The Work and Pensions Select Committee has published a stinging assessment of workplace pensions, calling for the abolition of consultancy charging and active member discounts and the creation of a single regulator.
The Select Committee says it is concerned at the inconsistent regulation across workplace pension schemes with several bodies with responsibility for regulating contract-based pension schemes.
The report says: “Financial services regulation changed in April 2013; two new bodies were established to replace the Financial Services Authority (FSA). The Financial Conduct Authority (FCA) will now be responsible for regulating contract- based pension schemes. The Pensions Regulator and the FCA need to establish stronger joint working arrangements than those that existed with the FSA.
“We are not convinced that the FCA is the appropriate body to regulate contract-based pension schemes. If it remains the responsible body, the FCA must adopt a pensions- specific and proactive regulatory strategy and set up a well-resourced team dedicated solely to regulating contract-based pension schemes. We therefore recommend that the Government reassess the case for establishing one body with sole responsibility for regulating workplace pensions.”
Dame Anne Begg MP, chair of the Work and Pensions Select Committee, says: “Under auto-enrolment millions of people will be brought into pension saving for the very first time. The need for rigorous pension scheme governance has never been more vital.
“It is essential that all members of workplace pension schemes are protected from poor governance, irrespective of the particular scheme they are in. We do not believe this is always the case under the current regulatory system and evidence from the regulators failed to convince us otherwise. On the contrary, we are concerned that current gaps in regulation will be exacerbated by the fact that we now have not two, but three regulators involved – The Pensions Regulator; and the new Financial Conduct Authority and Prudential Regulation Authority, set up to replace the FSA.
“We are particularly concerned about member-borne consultancy charges and those charges applied to deferred members – people who stop contributing to their pension scheme. Neither can be justified; both should be banned.
TUC General Secretary Frances O’Grady says: “The TUC supports the call for the government to ban deferred member and consultancy charges. We also share the select committee’s concern that the government’s ‘pot follows member’ approach to staff with savings moving jobs could be detrimental for consumers.
“The committee is also right to call for a rethink of the regulatory structure. The growth of auto-enrolment and the growing overlap between regulators means that a tougher but simpler structure will make it easier for good schemes to comply and harder for poor schemes to slip through the gaps.”