Covenant advice body ‘potential solution’ to protect savers – Opperman

An independent body to provide accreditation and quality assurance for covenant advice could be a “potential solution” for shortcomings in regulations to protect savers, Pensions Minister Guy Opperman has said.

In a written reply to Work and Pensions Select Committee chair Frank Field, Opperman admitted that there were “practical and operational difficulties” with The Pensions Regulator (TPR) being responsible for assessing the quality of advisers.

However, he noted that the idea of an independent covenant advice body would require “further consideration”.

Field wrote to then-Secretary of State for Work and Pensions Amber Rudd in June 2019, expressing his concerns about how regulations were protecting savers’ pension benefits and how to strengthen them.

He noted that regulations needed to ensure that schemes get advice that is robust and independent, and that sponsors provide financial information to schemes in a timely manner, so they can act to protect members.

Opperman, replying on behalf of the Secretary of State for Work and Pensions, agreed that it is important that trustees receive quality advice, referring to the Competition and Markets Authority (CMA) investigation into investment consultancy and fiduciary management which recommended that the regulatory scope of the Financial Conduct Authority and TPR was broadened into this sector.

He added: “We are currently consulting on draft regulations which will integrate the requirements of the CMA Order into pensions law and allow TPR to oversee the requirements.”

Opperman also agreed that sponsors should provide information in a timely manner and said that the government intends to legislate on improving communication between schemes and their sponsor “as soon as parliamentary time allows”.

In his letter, Field suggested that regulations stipulating that employer nominated trustees cannot be removed while negotiations regarding scheme protections or valuations are ongoing, unless there is a fundamental breach of duty, should be introduced.

However, Opperman disagreed with the suggestion, saying that a statutory override to trust law preventing the removal of trustees “might not be feasible and might also have unintended consequences”.

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