The response notes, “Whilst there are some clear duplications of process, as illustrated by DC reforms in recent years such as the charge cap, consultancy charge ban, governance initiatives and transparency in investment charges and costs (and soon the new requirements for checking whether members have taken or opted out of guidance as introduced by the Financial Guidance and Claims Act 2018), they seem to have been delivered in a very joined up manner, albeit with differences in timing.”
The ACA is critical of ‘one clear failing’ on the Pensions Regulator side in its approach to pension scams, saying that far too much money has been allowed to leak out of the system that it regulates. Action by the Regulator, Government and Government agencies has been either too little, too late, or not at all. By contrast, it is almost unthinkable to imagine that pension scams could have been conducted through the contract-based system, due to the strong authorisation and supervision regime that such providers operate under.
The ACA comments that both the FCA and the Pensions Regulator no doubt have discussions behind closed doors with ministers and senior officials in relation to pension scams, but perhaps both organisations should be more independent and forthright of view, in public, when it is clear that the Government is not minded to tackle the issue, or give it the priority that it deserves.
The ACA says that one area that potentially has fallen between two stools is the regulation of DB to DC transfers as a whole, especially as seen in relation to the British Steel Pension Scheme. The Department for Work and Pensions’ consultation response on British Steel in the White Paper notes: “we strongly believe that there are lessons to be learned from all aspects of this case.”[1]
As the ACA has made clear in responses to other consultations, DB administrators have been swamped by FCA-regulated advisors’ requests for information when members are intending to transfer out of an occupational pension scheme. Continuing the work of standardising these requests will help to reduce costs, improve service and build member confidence.
The ACA response notes that ‘Freedom and choice’ was delivered in a rush and since then both the FCA and the Pensions Regulator have had to play catch up on the member protection aspect. The work on member protection is far from complete and to some extent this can only move at the pace set by HM Treasury and the Department for Work and Pensions respectively. But one clear exception to this is the slow pace at which the FCA is updating its DB to DC transfer advice guidance.
The ACA understands that there has been close working between the FCA and the Pensions Regulator as the latter has developed the authorisation and supervision regime for DC master trusts, once DWP accepted that the existing, largely unregulated, market was not fit for purpose. The ACA says that there is an opportunity for both parties to continue with such collaboration, along with the DWP, in the regulation of DB master trusts, as there may be some parallels with the authorisation and supervision regime for DC master trusts.
The general move from collective (DB) to individual (DC) has resulted in a corresponding need for low cost good quality individual advice (specific and / or generic) – a need which the ACA believes far outstrips supply. The ACA believes this is an area that the organisations will both need to return to time and again over the coming period, for example in relation to the development of robo-advice for which there would need to be common standards across both the contract and occupational space. A robust and standardised robo-advice process in relation to say mis-sold pension transfers may also help mitigate against any ambulance chasing.
In relation to decumulation, where monies may go from Pensions Regulator- regulated vehicles into FCA-regulated vehicles, the ACA’s sense is that decumulation is in its infancy as pot sizes are on the small side, so both bodies should be paving the way before the rush hour arrives.
The ACA response concludes by noting that consumer confidence remains an issue for any products that have a “pensions” label, with the clear risk that individuals put their money in other vehicles that are far less satisfactory as a means by which to deliver retirement income (such as buy-to-let residential property).
The full response is available here
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