On the go: The Financial Conduct Authority is concerned about a lack of consistency in the way independent governance committees operate, which means that members of some workplace pension schemes may not be receiving value for money.
The regulator published on Wednesday its review of IGCs and governance advisory arrangements, which took place from 2017 to 2019, and concluded that some of these bodies lacked independence and were ineffective at challenging firms, while those that maintained independence delivered better outcomes for pension scheme members.
It also found that GAAs operated by third-party companies on behalf of pension providers were less effective at ensuring improvements in value for money.
As a result of the review, the FCA has sent feedback letters to companies to ensure they make improvements to the way they work with their IGC or GAA.
The regulator also announced a consultation on how these bodies compare value for money on pension products to ensure members are getting the best service possible.
The FCA is bringing forward proposals to make it easier for IGCs and GAAs to compare workplace pension products and services to determine whether members are being treated fairly.
This includes proposals to set out a simple framework for the annual IGC and GAA value-for-money assessment process, including a definition of value for money and three key elements of value for IGCs to use when conducting their assessments.
The three elements the regulator believes contributes to value for money – and should be taken into account by the committees – are charges and costs, investment performance, and quality of service.
There is also a requirement for IGCs to compare their company’s workplace schemes against other options on the market, which the FCA said would lead to “better and more consistent value-for-money assessments across the workplace personal pensions market”.
The regulator expects IGCs to challenge their pension provider on the level of costs and charges to scheme members and users of investment pathways.
Therefore, the watchdog has proposed new guidance as part of this cost comparison, which states that if any scheme offers lower administration charges and transaction costs, the IGC should bring this matter, as well as an explanation and relevant evidence, to the attention of the company’s governing body.
If the IGC is then not satisfied with the governing body’s response, then the relevant employer should be notified.
This article originally appeared on ftadviser.com
