Regulation
Pensions regulation comes in many forms. In addition to legislation from Westminster and Brussels, regulatory bodies such as The Pensions Regulator and the Financial Services Authority play a crucial role in shaping the environment in which pension schemes operate.
The NAPF lobbies policy-makers at all levels to ensure we have an environment in which workplace pensions can flourish.
NAPF’s view
Pensions regulation must be simple, cost-effective, flexible and understandable for sponsors, trustees and members alike.
Scale and good governance should be the two key elements in the pension schemes of the future. The Government should encourage the creation of ‘Super Trusts’ - large-scale, professionally run schemes that would offer high-quality pensions. Super Trusts’ economies of scale would enable them to keep the costs to members low.
We developed these views in our response to the Pensions Regulator’s recent – and very important – consultation on the future of Defined Contribution pensions.
The regulatory and tax framework must encourage rather than discourage pension provision. And it must recognise that a completely risk-free environment is neither possible nor desirable.
There is scope to scale back the current, very prescriptive, volume of pensions legislation. We want to see higher-level regulations and codes of practice that place more initiative and responsibility with trustees and scheme managers.
- The Government has attempted to provide more flexibility by allowing DB pension schemes to index pensions by the Consumer Price Index, rather than the Retail Price Index. However, the handling of the issue has generated significant costs and uncertainty for many pension schemes.
- Accounting standards have contributed to the extra pressures on pension schemes. By adopting a short-term view of liabilities that will actually be met over many decades to come, standards intended to boost corporate transparency have actually incentivized companies to pare back their support for workplace pensions. The NAPF is developing new thinking that would provide the transparency that investors require while ensuring that long-term decisions are not taken on the basis of ‘snapshot’ accounting numbers.
- The NAPF would like to see a single regulator for pensions, with the FSA’s responsibilities for stakeholder pensions and group personal pensions transferring to the Pensions Regulator.
- We have proposed a new, additional, statutory objective for the Pensions Regulator: to promote the provision of good pensions and to ensure their health and longevity.
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