Regulation  

FCA asks industry for help to fight pension risks

FCA asks industry for help to fight pension risks

The Financial Conduct Authority (FCA) and the Pensions Regulator (TPR) have revealed plans to work closer together to help vulnerable pensioners, such as the British Steel defined benefit members, in the coming five to ten years.

In a paper out today (19 March) the regulators seek industry views on their joint approach covering access to pensions; governance and funding of schemes; making sure pension savings are safe and offer good value for money; and supporting better choices and consumer outcomes.

They identified the biggest potential harm in the sector as “the prospect of people not having adequate income, or the level of income they expected, in retirement”.

Broadly speaking the FCA is responsible for regulating pension savings and retirement where individuals access pensions directly, whereas the TPR is responsible for regulating the areas where individuals access pensions via their employers.

The TPR ensures employers auto-enrol their staff into a workplace pension while the FCA contributes by protecting consumers and supporting competition in the market but both believe there is scope for more joint work in this area. 

In particular, they want to work together in situations where people are especially vulnerable to making poor decisions, for example where the future of a defined benefit scheme is uncertain, such as with the British Steel Pension Scheme last year.

They have asked the industry for views on what this joint approach should look like.

Meanwhile, the TPR is in the process of introducing a new master trust authorisation and supervision regime and has pledged to work with the FCA wherever schemes are run by FCA authorised entities, such as some large master trusts.

The regulators want to know whether either of the bodies should do more to support people as they start to save in a pension.

While the TPR is responsible to ensure funding of defined benefit schemes is adequate to fulfil members’ benefits, and is due to developing a framework to clarify what schemes and employers need to do in this space, the FCA looks at the governance processes in place and the design of pension products.

For instance, FCA rules, effective from April 2015, require workplace personal pension scheme providers to have either an Independent Governance Committee (IGC) or a Governance Advisory Arrangement (GAA) in place.

In addition, the FCA’s Senior Managers and Certification Regime will increase the focus on
individual responsibility as it requires senior managers to take reasonable steps to prevent regulatory breaches from occurring.

The regulators want to know whether they should be doing more in this area and whether they should collaborate with a wider group of bodies to improve the advice and services supplied to schemes, such as administrators or investment consultants.

The TPR and the FCA also said they aimed to empower pension schemes and their supporting services to protect the client money they hold and comply with data protection laws, for example were they may be at risk of scam activity.