RegulationMay 30 2013

Watchdog worries

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To promote such regulation, the House of Commons work and pensions committee recently published a report on improving governance and best practice in workplace pensions. One of the report’s key recommendations is a call for a single watchdog to oversee all workplace pensions. What, if anything, is wrong with the current regulatory framework and will a single regulatory body be able to restore public confidence in pensions?

High-quality governance and regulation – which protect individuals and focus on maximising retirement income – are vital to avoid a collapse of confidence in the pensions system.

To promote such regulation, the House of Commons Work and Pensions Committee recently published a report on improving governance and best practice in workplace pensions.

One of the report’s key recommendations is a call for a single watchdog to oversee all workplace pensions. What, if anything, is wrong with the current regulatory framework and will a single regulatory body restore public confidence in pensions?

UK workplace pensions are currently subject to the oversight of three regulatory bodies. The Pensions Regulator is responsible for regulating the running and management of all workplace pensions. With the abolition of the FSA on 1 April this year, the Financial Conduct Authority now regulates conduct in contract-based pension schemes and the Prudential Regulation Authority promotes the stability of large insurance firms – including providers – that offer contract-based workplace pensions.

However, those familiar with the criticisms of the now-superseded three-sided structure responsible for financial stability in the UK (comprising the Bank of England, the Treasury and the former FSA) will not be surprised to hear the concerns raised by the committee’s report about the regulation of workplace pensions.

The shared regulatory responsibilities require TPR to work together with the FCA and the PRA. The report cited demands for better co-ordination between the regulatory bodies and for the government to play a role in getting the parties around the table to set agreed quality standards.

However, there appears to be duplication of work by the regulatory bodies.

The report was highly critical of the FCA’s resources available to devote to pensions. Its predecessor had a team that dealt specifically with pensions policy, but admitted it did not have staff dedicated to regulating pension schemes or a specific pensions strategy. Its approach was to focus resources wherever it perceived the biggest risks to be at any given time. It had, therefore, dedicated much of its recent resources to the banking sector, which it considered high risk.

The committee questioned whether the FCA will have sufficient resources in the future to apply to pensions at a time when pension provision will increase significantly on account of auto-enrolment.

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