The engagement between the Financial Conduct Authority and the Pensions Regulator should be welcomed, says Robert Branagh from the Pensions Management Institute.
In the absence of an independent pension commission – an advisory, non-legislative body – this development has the potential to bring about positive change in our industry. Change has been a watchword for pensions over the past five years, headlined by pension freedoms. This development has not only radically altered the way people access their pension savings at or near retirement, but has also brought new risks.
Overlapping responsibilities are all too common in today’s regulatory environment
With great freedom, of course, comes great responsibility, and the new flexibilities have demanded a more active and interventionist regulatory approach. Beyond pension freedoms, regulatory powers have expanded both in scope and complexity in response to rising administrative, digital, and governance demands.
In 2013, the regulator took on responsibility for the governance of public service pensions; in 2015, the FCA introduced new rules for independent governance committees for workplace personal pension schemes; in 2016 the FCA’s recommendation for pooling of pension scheme assets came in response to concerns over the quality of governance; and this year, the regulator will continue to assess the governance of trust-based schemes as part of its 21st century trusteeship programme.
As the above examples illustrate, the UK pensions industry’s current regulatory regime is constantly divided across fairly arbitrary lines. Under its new collaborative strategy, the FCA and the regulator want to assess opportunities for collaboration both with each other and with stakeholders over the coming years, as part of ongoing efforts to ensure the industry is working together for the benefit of members.
Good regulation is about promoting understanding, transparency and consistency across the system, but overlapping responsibilities, duplication of interests and overriding complexity are all too common in today’s regulatory environment. This is confusing and unhelpful for both trustees and members.
This early-stage engagement between the two regulators might one day be seen as the first step towards a single regulatory body, but in the meantime, we can hope for an improvement in their existing relationship to ensure better outcomes for all.
Robert Branagh is president of the Pensions Management Institute
