Over the past decade, the pensions landscape has fundamentally changed, with Automatic Enrolment, increases in life expectancy, pension scams, poor pension transfer advice, big legal changes and Guaranteed Minimum Pensions issues to name but a few.
Against this backdrop, the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have published a Joint Regulatory Strategy document (JRS) aimed at enhancing regulation of the pensions sector.
The JRS follows a joint Call for Input released in March 2018, which sought input from those with an interest in the sector to contribute. The overarching aim of the JRS is to help the sector deliver the best outcomes for pension savers and those in retirement, now and over the next decade(s).
The JRS identified the following four themes;
• People struggling to maximise their pension savings;
• Money not being managed in line with savers’ needs;
• Pensions not being looked after properly; and
• People not being enabled to make good decisions.
From these four themes, the JRS has identified four main objectives:
To ensure that pension and retirement income products support people and increase their financial provision for later life.
This can be achieved by the coordinated actions of Government, Trustees, employers and employees. TPR wants to ensure compliance with auto-enrolment requirements and also an increase in the level of contributions being made and that existing schemes are resourced to provide better member outcomes.
Firms such as Quantum offer support for such provision through providing training and producing communication material for all, highlighting the issues and explaining the benefits of saving for later life.
Pensions are well-funded and invested appropriately.
In the case of both Defined Benefit and Defined Contribution pension provision, the funds need to be invested appropriately, with a balance struck between achieving good investment returns commensurate with a reasonable level of risk. To achieve this, the JRS proposes:
• Being more proactive by initiating one-to-one supervision with a “select” group of Defined Benefit schemes;
• Undertaking closer governance supervision for Defined Contribution schemes’ default funds;
• Potentially extending the FCA’s regulatory remit in line with the Competition and Markets Authority’s recent recommendations;
• Having an increased focus on Environmental, Social and Governance factors in investment decisions.
Trustees will be encouraged to work closely with their advisers to ensure that the necessary outcomes are achieved. If they find that Trustees are slow to engage then more regulation may be forthcoming.
Pensions are well-governed, well run and deliver value for money.
Pension providers should have strong administration processes and systems and governance should be clear and effective. Funds and their data should also be protected appropriately from security threats.
Both Regulators intend using a broader range of powers to counteract poor governance and administration by supervising master trusts, introducing more regulation of public-sector schemes and assessing governance arrangements in unit-linked and with-profit funds. They also intend increasing collaboration with providers to promote data quality and security.
Access helpful information, guidance and advice that enables them to make well-informed decisions.
Engagement, understanding and support are the key ingredients to assist individuals to make good decisions. Both Regulators intend launching a joint review of the consumers’ “pensions journey” in 2019 to not only examine the information that pension schemes and providers supply but also the guidance provided by external advice services.
Joint initiatives are planned to improve consumers’ understanding and engagement including supporting technology-based innovation and implementing the Retirement Outcomes Review proposals published by the FCA in June 2018 which focussed on the need to improve the quality of information that consumers are receiving.
There are also proposals to support the Department for Work and Pensions and the wider pensions industry in areas such as the pensions dashboard implementation.
It goes without saying that even if there were no new issues arising in the pensions industry over the next decade, it certainly won’t be a quiet period. All within the industry must pull together if we are to combat the problems that have arisen to date. ●
Samantha Willoughby, Compliance Manager