Posted: 23rd March 2018
Over the past five years, The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) have each implemented major government reforms within their respective remits. The most notable has been for automatic enrolment (AE) and pension freedoms. The regulators have demonstrated the need to be able to protect scheme members and consumers against a rapidly evolving pensions and retirement landscape.
As a result, the FCA’s focus has been ensuring appropriate levels of consumer protection and competition exist, whereas, the TPR has been driving up standards of scheme governance.
Both regulators have continued to work on their pension strategies to clarify how they will work together, and how they will work over the next five to ten years. They have now published a ‘joint call for input’, which is an opportunity for everyone interested in this sector to contribute to the development of their joint approach.
WHERE DO THE REGULATORS INTERSECT?
Broadly, the FCA is responsible for regulating the areas of the pension savings and retirement income sector where individuals access their pensions directly. TPR are broadly responsible for regulating the areas where individuals access their pensions via their employers. The FCA also has significant regulatory responsibilities for firms that provide products and services more broadly.
The paper sets out a high level view the responsibilities of each regulator lie and identifies areas where they intersect, such as:
- Winding up of schemes
- Transfers from Defined Benefit (DC) to Defined Contribution (DB) schemes where individuals exercise pension freedoms
This paper asks the question – “where the FCA & TPR’s remits intersect, are they working effectively, or are there areas where this could be improved?”
A CHANGING LANDSCAPE
The UK pensions and retirement income sector serves over 34 million consumers and holds £2.1 trillion of assets. Over the next five years the number of people over 65 will increase by 1.1 million. The over 85s are the fastest growing segment of UK population.
The paper states that ‘the biggest potential harm in the sector is the prospect of people not having adequate income, or the level of income they expected in retirement”, and the regulators have identified several areas which they are looking for contributions from stakeholders to help in their strategic approach, which includes:
- Getting off to a good start: access to pensions
- Making sure pensions are well run and funded: effective governance and secure funding
- Making sure pension savings are safe
- Making sure pensions offer good value for money
- Supporting good choices and outcomes for consumers and members
The regulators would also like views as to whether individuals and firms agree with these factors and if there are any other considerations they should include.
WORKING WITH OTHER BODIES
In the paper, the regulators have also recognised that there are other factors which they cannot tackle alone and would need to work with other regulators and Government, for example:
- The level of consumer confidence
- The level of real interest rates
- The level of retirement savings
REGULATORY NEXT STEPS
The regulators have given a deadline of 19 June 2018 for stakeholder feedback. They will also be holding a series of stakeholder events in order to gather the widest possible range of comments. More information is available on the regulator’s respective websites.
CONSIDERATION FOR FIRMS
Firms should consider whether they wish to give feedback in relation the call for input. It is likely that pension scheme operators, pension product providers and advisory firms would be interested in doing so.
The strategic work of both regulators will be ongoing for some time, so the impact on firms is difficult to envisage until this work is further developed. However, there is a clear opportunity for firms to influence the thinking of the two key regulators within the pensions space.