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Pension regulator pledges tough line on enforcement

Tom Selby interviews TPR chief executive Bill Galvin


The Pensions Regulator will scrutinise VAT, income tax and National Insurance records in an effort to develop its enforcement strategy ahead of automatic enrolment.

Recently appointed chief executive Bill Galvin told Money Marketing the regulator will focus resources on communicating with “certain industries, sectors and geographies” in an effort to achieve maximum compliance with the new rules.

He says: “Our view is if you are likely to try to evade National Insurance or VAT, for example, then it is quite likely you are going to try to evade your pension duties as well.

“We might put an awful lot more effort into some areas where we think it will be more difficult or challenging to comply. You could make an edu- cated guess as to where that might be, such as segments of the economy with minimum wage and lots of transient workers.”

The ultimate goal, he says, is to create a culture of “contingent consent” among employers which fall under the new rules.

Galvin says: “We are not going to be malicious when we are regulating employers but we will do our utmost to create a world where there is contingent consent, where people believe other people around them are complying and if they do not comply they will be caught.”

Galvin says communicating with employers represents the most immediate challenge for the regulator, with 27 of the UK’s biggest firms set to begin auto-enrolling employees from October 2012.

Bill Galvin: ’We will do our utmost to create a world where there is contingent consent’

He says: “If we fail in communications and we have to start writing to all the people that do not register in time, that is going to be a nightmare. If we get the communications right, then it will be manageable.”

As part of its preparations for the reforms, the regulator has issued a wide-ranging discussion paper on the future of defined-contribution regulation. The paper, Enabling Good Member Outcomes in Work-based Pension Provision, calls for industry views on issues such as pension product characteristics, master trusts and decumulation strategies.

Galvin insists the DC paper is not just about preparing for the reforms but also to learn from the mistakes of defined-benefit provision. He says: “We have to come to a view with the Department for Work and Pensions, the FSA and Treasury and everybody else as to what kind of pension system we want in this country.

“We are at a certain stage now when you look back at the world of DB and the current 7,000 or so schemes and you ask, was it sensible to set up these schemes in the first place, particularly at the smaller end of the system? Here is a chance now to cast our mind forward 20 years and ask how can we make sure schemes are resilient and result in sensible pension provision for members that will last. It is no small deal.”

Given the significant overlaps between trust-based and contract-based provision, some organisations, including the National Association of Pension Funds, have argued that the roles of the FSA and The Pensions Regulator could be merged.

Galvin says: “I do not think there is much of a need to bring all pension regulation under one regulator. As long as we work closely together and we are not clumsily regulating the same area it is not a big deal. I think sometimes people will stand up and say, we want one regulator and what they actually mean is, we want less regulation. Everybody has their own agenda in this area.”


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