UK pensions regulation lacks accountability: NAO
The UK’s regulatory system falls short in protecting members of defined contribution pension schemes, a report from the National Audit Office has found.
In a 52-page report, the National Audit Office has concluded there is “insufficient accountability” within UK pensions regulation and in paticular the The Pensions Regulator and the Financial Services Authority to ensure it delivers value for money.
It said way it measured performance also made it impossible to judge whether it was actually protecting members’ benefits.
The NAO also found that outcomes between DC members contributing the same amount and experiencing the same stock market performance can vary by as much as 17 per cent, yet one third of members stated they cannot assess whether the charges they pay represent value for money.
The report added: “Differences in annuity rates can reduce the value of a pension, but 30 per cent of trust-based scheme members do not recall being made aware of the option to choose a different annuity provider.”
Major problems were also highlighted in the way The Pensions Regulator measures performance and works with other public bodies.
The Pensions Regulator is responsible for protecting the benefits of members of DC schemes and shares responsibility for regulating contract-based schemes with the FSA.
However, The Department for Work and Pensions, HM Treasury and HM Revenue & Customs have responsibility for setting the overall policy framework for pensions.
The DWP oversees the work of The Pensions Regulator, and the Treasury is responsible for setting the overall legislative framework within which the FSA operates.
All public bodies discuss DC scheme issues, but none leads on, or is accountable for, the regulatory system as whole.
The report said: “The lack of a joined-up approach means there is insufficient basic information available about the market, such as definite numbers of scheme members or the levels of fees and charges they face.
“There is also no overarching system for measuring the performance of both The Pensions Regulator and the FSA in reducing risks to members.”
Amyas Morse, head of the National Audit Office, said: “Responsibilities for regulating pensions are shared, and the agencies involved need to develop a concerted approach to assess and, where necessary, act upon risks.”
The news came as a study from PricewaterhouseCoopers found that FTSE 350 companies’ ability to support their DB pension obligations is only marginally better than when the recession was at its worst, despite pouring billions of pounds to prop up the schemes.
Michael O’Higgins, chairman of The Pensions Regulator, said: “We will reflect on the NAO’s comments as we take forward our work with government bodies and the industry to protect members of DC schemes through effective regulation.”
Adrian Pickersgill, director for Birmingham-based Chatfield Private Client, said: “Most employers have no idea what the Pensions Regulator is. No one is enforcing DC schemes or communicating to employers. No one takes responsibility because so many different bodies are involved.”