Individuals with risky or high cost assets will be hit worse than others in the event of a recession, the chairman of the Financial Conduct Authority has warned.
In a speech at the Gleneagles Pensions and Savings Symposium on Friday (September 27), Charles Randell stressed the regulator would have to work with other bodies to ensure that savers would not suffer from a loss in investments if a recession were to hit in the coming years.
He claimed that in a recession, if asset prices fell, those who have chosen to exercise their pension freedoms and decide how to invest their pension assets and when to draw them may be shocked to see the value of their assets go down.
Due to this it is likely that some savers would sell their investments at the bottom of the market, and would need extra guidance from the FCA and other public bodies in how to act in their long-term best interests, according to Mr Randell.
He said the FCA had to continue to work with the Pensions Regulator and the Money and Pensions Service to ensure that savers get the right advice and guidance and to quickly scupper pensions scams and inappropriate advice before a downturn scenario happens.
Mr Randell said: “The FCA needs to consider the support which consumers would need if a recession led to falls in the value of their investments, pressure to access pension savings for everyday living expenses and bigger gaps in new retirement saving.
“For most individual savers, spreading risk and keeping costs down are the right way to invest, and unlisted and illiquid investments like these should have little or no place in their savings plans. They are more likely to be badly affected in a recession.
“And reducing costs will become even more important as people’s savings reduce.
“So we must maintain our focus on ensuring that better value, well diversified investment products are available and signposted, both in the accumulation and decumulation phase of people’s retirement plans.
“And we must continue to work with government on ensuring that savers don’t invest money they can’t afford to lose in unlisted, illiquid and high cost investments.”
Earlier this month (September 4), Mr Randell said the FCA is poised to restrict the sale of high risk assets but warned banning unregulated products altogether was "not quite so simple".
Today the regulator announced it was tightening the rules for non-Ucits open-ended funds in a bid to protect investors.
This came after he conceded there was too much confusion in the market about which financial products were regulated and which were not.
Mr Randell's latest warning came as he urged that the next recession was on its way.
He said: "No one can predict with certainty when the next recession is coming, but we know there will be another one at some stage.
