By Adam Cadle
The Pensions Regulator’s (TPR) performance measurement system is not strong enough for assessing pension risk to members and the overall effectiveness of regulation, a report by the National Audit Office has revealed today.
Whilst acknowledging that the Pensions Regulator has achieved some improvements in the administration of schemes, the report has highlighted that there is too much complexity surrounding the current regulatory structure, raising concerns that it makes it increasingly difficult to judge whether the regulator is protecting members’ benefits.
The report added that TPR, the Treasury and the Financial Services Authority (FSA) all deal with defined contribution issues. However, the report stated that “none of these bodies leads on, or is accountable for the regulatory system as a whole, for example, setting clear system objectives”. Neither the regulator nor the FSA collects data on investment returns (after fees and charges) of defined contribution schemes, and how those returns vary across different segments of the market.
National Audit Office head Amyas Morse said: “Responsibilities for regulating pensions are shared, and the agencies involved need to develop a concerted approach to assess and, where necessary, act upon risks. The DWP and the Treasury should therefore work with the Pensions Regulator and the Financial Services Authority to develop a more integrated approach to collecting evidence, assessing risks to members, and measuring the effectiveness of pension regulation.”
This approach was also echoed by the National Association of Pension Funds director of policy Darren Philp. “We need to slim down the regulatory framework and have a single regulator for all workplace pensions. In our view the Pensions Regulator should be responsible for all DC pensions, whether trust-based or contract-based. Prudential regulation for insurance companies and pension providers would remain with the FSA,” he said.
TPR chair Michael O’Higgins said that the NAO’s comments would be “reflected upon” and further work would be carried out with Government bodies and the industry “to protect members of DC schemes through effective regulation”.