An influential committee of MPs has questioned whether the Financial Conduct Authority should continue to regulate contract-based pension schemes and called on the Government to consider establishing a single pensions regulator.
Regulation of pensions is currently split between the FCA, which regulates contract-based schemes, and The Pensions Regulator, which is responsible for regulating all workplace pensions including trust-based schemes.
The Work and Pensions select committee warns persisting with the current framework could lead to “gaps” in regulation, potentially putting members’ savings at risk.
In a report published today, the committee says: “We are not convinced that the Financial Conduct Authority…is the appropriate body to regulate contract-based pension schemes.
“If it remains the responsible body, then we strongly urge it to adopt a pensions-specific regulatory strategy and to set up a well-resourced team dedicated solely to proactively regulating contract-based pension schemes.”
The report goes on to say: “We believe that it is necessary for a single regulatory body to have sufficient powers to ensure that all members of workplace pension schemes are given adequate and consistent protection.
“We therefore recommend that the Government reassess the case for establishing one body with sole responsibility for regulating workplace pensions.”
The report also ramps up pressure over consultancy charging and active member discounts, calling on the Government to ban both practices.
In addition, the committee urges policymakers to initiate an “urgent review” into pension charges due to concerns scheme members could suffer if high charges persist.
It says: “We are very concerned by the potential for pension scheme members to suffer detriment where schemes persist in retaining high charges, with the accompanying potential to reduce the amount of income people receive in retirement.
“In the short term, we recommend that the regulator carries out an urgent review of the “outliers” with high charges, with a view to taking action if it considers this necessary.
“We further recommend that the Government carefully monitors the level of pension scheme charges more generally and reviews its position on capping charges in auto-enrolment schemes frequently, at least bi-annually, commencing in 2014.”
A DWP spokesman says: “The committee’s report on workplace pensions is a welcome contribution. It addresses a number of issues we are looking at to ensure people continue to have access to value-for-money pensions, including charges, fees and risk sharing, and we will respond in due course.”