The FCA is considering extending the scope of the new Independent Governance Committees to include assessing the value for money of retirement products.
Currently the committees, a requirement for pension providers introduced following the Office of Fair Trading’s damning report into the defined contribution market, are only responsible for ensuring members are in good value accumulation schemes.
All providers of contract-based DC schemes must have an IGC in place by April 2015. There will be a minimum of five members, the majority of which must be independent of the provider, including the chair.
But following a consultation on rules for the committees, the FCA says the focus of the committees could be extended.
It says: “While the primary focus of IGCs will be on default strategies, there is no reason why this should not extend into consideration of decumulation and retirement income options.”
Whether or not to extend IGCs’ remit will be included in a review of the committees’ effectiveness, earmarked for 2017.
The final rules also reveal the regulator will hold a forum for committee chairs to help them assess value for money.
In addition, the FCA rejected calls to require all members of the IGCs to be independent of the pension provider.
It says: “We see value in allowing one or more provider employees on an IGC, provided they are in a minority and never the chair. Provider employees bring in-depth knowledge about a provider’s schemes and a mix of members helps ensure a balanced view in decision making.
“Any provider employees on an IGC would be contractually bound to act in the interests of scheme members in their capacity as IGC members. Moreover, we will require that an IGC quorum comprise a majority of independent members.”
Charity ShareAction says it is disappointed the regulator has not ruled member presentatives should also be included in the committees.
Policy officer Bethan Livesey says: “The introduction of Independent Governance Committees is positive, but their effectiveness will have to be judged by how forcefully they are willing to challenge pension providers’ boards and to hold them to account.
She adds: “We are also disappointed that the FCA has shied away from requiring IGCs to include member representatives. The best way to make sure members are heard would have been to insist that they are given a seat at the table.”
The regulator also confirmed that group Sipps will fall within the committees’ remit but individual personal pensions – even where there is an employer contribution – will not.
FCA director of strategy and competition Christopher Woolard says: “Pensions are complex and employees and ex-employees are often unlikely to know whether or not their workplace scheme delivers value for them.
”It is important that schemes are operating in the interests of members and IGCs are a significant step in a package of measures aimed at improving the value of workplace pensions.”