Responding to the committee’s paper published in April, Improving Governance and Best Practice in Workplace Pensions, the department for work and pensions said it was not feasible to tamper with the regulatory framework and create a single regulator.
In a 12-page document the DWP rejected calls from the committee to reassess the case for establishing one body to regulate workplace pensions, after it expressed concerns about regulatory gaps between the FCA and The Pensions Regulator.
The DWP said: “There will always be a need for shared regulation of the different components of the pensions.
“We believe that it is too soon after the creation of the FCA and less than a year into auto-enrolment to consider whether the current regulatory framework and divisions of responsibility are appropriate.”
It added that the challenge remained to ensure that the two regulators were “aligned as closely as possible” with a common understanding of the risks to members under both regulatory regimes.
The committee had also raised concerns that the FCA was not the “appropriate body to regulate contract-based pension schemes” given its “risk-based” approach in the banking sector, and that it may not start focusing its attention on workplace pensions “unless or until something goes wrong”.
The DWP said the successful performance of defined contribution pension schemes relied on well-supervised investments, a role “firmly in the FCA’s remit”.
It added: “We believe that the overall regulatory architecture is sound and, given there will always be a boundary between the roles of the FCA and The Pensions Regulator, there are no current plans to fundamentally change the arrangements for regulating contract-based pension schemes at this time.”
|Other key points in the paper:|
• Proposals which could compel pension providers to set up independent governance committees to oversee contract-based schemes.
• Promoting the use of plain language in pensions information and financial literacy.
Steve Thomas, partner of Surrey-based The Eurofinance Partnership, said: “We are at a point in time when millions of people are being auto-enrolled into schemes administered by employers that may never have had employee schemes to look after before. It seems to me that now, more than ever, we need strong regulation of workplace pensions.
“It may be that a combination of the FCA and The Pensions Regulator can do this, but my worry would be that unless responsibilities are clearly defined there might be areas that get regulated twice, to two different standards and, of more concern, areas that may fall through the net altogether.”