The outgoing chief executive of The Pensions Regulator (TPR), Lesley Titcomb, has used her final speech in office to call for new powers for the watchdog to set its own rules.
Speaking at a conference of law firm Eversheds Sutherland last week, Ms Titcomb said TPR should not have to wait for government legislation before implementing rules, as the current framework was slow to tackle risks.
She said her experience of working in both TPR and the Financial Conduct Authority (FCA) – which has the ability to make its own regulations - had taught her the latter was a better system.
She said: "At the moment TPR can only make codes or issue guidance. I have the utmost respect for the [Department for Work and Pensions] DWP, our sponsoring government department to whom we look when the legislation, whether primary or secondary, through which the rules are made needs changing.
"They are approachable, willing to listen and wherever possible they propose enabling legislation, rather than hardwiring too much detail into the law.
"But it can take years to develop, enact and then implement a Pension Bill, and there is always pressure on Parliamentary time and political horse-trading as it goes through the process."
Ms Titcomb said the current framework of rules and requirements was "slow to respond to changing risks and harm in what is an increasingly fast moving world".
She noted: "It also means that small, detailed things that need updating never get done, because there is never a slot in the Parliamentary timetable.
"Why should this be the case for workplace, trust-based pensions but not for contract-based pensions or wider financial services?"
Ms Titcomb stressed TPR had the knowledge, experience, and expertise to do this work.
She said: "We could make rules as the independent regulator and members and the industry could benefit from a huge escalation in pace and responsiveness. It would also reinforce further our independence as a regulator.
"Consider the effect on compliance if the codes and guidance we now provide were pitched as rules. How more effective might our ‘nudge’ to do the right thing be?"
She recognised that safeguards would be needed, such as reserving rule making to the TPR board, and subject proposed rules to public consultation, alongside the publication of cost benefit analysis.
Currently, TPR is waiting for the government response to a consultation on its new powers, which will include unlimited fines or a prison sentence for rogue bosses.
Ms Titcomb would also like TPR’s area of supervision to be extended, saying that at the moment the watchdog had no direct regulatory grip over the third party administrators who provide essential services to the pensions industry.
She said: "They can be a source of significant risk - we have been concerned about the impact that a 'sudden stop' of one of these administrators could have on their client schemes’ ability to pay benefits, for example - but they can also be a channel through which standards of administration in a large number of schemes can be significantly improved.
"So I have to ask - is it sustainable for TPR to have no direct regulatory remit or power over third party administrators? Is it sufficient that we try, as we are indeed doing, to influence or cajole, but cannot direct or compel? Do we want to wait for something to go seriously wrong before addressing this regulatory lacuna?"
Ms Titcomb is to leave TPR at the end of her four-year term in February.
TPR was heavily criticised for its role in the Carillion collapse, with MPs accusing it of making "hollow threats" and failing “in all its objectives".
The work and pensions, and the business, energy and industrial strategy (BEIS) committees called for cultural change at the watchdog, saying they were "far from convinced that The Pensions Regulator's current leadership is equipped to effect that change."
But the regulator stressed Ms Titcomb’s decision to leave was entirely unrelated to those pressures.
FTAdviser reported last week that Sir Steve Webb, former pensions minister and director of policy at Royal London, was one of a handful of candidates who have been shortlisted to replace Ms Titcomb.
maria.espadinha@ft.com
