Independent governance committees shouldn’t be in charge of overseeing investment pathways, as their members aren’t responsible for the product performance, Scottish Widows has stated.
As part of its latest work on retirement, the FCA proposed pension providers offer their non-advised customers a choice of investment pathways to meet their retirement objectives, which would be overseen by their IGCs.
The FCA proposed four pathways after it found many consumers were solely focused on taking tax-free cash from their pensions and were "insufficiently engaged" with deciding how to invest funds that moved into drawdown.
The pathways include an option for consumers who have no plans to touch their money in the next five years and for those who plan to use their money to set up a guaranteed income within the next five years.
The regulator also proposed an option for consumers who plan to start taking money as a long-term income within the next five years and those who plan to take out all their money within the next five years.
Peter Glancy, head of policy, pensions and investments at Scottish Widows, told FTAdviser that these committees were well placed to make value for money assessments, but the provider doesn’t believe they have the appropriate expertise to oversee the design and performance of the investment proposition, including pathways.
Mr Glancy explained that the IGCs were introduced due to auto-enrolment, because some of the customers weren't engaged.
He said: "Many of them weren’t even aware they have got a pension, and the IGCs were set up to access essentially if the providers are providing value for money, and if they don't think the provider is doing a [good] job to put a challenge in, so it is like an oversight committee.
"They have the power to escalate to the regulator, or to the board, or to write to customers if they think the provider isn't doing a good job. But the IGCs aren't on the hook for the product performance."
Mr Glancy explained that unlike trustees, which are responsible if something goes wrong in the occupational pension schemes they oversee, in the contract based world the providers are accountable, and not the IGC members.
He said: "We're not saying that IGCs shouldn't oversee and to challenge whether we are doing a good job with the investment pathways, but I think the way that it was worded was trying to make IGCs a bit more like trustees.
"We would see the IGCs remit as overseeing us and making sure that we are overseeing the investment pathways and that we are doing a good job."
Mr Glancy believes that similar to other products, providers' internal governance structures should be in charge of investment pathways.
He added: "We are worried that it blurs accountability, we think it's better if the consumer knows exactly who's on the hook if something goes wrong."