On the go: A survey of pensions professionals has uncovered concerns about the added cost burden placed on schemes by increasingly strict regulation.
Asked by the Pensions Management Institute whether the cost of regulation is appropriate, 34 per cent of survey respondents said requirements are now unnecessarily expensive, although 39 per cent said they are at the right level.
The research comes on the back of proposed changes to the levy funding by the Department for Work and Pensions’ arm’s-length bodies, which has sparked outrage in the master trust sector in particular.
The PMI also revealed disagreement about the way the Pension Protection Fund calculates its levy. The lifeboat currently charges a hybrid levy based on both the size of the scheme’s liabilities and the risk run by trustees and employers, but 39 per cent of respondents felt a straightforward calculation based on funds under management was most suitable.
Respondents also criticised the approach taken by the Pensions Regulator. More than half were dissatisfied with the direction of policy heading into 2020, and 31 per cent expected the watchdog to focus on the wrong areas, while slightly more experts took the opposing position.
Neither was Guy Opperman spared from criticism. The minister for pensions and financial inclusion has been a vocal proponent of sustainable investing, laying regulations requiring schemes to set out their approach to environmental, social and governance issues, and writing letters to large schemes to encourage them to take action.
However, 37 per cent of those surveyed by the PMI felt this set a “worrying precedent”, fearing that they were being forced to accept increased costs. Twenty-six per cent welcomed the intervention, and 15 per cent thought it was acceptable in this case alone.
Lesley Carline, the PMI’s president, said: “While we of course welcome appropriate regulation and an increased focus on ESG across our sector, we need to bear in mind the extra costs this might bear on pension schemes. The protection of scheme members’ funds should remain the top priority, and obstacles to achieving positive member outcomes should be thoroughly examined.
“It is imperative that we see increased transparency around any regulatory costs that may negatively impact the costs of levies for schemes and leave them out of pocket.
“It’s important that all schemes consider integrating ESG principles into their investment portfolio, although we again recommend that targets are achievable, particularly for smaller schemes with less financial clout.”
