Do you work in DB, DC, MasterTrust, or a contract-based scheme? If so, good news. The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) are working together on a pensions regulatory strategy, which will set out how they could work together to tackle the key risks facing the pensions industry over the next 5-10 years.
In the absence of an independent pension commission, (an advisory, non-legislative body), this has real potential to bring about positive change in our industry.
The last five years has seen significant change in the industry, not the least of which was the introduction of pension freedoms. This not only changed the way that people can access their retirement savings, but alongside the introduction of automatic enrolment, we have seen more than 9 million people newly saving into workplace pension schemes. During this time, Regulators’ powers have expanded in both scope and complexity with the regulatory bodies taking on a much more active, and interventionist role.
In 2013, TPR took on responsibility for the governance of public service pensions, both local and central government. In 2015, the FCA introduced new rules for Independence Governance Committees for workplace personal pension schemes, and TPR is looking at governance of trust-based schemes as part of their 21st century trusteeship programme. Concerns over the quality of governance have contributed to FCA’s recommendation of pooling of pension fund assets, while the Pension Schemes Act 2017 seeks to transform the quality of master trust governance.
For the FCA, this has meant making sure that their regulation provides the appropriate level of consumer protection and competition within this new arena, whether this is through the establishment of IGCs or ongoing work such as the Retirement Outcomes Review.
For TPR, the focus has been on protecting workplace pension savers through improving standards of governance in schemes, ensuring schemes are being treated fairly by sponsoring employers, and that workers are enrolled into the pensions they are entitled to by employers as part of automatic enrolment.
TPR is also moving from its earlier educate, enable and enforce policy to one where it wants to be “clearer, quicker and tougher”.
As part of ongoing efforts to ensure the sector works well for consumers and workplace pension savers alike, both the FCA and TPR want to work together on a pensions strategy which will look at how they could work together, and with stakeholders, better in the coming years. Good governance is about having motivated, knowledgeable and skilled trustees in place. There is a clear link between good governance and good scheme performance. Whilst it is the responsibility of trustees to make sure that their scheme is well run, both Regulators have a role in helping understanding, transparency and consistency on the pensions system.
Some of the existing overlapping of responsibilities, and duplication of interests, e.g. value for member test definitions, can be confusing and unhelpful for Trustees and members alike. This early stage engagement between the two bodies, might one day be seen as the start of the process for a transition to one overall Regulator but in the meantime, we can contribute to and hope for, an improvement in their existing relationship to ensure that those involved in workplace pension schemes are protected and that our Regulators advice and directives are consistent.