Committees set up to examine the value for money of workplace personal pension schemes should have the FCA’s support to give them teeth, the regulator has announced.
The 66-page FCA policy statement, Final Rules for Independent Governance Committees, Including Feedback on CP14/16, said: “We consider that the force of regulation behind the escalation route will give IGCs teeth.
“We expect the provider to take action on an IGC’s recommendations and, where there is disagreement, to explain in the first instance to the IGC why it disagrees.
“If an IGC is not satisfied with the provider’s explanation, the IGC should be able to make material concerns public and/or escalate its concerns to the FCA, as it sees fit.”
From 6 April, firms operating a relevant workplace personal pension scheme with at least two relevant policyholders must establish an IGC or, in certain circumstances, have an alternative arrangement.
The policy statement said: “We believe that IGCs will improve pension outcomes for scheme members. IGCs will result in providers more focused on what matters to pension outcomes, particularly for those consumers in default investment strategies.”
According to FCA data, in 2013 there were approximately 20 firms or groups selling workplace personal pension schemes to employers in the UK.
It said: “In addition, there are other firms or groups which operate group pension schemes which are no longer being actively marketed to employers.”
IGCs would depend on providers for the resources and support they needed to operate effectively, including analytical and administrative support.
IGCs must produce a report each year, which the relevant firm would be expected to make publicly available.
Members of the committees will be given fixed terms of no longer than five years, with a cumulative maximum duration of 10 years, unless that member is a corporate person.
IGC members would not need to be approved persons.
David Smith, director of financial planning for London-based Tilney Bestinvest, said: “Why would you use a committee over the knowledge and skill set you could get from going to a financial adviser?”