Too many regulators?

Independent financial adviser Aj Somal says there should only be a single regulator for auto-enrolment in a bid to ease confusion and reduce the regulatory burden for both advisers and providers.

Currently, both the Financial Conduct Authority and the Pensions Regulator oversee different parts of AE.

More specifically, the authorisation and regulation of AE schemes and master trusts sits with TPR.

However, the regulation of trust and contract-based pension schemes is split between the two regulators.

Somal, chartered financial planner at Birmingham-based Aurora Financial Planning, says: “I believe there should be one single regulator for the AE sector, as this would ease confusion, particularly for the end consumer, whilst also reducing the regulatory burden for both advisers and providers alike.”

Former pensions minister Steve Webb agrees that it is unusual to have two separate bodies in charge of this area. 

Webb, who is currently a partner at consultants LCP, says: “It certainly seems odd to have two separate regulators covering different types of workplace pension provision.  Eventually there may be a case for combining regulators.  

"But in the short-term it’s very hard to see that the gains from doing so would offset the huge transitional cost of merging two organisations and all the disruption which could result.

"Before any merger took place, you would need to be sure that the benefits could not be achieved simply by better joint working.” 

Too many cooks

There is also concern that having two different regulators means they can take two very different approaches. 

Romi Savova, chief executive officer at PensionBee, adds that having two regulators can lead to different rulesets and a duplication of regulatory initiatives.

She says: “Most savers don’t distinguish their pension according to whether it is regulated by the FCA or TPR, so having different rulesets and procedures can certainly be confusing for all.

"Often there is duplication in the regulatory initiatives, and differences can emerge in the final rules, which can be challenging for all participants in the financial system to grasp.”

She adds that having two different regulators can also lead to "soft standards" in transfer times. "Providers regulated by the FCA undertake pension transfers in a reasonable timeframe of around 10 working days, whereas many large providers regulated by TPR can take months.

"Divergences in rules and standards are further complicated by the prominent role of HMRC in the pensions landscape. Therefore, joint initiatives are helpful for all in order to reduce the number of cooks in the kitchen.”

The case for two regulators

Interestingly, some experts say there is still an appetite for the two different regulators. 

Jamie Jenkins, director of policy and communications at Royal London, argues that "the regulators work together to reduce any risk of overlap, and their respective roles are very well understood.

"Increasingly, consultations on issues that affect both contract-based and occupational schemes are conducted in tandem to ensure regulation is consistent.

"While some commentators have called for the regulators to be merged, there is undoubtedly merit in maintaining the specialism that the pensions regulator brings to this highly complex area”.

Adviser Keith Churchouse is also a champion of having two regulators. The director and chartered financial planner at Guildford-based Chapters Financial, says: “When TPR succeeded [the Occupational Pensions Regulatory Authority] in 2005 they made significant changes to pensions reporting, which was very welcome and made their data position very much more robust.

"This has continued and has evolved to provide help to employers, along with protection to employer-based pension schemes.

"In addition, the roll-out of auto-enrolment and its evolution over the years since the start in 2012 has been largely judged a great success, with over 10mn people having now accrued some benefits through auto-enrolment. 

“My preference would be to see the two regulators remain independent of each other, and I believe that the new government administration has plans in this regard.

"Indeed, I would prefer that the FCA and Prudential Regulation Authority re-merged, rather than merging in TPR, which from my experience has been doing a good and consistent job.”

He adds: “The regulation of employer pension schemes by TPR I believe is and has been good. I think the major issue is that the contributions being made are not anywhere close to being sufficient to provide a reasonable level of income in retirement and I believe many individuals are being lulled into a false sense of security by being auto-enrolled.”

A spokesperson for TPR says: “TPR and the Financial Conduct Authority have separate responsibilities for regulating pensions, however, we work closely in partnership to help put savers at the heart of what we do.

“The laws governing trust and contract-based schemes are quite distinct and the legal frameworks which govern the operation of TPR and FCA are very different.

“Creating a single regulator for pensions would not remove these differences – more fundamental changes to pensions and other legislation would be needed. But whatever the regulatory structure, what’s important is regulators and related agencies work closely together in a joined-up way.”

A spokesperson for the FCA said “This is a matter for government as they are the ones who set the remits of both organisations.”

Aamina Zafar is a freelance journalist