Nikhil Rathi, chief executive of the FCA
Nikhil Rathi, chief executive of the FCA, said the regulator was considering how retail markets can take a more holistic approach to Britons’ finances.
He believes that key sectors, such as pensions, mortgages and investments, may be too "isolated" from each other and could work better if there was more co-ordination.
The FCA will soon consult on how the mortgage, savings and pensions markets can take a more collaborative approach to each other, he said.
In a speech to the JP Morgan Pensions and Savings Symposium on Friday, he said the regulator and financial markets needed to “challenge ourselves” to take a more holistic approach across retail markets by looking at buying property, saving and building a pension as “junctions on the same financial journey” rather than as isolated events.
One area where he suggested a more holistic approach could be introduced was integrating pension saving into credit reports.
He said: “Research from NEST Insight has found that pension auto-enrolment is associated with lower loan defaults and higher credit scores. So could more be done to integrate positive pension saving behaviour into mortgage and credit affordability assessments?”
He also questioned if prospective homeowners could leverage their pension savings to buy a first home, as is seen in Australia, the USA, Singapore and South Africa.
He said: “We would need to take into account the ability of savers to replace those withdrawn funds, the impact on house prices, and whether those individuals – and the UK economy – might be better served by investment in a wider range of productive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.
“And as we think more radically about the mortgage market and options to support homeownership, what might this mean for saving, including for pensions, more broadly?”
He said he plans to open discussions on the mortgage market and its interaction with pension savings shortly.
Mr Rathi added: “If we continue to treat pensions, mortgages and savings as separate tracks, we will miss opportunities to help consumers get where they need to be. But if we build a network that truly connects, we can get more people on the way to financial security in retirement.”
Financial Planning Today Analysis: Mr Rathi's thinking suggests a more grown up, holistic approach to personal finances is under way and many in the Financial Planning profession may welcome this fresh approach. Good Financial Planning involves a long term approach taking into account all aspects of a client's financial needs, from protection to investments and from pensions to estate planning. It is already a holistic approach and Mr Rathi may be seeking to emulate this in some ways for the wider market. He is not suggesting a revolution here but some more joined-up thinking on different aspects of personal finance could well bring dividends and encourage cross-fertilisation, new products and growth. Breaking down the barriers between products seems to be something of an emerging theme and aligns with Labour's push for growth. Financial products in the UK have mostly been silo-ed for many years and that has brought clarity and simplicity so changing this needs to done carefully to avoid damaging the regulatory 'cleanliness' this approach has offered.