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Britain’s financial watchdog will encourage retail investors to take more risk with their savings to tackle the challenge of an ageing population as a key part of a new five-year strategy it will present this week.
Ashley Alder, chair of the Financial Conduct Authority, told the Financial Times its new plan is built around helping consumers to make higher returns from their savings and increasing trust in financial markets by clamping down on fraud.
“One thing we have focused on a great deal in constructing a strategy is the demographic challenge . . . Provision for later life [is] a large part of it,” Alder said in an interview a few days before launching the new strategy on Tuesday.
Alder also threw his support behind FCA chief executive Nikhil Rathi, saying “he is the right person to move us forward”. Rathi’s five-year term ends in September and there has been speculation over whether he might leave.
The FCA, which regulates financial services firms, protects consumers and stimulates competition, has come under pressure from Sir Keir Starmer’s government to ease the burden of red tape and encourage more risk-taking.
Alder said the FCA would support the government’s drive to make regulators more growth-focused by opening fewer, more targeted investigations, using artificial intelligence to spot wrongdoing and being more selective in the data it requests from financial firms.
The UK’s ageing population — the number of people of pensionable age is expected to rise 14 per cent by 2032 — puts the spotlight on the “ability of people to have a decent income in later life”, Alder said.
To address this worry, the FCA would focus on a “rebalancing of risk”, which Alder described as “the risk of not deciding to, for example, participate in or access financial products or services that can lead to greater long-term returns”.
As part of this push, the government is already considering adjusting the rules on tax-free cash Isa savings accounts to encourage people to shift more money into higher return investments such as shares and bonds.
The FCA has also proposed allowing pension holders to receive “targeted support” from companies to make generic suggestions under a lighter regulatory framework. It hopes this will fill a gap in financial advice for people who are not wealthy.
Alder pushed back against concerns that its pro-growth approach would mean less protection for people. “It isn’t an exchange, or an either/or, of consumer protection or growth,” he said. “We want to supply retail consumers with far better tools to do this thing that is informed risk-taking.”
The regulator’s new strategy will include “a heavy emphasis on financial crime and fraud across the sector”, Alder said, adding that this was a key element in boosting consumer trust in financial markets and in the regulator itself.
“If you were able to increase the trust in the system and therefore increase the level of participation in products and services, clearly you would then end up with a greater level of savings being converted into investments via markets,” he said.
The FCA has been opening fewer investigations in the past couple of years and closed many in its existing pipeline in an effort to focus its resources on “cases that present the greatest risk of harm”, Alder said. By being more selective, he expected it to keep the number of enforcement actions stable or even increase them.
Another shift in the FCA’s strategy is to prepare for an erosion of global co-ordination in financial regulation, stemming from protectionism and trade tensions. “Clearly we have experienced a shift from globalisation . . . the word protectionism is high up the agenda,” he said.
In response it was likely to focus on “engaging with a smaller group of like-minded jurisdictions”, said Alder, who was head of Hong Kong’s market watchdog and chaired the International Organisation of Securities Commissions before joining the FCA in 2023.
