As part of its annual ‘sector views’, the Financial Conduct Authority (FCA) assesses the developing risks to the markets and where there may be a negative impact on consumers.

The City watchdog said it is concerned about the debt burden facing 7.4 million UK adults with some firms not identifying this problem early enough. It said that poor value products, often targeted at vulnerable users, can make the problem worse.

Poor value is also present in overdrafts, cash savings products and pension savings, the regulator said.

The FCA said consumers may not know they’re not fully protected when using some payment products and services, such as e-money firms which advertise ‘current accounts’ which aren’t covered by the Financial Services Compensation Scheme (FSCS).

Pension savings also aren’t adequate to maintain current living standards in retirement, highlighting the spread of unsuitable advice and products as well as poor value products. Pension scams, which rob consumers of their life savings, were also mentioned.

The FCA is also concerned about pricing practices in insurance as loyal customers are still being penalised. The ‘loyalty penalty’ in home and motor insurance cost six million consumers an extra £1.2bn in 2018.

Turning to investments, the FCA said high-risk retail investment products are exposing consumers to more risk than they can absorb. Some of the highest risk products are often marketed directly to retail consumers with poor communication of the risks involved and implications that the investments are regulated, when this is not the case.

Poor consumer support and unsuitable advice is not helping, while the level of financial crime and scams remain high.

Christopher Woolard, executive director of strategy and competition at the FCA, and interim chief executive designate, said: “We are committed to reducing harm in the markets we regulate. Our analysis of markets ensures that we do this effectively, helping us to decide where to focus our attention. We expect firms to be similarly focused on preventing harm and assisting us where they can, and we will continue to actively supervise all firms to ensure they achieve this.

“What is clearly apparent from the ‘sector views’, is that many of the harms we are seeing are created by a significant number of smaller firms we regulate or firms beyond our remit.

“The findings in the report will contribute to our upcoming Business Plan and the decisions we make affecting consumers, market integrity and competition.​​​​​​”