The Pensions Regulator has come under attack for dropping its plan to publish a list of pension schemes available to small employers, meaning it will continue to only actively promote Nest.
TPR says it has dropped the plan because of the challenges of setting quality criteria for the inclusion of schemes on the list and its role in monitoring the list.
The regulator has pointed to the difficulty in articulating criteria for universal acceptance of all employers, regardless of size and concerns that some suitable schemes, operating reasonable terms and conditions, could end up being excluded.
But Now: Pensions chief executive Morten Nilsson has described the failure to move forward with the list as a ‘serious blow’ for small businesses looking to source a scheme and highlighted the way the decision favours Nest, which is the only scheme actively promoted by TPR.
The People’s Pension says the decision ’severely jeopardises’ the success of auto-enrolment.
The consultation says: “These concerns were expressed against a backdrop of proposed new legislation setting minimum governance standards for defined contribution schemes, and other governance initiatives being in their early stages of implementation, such as the master trust assurance framework and the requirement for independent governance committees for contract based schemes.
“Without commonly agreed criteria, it is difficult for the regulator to manage a list in an objective and transparent way, including providing appropriate levels of scrutiny, managing entry and exit from the list. At present, this could only be achieved with substantial upfront and ongoing assessment of schemes intending to enter and remain on the list, which could be disproportionately onerous for those schemes and the regulator.
“In light of these challenges, the regulator will not be pursuing its proposal for a list at this time. It will continue to keep this position under review. The regulator will work with the pensions market to look for alternative ways to help small and micro employers to find a suitable scheme, and will strengthen its existing guidance to employers in this area.”
TPR executive director for automatic enrolment Charles Counsell says: “We are providing employers with the information they need to plan and prepare for automatic enrolment, and are currently enhancing this material to make it more suited to the needs of small and micro businesses. This work will include strengthening our guidance to help employers to find a suitable scheme.
“We will continue to work with stakeholder bodies and those operating in the automatic enrolment market to increase the quality and accessibility of information about available schemes so that smaller employers can get ready on time.”
A spokesperson for TPR says: “We continue to regulate occupational trust-based DC schemes in accordance with our statutory objectives, and the requirements of pensions law as set out in our DC code. We believe that schemes that display our DC quality features will be best placed to deliver good outcomes for members, and we continue to encourage the provision of schemes designed on these lines. The new minimum governance standards set out in legislation complement our existing DC code and provide a stronger foundation in law for the standards we’ve said we expect of trustees in order to provide good outcomes for members.
“This is a different issue from the regulator providing a managed list of schemes available to all employers for automatic enrolment, which would require us to establish objective entry and exit criteria that could be applied fairly and evenly across all schemes.”
Nilsson says: “The news that TPR won’t be publishing a list of pension schemes that are directly available to any employer for auto enrolment is a major disappointment and a serious blow for small firms trying to comply with the legislation.
“The consultation TPR launched in November 2014 clearly identified that there was a risk that employers might struggle to find a suitable scheme for auto enrolment and outlined measures to address this issue.
“It’s a great pity that despite the majority of consultation responses being supportive, TPR encountered obstacles that meant it was unable to find a way to get this pragmatic initiative off the ground.
“The industry, Nest, DWP and government should all be lending their support to any measures that will help employers identify high quality schemes and ease capacity constraints in the market.
“It is foolhardy to think that Nest will be able to handle every employer and taking action now to help channel these firms to the right places is critical otherwise we run the risk of a pensions train crash which would seriously derail confidence in auto enrolment.
“A list would have helped employers avoid wasting their time with providers that aren’t interested in their business, supported those that are committed to serving the whole market and helped manage the vast volumes of employers that will be seeking a scheme.
“One of the major challenges we face is employers coming to us late – either in their month of staging or after their staging date has passed. In many circumstances this is due to them being let down by another provider at the eleventh hour.
“As a trusted source of information on auto enrolment, The Pensions Regulator has considerable influence. It has direct communication with every company about auto enrolment but has only ever actively promoted Nest.
“The publication of a list of providers would have helped to level the playing field and encouraged employers to think more carefully about which scheme is best for them and their employees.
“I hope that TPR honour its statement to publish a separate list of all master trust schemes that hold the independent assurance framework as this will at least signpost employers to high quality master trusts.”
The People’s Pension director of policy and market engagement Darren Philp says: “We believe this decision significantly jeopardises the success of auto-enrolment. The Pensions Regulator’s anti-competitive stance will limit choice for smaller employers and is a further leg up for the Government-subsidised provider. The Regulator needs to urgently think again if it wants employers to have real choice and avoid fundamentally distorting the market by only signposting NEST.
“Our focus going forward will be to continue to work with advisers to help employers have real choice when it comes to choosing a pension. Our work so far has demonstrated the importance of advisers in making a success of auto-enrolment and taking the burden away from employers.
“The Regulator’s position also fundamentally calls into question its approach to regulating mastertrusts. The one scheme it will be signposting to has not yet undertaken its ICAEW assurance and the Regulator’s stance will mean those that have will call into question the usefulness of a voluntary framework.”