CAS – EIOPA behind lack of focus on hidden pension charges – TPR

Andrew Warwick-Thompson executive director for DC governance and administration at The Pensions Regulator, slammed his European counterparts at EIOPA, for not caring about the effect of soft commissions on total pension scheme costs. 

Warwick Thompson said that EIOPA, the European Institutional and Occupational Pensions Authority, “had not been helpful” by failing to insist that providers disclose  total costs and charges, including off-balance sheet costs and soft commissions paid to fund managers. 

He said: “I want to get behind all of the costs in the funds that are passed on to the members. It was actually EIOPA that said transaction costs behind the funds in DC are not relevant and they have kicked that into the long grass.”

Elsewhere in a wide ranging speech at the Corporate Adviser summit today, Warwick-Thompson said:”We are determined to drive up standards across the industry and sub-standard schemes will not be allowed to auto enrol.” He said the code for DC schemes would be laid before Parliament in November 2013 and that TPR would be regulating against it from end November.

The industry could also expect to see the results of the  consultation from the DWP on quality, costs and charges and defined aspiration in the autumn, while the legislation for pot follows member would follow in 2014. Warwick-Thompson said TPR preferred to “educate and enable” before thinking about enforcement, dubbing TPR the “soft and cuddly regulator.”

It  was supporting employers in providing good quality schemes by identifying the characteristics of such schemes and was considering carrying out thematic reviews in 2014. He said he did not want providers to engage in a “race to the bottom” on charges, but demonstrate a sustainable business plan. “Charges have to be completely transparent and justifiable. We want a formula that gives the total cost of membership and benefit of a DC scheme that can be reported back to the regulator. TPR wants to publish this information, so there is a benchmark for employers and trustees to make value-based decisions. It must be audited and appear in the scheme returns.” 

Warwick-Thompson added that the cost of charges had to be value for money, relative to “best global practice “and that the regulator was looking at capturing all transaction costs. He said TPR was working with the ICAEW to nail down definitions. “This data will enable employers and trustees to look for better providers if their existing suppliers are out of line with the market.”