, will help us make the vision a reality.