The cost of running company pension schemes looks likely to rise sharply after the implementation of the insurance mediation directive in January, says the Society of Pension Consultants.
Financial services committee chairman Mike Young says the IMD will bring a number of activities provided by third-party pension administrators under FSA regulation.
He fears the move will have huge cost implications for many pension administrators. He thinks few firms which provide pension admin services are aware of the significance of the impact of the legislation.
Young says the cost of FSA regulation will hit margins and the real impact will have to be passed on to the schemes, which may drive a number of smaller occupational schemes to consider alternative arrangements such as GPPs.
Third-party administrators need to consider how they will seek authorisation to undertake regulated activities along with how they will ensure compliance with requirements on financial reporting, capital adequacy, money laundering regulations, client money regulations and senior management systems and controls.
Young says: “I imagine that smaller firms, particularly those with no current in-house compliance experience, will struggle to meet the extra cost demands of this impending regulation.”