The Pensions Regulator should make better use of its powers in order to avoid making the same mistakes as its predecessor the Occupational Pensions Regulatory Authority (Opra), according to The House of Commons Committee of Public Affairs’ report The Pensions Regulator: Progress in establishing its new regulatory arrangements.
The report states that although the Pensions Regulator has been given greater powers than Opra to intervene where pension schemes are not governed well, in order to protect members’ benefits it has so far been reluctant to use them. “Whilst [the Pensions Regulator] should only use such powers when there is good reason to do so, it must avoid appearing reluctant to use them.”
It concluded that the regulator should ensure it treats all pension schemes differently to determine what schemes present the greatest risk. It also said that although the regulator has made good progress reporting on 99% of final salary schemes, it has been inactive in overseeing defined contribution (DC) schemes as it has so far only reported on 32% of DC schemes, which should be addressed.
Helen Dowsey, principal in the benefit solutions division at Aon Consulting, said this is too severe. “The regulator has actually been very active in paying attention to these schemes. Over the last 18 months or so the regulator has issued a series of documents specifically addressing the risks facing members of DC work-based pensions.”
The Pensions Regulator is also criticised in the report for not improving the level of understanding scheme members have of DC arrangements. “[The Pensions Regulator] should review with the Financial Services Authority the adequacy of the information provided to members about their likely pensions and work with the Financial Services Authority to fill in any gaps attended,” it said.
The regulator has also been recommended to encourage trustees to further make use of its guidance and should be transparent in its decision making.
Liberal Democrat shadow work and pensions secretary Danny Alexander, said: “The Pensions Regulator has made good progress in rebuilding consumer confidence in the pensions market. However, it must now turn its attention to the increasing number of DC schemes which have overtaken final salary schemes.
“Final salary schemes will become increasingly important. The regulator must ensure members are sufficiently protected, without unnecessarily over-regulation.