The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) vowed to continue working together to make the UK pensions systems work for everyone.
The two regulators were updating delegates at the Pensions and Lifetime Savings Association’s annual conference on the pensions value for money (VFM) framework consultation.
The latest consultation, on detailed rules and guidance, began in the summer and ends this week.
Nina Blackett executive director strategy policy and analysis at The Pension Regulator said: “We have a unique opportunity to make the pensions systems work for everyone, auto enrolment has doubled participation with eight out of every 10 workers now paying into a pension.
“But now we have the challenge of making sure those savers get value from the system.”
Nike Trost, head of asset management and pension policy at the FCA, reminded delegates that the value for money consultation had introduced the concept of three pillars on which the metrics would be based. These included investment return, high quality service and cost.
She said: “Over 90 per cent of members are in default arrangements, relying on employers and trustees to make decisions for them. It can be difficult to understand the value different schemes offer and the default option is often a decision based on cost.”
“We want schemes to disclose how they are doing across those three pillars.”
Proportionate
Trost said it was open to discussion around the suggested use of a traffic light system, red, amber and green.
She said nothing was set in stone and both regulators also wanted the pensions industry to be involved in drawing up ideas on the “right action that needs to be taken if a scheme is found not to be providing value”.
“We are interested in hearing that and evolving the proposals as necessary.”
Delegates questioned the need for more regulation, and asked if there was any chance of streamlining the proposed framework.
Trost said: “We have looked carefully at the cost and benefit and because of the size of the pension market, bringing up some of those at the bottom will drive up the rest.”
“That’s not to say we shouldn’t look at the proposals and see how we can streamline that.
“We are keen to set out the whole range of options and we can streamline them.”
Blackett said the intention was for the value for money framework to evolve - possibly to include ESG and responsible investment which were not included in the initial framework.
She said: “Nothing is set in stone and we are really interested in your thoughts.”
Questions were also raised about productive finance and whether the government’s drive for pension funds to invest more in UK startups and private equity was at odds with the concept of value for money.
