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Pensions Regulator to probe DC strategy

The Pensions Regulator will launch a consultation on its defined-contribution strategy early next year ahead of the 2012 pension reforms.

Chairman David Norgrove, giving his final speech this week before leaving the regulator at the end of the year, said the consultation would gauge ind-ustry views on how to ensure “safe and secure” DC pensions for the future.

He said: “In trust-based DC schemes, the accountability is clear. There is less clarity in DC contract-based schemes. We have been liaising with colleagues at the DWP, the FSA and the Treasury as well as with major players within the pension industry to explore what a safe, secure and sustainable DC market might look like.”

He also warned that employers will face sanctions if they fail to comply with auto-enrolment legislation as the regulator targets “maximum compliance” ahead of the official start date in October 2012.

He said: “We want to see maximum compliance and we will do everything we can to help employers fulfil their duties. As in all our work so far, we do not want to hand out penalties where this can be avoided.

“No penalty will be issued without due warning and the opportunity for the employer to rectify the situation. However, we cannot leave deliberate non-compliance unch-ecked and we will have powers to deal with this behaviour.”

Norgrove indicated that The Pensions Regulator will cont-inue to target schemes with sponsors that have weak coven-ants and take “excessive” investment risks, effectively using the Pension Protection Fund as a safety net.

He said: “It is not right for schemes to take excessive investment risks to bridge the funding gap where there is a fragile employer. This is essentially gambling with people’s money.”

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