The Government is considering proposals to force pension providers to set up independent governance committees to oversee contract-based schemes.
The Government has today published its formal response to the work and pensions select committee’s report on governance and best practice in workplace pensions.
One of the committee’s key recommendations was for the Government and regulators to investigate ways of assisting employers to set up governance committees for contract-based pension schemes.
In its response to the report, the Government says: “There are a number of facets to good governance, but one critical element we wish to explore is whether all schemes should have a body overseeing them which represents the interests of members.
“Within trust-based schemes the trustee board has such a responsibility and we know that in contract-based schemes some employers have a governance committee, as they see such arrangements as beneficial for both themselves and the scheme members.
“However, we do not think it is realistic to replicate the employer-specific governance committee arrangement for each employer in large scale group personal pension schemes, given the number of employers involved and the size of many of them.
“Therefore we will be exploring whether there are alternative options for contract-based schemes, to avoid requiring member committees for each employer.
“This could be at provider level, or some intermediate arrangement, though we would not wish to preclude employers who wish to set up governance committees from doing so.”
The Government also rejects the committee’s call for the creation of a single regulator to oversee pensions. Pensions regulation is currently split between the Financial Conduct Authority and The Pensions Regulator.
The FCA and TPR will, however, publish a joint document in the autumn setting out how the regulation of workplace pensions operates.
The Government says: “We believe that the overall regulatory architecture is sound and, given there will always be a boundary between the roles of the FCA and TPR, there are currently no plans to fundamentally change the arrangements for regulating contract-based schemes at this time.
“In addition, we believe that it is too soon after the creation of the FCA and less than a year into automatic enrolment to consider whether the current regulatory framework and divisions of responsibility are appropriate.”