Standard Life has called for one regulator to oversee all pension provision due to the convergence of trust-based and contract-based defined-contribution schemes.
In its response to the consultation on the Thornton review of pensions institutions, which closed last week, Standard calls for the merger of The Pensions Regulator and the FSA and says there is a strong case for a merger of the Pensions Protection Fund and TPR. It adds there is an argument that defined-benefit schemes could be regulated separately by a merged PPF and the DB functions of TPR.
It says recent rule changes have all but wiped out the differences between trust-based and contract-based DC schemes. Both schemes, it argues, invest in the same or similar funds, bear similar risks, must provide the member with the option of an annuity on the open market, and operate similar charging for schemes of a similar size.
But despite being almost identical from a member’s perspective, regulation of contract-based and trust schemes is different.
Standard says that looking solely at money-purchase pensions, having “two overlapping regulators, neither with vision of the whole marketplace, has led to a situation where there is no strategic direction in the regulation of pensions”.
It warns that by 2012, with the introduction of personal accounts, the UK will have three virtually identical types of money-purchase schemes regulated in three radically different ways by five bodies – TPR, FSA, PPF, DWP and the Treasury. It says personal accounts will confuse matters further. Although PAs are being branded an occupational scheme, Standard says it is unlikely that TPR will regulate much of it.
There will be no trustees in personal accounts and no member-nominated trustees. It says it is difficult to see how TPR dispute resolution rules will apply. TPR contribution rules will not apply, says Standard, because the personal accounts board intends to carry out its own monitoring of employer payments.
Standard adds that the FSA will have little involvement in personal accounts as they will not be sold or promoted in an FSA sense, so marketing and promotion conduct of business rules will not apply.
It says FSA involvement will extend only to the prudential supervision of investment firms managing personal account funds. It says: “Despite being an occupational scheme, it is difficult to see how the existing regulators and regulations will apply.”
But TPR spokeswoman Amy Balchin says: “We believe it remains appropriate to define the regulator’s scope of regulation as pensions which are arranged through the workplace. The role of the employer in particular is more suited to our regulatory approach. Our recommendation is therefore that the two bodies remain separate. This depends, however, on the future development of personal accounts.”