In terms of improving its oversight function, HMRC could consider putting newer schemes under closer scrutiny. It could achieve this under its general powers to be able to request information by asking schemes for details of their transactions every three months for the first two years of existence. This eliminates the lag issue and while it would lead to increased costs for consumers, it would only be temporary.
The two regulators
The FCA is promoting better “systems and controls” for personal pensions such as Sipps, while TPR is doing its bit in promoting better governance by scheme trustees of occupational schemes.
In its paper entitled “Strategy for regulating defined contribution pension schemes” issued in October 2013, TPR noted that despite the different ways of describing their regulatory strategies and those of the FCA, the activities that underline them are broadly analogous.
In November that year, TPR issued Code of Practice 13 setting out its governance standards for trust-based defined contribution occupational pension schemes. This covers such issues as trustee knowledge and understanding, member administration, investment options, risk controls and general governance. Although presumably directed largely at staff schemes with less than 100 members, there is no exemption from these standards for SSASs. This could be an indication that TPR is expecting all member trustees to know how to exercise their duties and have responsibility for ensuring their scheme is properly managed.
TPR maintains a list of occupational pension schemes but single member schemes are not required to register. Table 1 shows the range of defined contribution occupational pension schemes as of January 2013.
If these schemes are not flagged with HMRC as being member-directed, they could fall below the radar of both HMRC and TPR. An obvious means of addressing this is to require all occupational schemes to register with TPR. This will add slightly more cost to consumers as there is a small levy to pay and an additional online report but once registered TPR can apply its “educate, enable and enforce” system.
On the other hand, an integrated approach between HMRC and TPR could bring about efficiencies and offset any increase in costs. After all, surely it is the common goal for both HMRC and TPR that trustees understand their responsibilities and run their schemes in accordance with the rules? The multiple of returns needed to be submitted to HMRC could be combined with the online reporting to TPR. This could improve efficiencies and allow TPR to identify problem cases more quickly.
A court case last year confirmed that trust-based schemes set up by companies – whatever the scheme’s structure or company history – are occupational pension schemes and so fall under the jurisdiction of TPR rather than the FCA.