Pension trustees should be trained, licensed and held personally liable for any governance failings in their schemes, Michael Johnson has said.
In a four-page Centre for Policy Studies paper on reforming pensions regulation, Pension Regulation: Governance to the Fore, the CPS research fellow questioned whether having tougher watchdogs was the best way to regulate the pensions industry.
He said: “Rather than impose top-down regulation upon the industry, regulators should reposition themselves behind consumers and professional trustees, to share their experiences when interacting with the industry.
“An important first step would be to professionalise the execution of governance and other fiduciary responsibilities, and codify fiduciary duties into law.”
One of the reforms he suggested is making sure trustees satisfy tough training requirements and are then licensed.
They would then be held personally liable for any governance failings and demand total transparency for all costs, charges and fees.
Mr Johnson said the regulatory structure for pensions should also be simplified, with The Pensions Regulator and the FCA assigned separate remits. So the FCA would be responsible for all defined contribution schemes and any collective DC schemes which come out of the new defined ambition scheme.
Meanwhile the Pension Protection Fund would be folded into The Pensions Regulator, which would be responsible for defined benefit schemes.
Mr Johnson also disputed the idea that more trustees would be better.
He pointed to Canada where the largest funded public service pension scheme - with CAN$219bn in assets - has a single governance committee made up of five members.
Mr Johnson said: “The UK has to get real about embracing both economies of scale, and independent oversight by experienced, professional governance boards, driven by a fiduciary duty to put the beneficiaries first.
“Authoritative and informed governance would leave the industry with little choice but to change its behaviour. Then the need for regulation would significantly diminish.”
Adviser view
Steve Bonell, managing director of Sheffield-based Futures Assured, said: “In my opinion to make sure every trustee of every occupational pension scheme is adequately trained and knows the rules is asking a lot.
“You are far better off having The Pensions Regulator run it.”
