Today (5 April) the Financial Conduct Authority revealed it will investigate whether independent governance committees are working properly, amid their recent rise to prominence in pressuring providers to cut pension charges.
Since last February, the FCA made ensuring legacy pensions are good value for money the responsibility of independent governance committees, which became a mandatory requirement for all pension schemes from pension freedom day last 6 April.
At that time, it was announced that in addition to reviewing exit charges and other fees, the committees would also be required to assess whether the scheme could or should be offering the full suite of pension freedoms from April 2015.
As such, they are be able to report failure to follow recommendations directly to the regulator.
The FCA’s business plan, published today, stated:“In 2016/17 we will undertake a review of the effectiveness of Independent Governance Committees (IGCs).
“The review will assess how effective IGCs are in helping pension providers deliver value for money for workplace pension policyholders.
“This will include their effectiveness against the recommendations made by the Independent Project Board, where we will work closely with the Department for Work & Pensions (DWP).”
Many providers have come under the spotlight recently as some independent governance committees have released inaugural reviews on their respective providers.
In March this year, Prudential announced it had reduced charges by an average of 15 per cent across its workplace group personal pensions and where exit charges applied, these have been removed.
Later in the same month, Zurich announced it was set to cap pension charges following its inaugural independent governance committee report.
Over the course of 2016, a cap will be applied to charges over 3 per cent. However, this is a holding position, according to Laurie Edmans, chair of Zurich’s IGC.
At the end of March, it was revealed through Standard Life’s independent governance committee report that the provider is working with the Financial Conduct Authority and the Department for Work and Pensions over concerns its default funds remain targeted at annuity purchase.