PensionsSep 2 2014

Webb: Future is a single pensions regulator

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Pensions minister Steve Webb has admitted that his experience in drawing up legislation during the last year has led him to believe that the “destination will be a single regulator”.

During the second reading of the Pension Schemes Bill in the House of Commons today (2 September), Mr Webb responded to a question about the regulation of ‘defined ambition’ risk sharing pension schemes that are to be introduced.

He responded by saying that it has been “tricky” to ensure that the Financial Conduct Authority and The Pensions Regulator mirror one another, and while he still does not support creating one body for all pensions regulation, recent difficulties suggest it may happen in the future.

In the most simplistic way, the FCA regulates personal pensions and the Pensions Regulator regulates workplace pensions.

The pensions industry has previously called for such an event, with outgoing National Association of Pension Funds chairman Hyde Harrison stating that: “the mass defined contribution market brought about by auto-enrolment will mean that the current regulatory split of the market between the Pensions Regulator and the FCA will become increasingly apparent – and increasingly unsustainable”.

Aegon’s regulatory strategy manager Kate Smith also stated that the Pensions Regulator already has “enough on its hands” with auto-enrolment and could be overstretched if it took over from the FCA in monitoring individual advice.

In laying out the Bill, Mr Webb touted the success of auto-enrolment, saying that there had been substantially higher numbers getting into workplace defined contribution schemes and that opt-out figures had been substantially overestimated.

Anne Begg, chairman of the Work and Pensions Committee, accused him of rewriting history over the success of auto-enrolment, but Mr Webb reacted by stating that the policy “would have crashed and burned” under the Labour government’s previous proposals.

One MP raised concerns over the guidance guarantee, suggesting that financial advisers would be the real beneficiaries, as opposed to “entrepreneurial providers innovating new products”.

Mr Webb stated that there was no evidence that the level of levy would hamper any firm’s entry into the market, calling auto-enrolment and the at-retirement reforms a “huge opportunity”.

He added that there was “a world of difference” between the guidance consultation and sophisticated, tailored financial advice, with the service provided by The Pensions Advisory Service and the Money Advice Service “intended at the budget end of that scale.”

Questions over the substance of defined ambition surrounded whether smaller businesses would actually offer risk sharing schemes.

Mr Webb said that research showed a quarter would be interested and another quarter were waiting to see, adding that it was unlikely to be small and medium sized enterprises at the outset, and more likely to be larger employers doing more than the legal minimum.

Finally, shadow minister for pensions Gregg McClymont offered his opinions, taking issue with the contradictions inherent in the pensions bill.

He suggested a “tension between two polls of policy”, referring to people being defaulted into auto-enrolment, but no longer defaulted into an annuity.

“The annuities market was broken, because individuals did not exercise choice effectively, so why does the government believe they will now be able to?” Mr McClymont asked.