Rules detailing how providers’ new workplace pension governance committees will work could unfairly impact on firms who only offer personal pensions, experts are warning.
The FCA’s final rules, published yesterday, confirm how the makeup and powers of the independent governance committees all workplace pension providers must have in place by April this year.
The regulator confirms deferred members of schemes will be in the scope of the committees, despite respondents raising concerns that it would be difficult to keep track of inactive savers.
The FCA says if providers struggle to identify deferred members, they could extend the remit of the committees to the entire business, including individual personal pensions.
But professional trustee and PTL managing director Richard Butcher says extending the IGCs’ role to include individual personal pensions “significantly increases the scope of the IGCs and potentially the volumes of work they have to deal with, and that will have a knock-on to costs”.
He says the rule could create a “market risk” where providers who do not offer workplace schemes – and so aren’t required to provide IGCs – lose individual pension business to those providers who do.
Butcher says: “An IFA deciding where to put his client now has a choice between a personal pension provider with an IGC and one without. They will feel compelled to recommend the IGC-protected personal pension plan.
“This should only be about workplace pensions, not disadvantaging firms that have never been involved in that market, but it will. They’re going to have to pick up the tab and all sorts of things.”
Standard Life head of pensions strategy Jamie Jenkins says: “Extending the scope of the IGCs at this late stage has the potential to distract them from their central purpose, which is to protect the interests of workplace pension savers. The OFT identified a ‘buy-side’ weakness insofar as people who have joined, or have been auto-enrolled, in workplace schemes have not themselves been involved in the selection of the pension.
“It is absolutely right to consider those people who had previously left such schemes, but this was already being picked up by the sampling exercise agreed as part of the Independent Project Board’s legacy review.
“For some providers, the inability to identify such members will now mean that they have no choice but to significantly change the scope of their IGCs to accommodate all their individual pension customers – both those that have actively ‘purchased’ a pension and those that haven’t. This then creates an anomaly for providers that are not running workplace schemes, for which there will be no IGC.”