That was the question that was asked by one of the panellists at the launch of the PPI’s “Comparison of the regulatory frameworks for DC pensions.
I am listed as one of the people providing input to the production of the paper and – though I am bound by Chatham House rules not to credit the views expressed by others, I am happy to add my tuppence to the conversation.
The first thing I’d say is that the gulf between the policy wonks who attend meetings like the one I went to, and the practitioners tasked with establishing DC pensions for 1.8m employers is wide- very wide.
I counted two practitioners in the room – about 2% of those present. For the majority of the people in the room, understanding about how employers actually behave when choosing and monitoring pensions, results from discussions like these.
Since these discussions are exclusive, there is a danger of policy being created in a vacuum. But back to the question in hand and the obvious supplemental
The FCA registered Master Trusts – so what?
Well I think we’d see some major changes
- The majority of small master trusts would merge around the two or three that had serious business plans. Quite simply the FCA’s fees and reserving requirements would see to that.
- The Master Trusts that remained would be run with governance that looks a lot more like IGCs than the occupational trust model currently in operation.
- Professional trustees would be protected from Master Trust failure by the reserves and would not have to raid member’s funds as happened in one recent instance.
- Those organisations looking to set up fraudulent master trusts would turn their attentions elsewhere.
- The overall standard of governance would be consistent across GPPs and mastertrusts leading ultimately to a simplification of provision.
There is no obvious reason why master trusts and contract based should not be regulated in the same way and there is much to be said for the single regulatory approach. I have argued for it for some time on these pages. It is true that there is a lot more expertise of collectives in Brighton than Canary Wharf, but that doesn’t mean that it can’t be merged.
Everyone on the Regulatory side was extremely nervous when this suggestion was made and the occupational scheme trade body present made it clear that despite recent noises about changing- it wasn’t for changing on this. A spokesperson for the DWP looked wearily at the issue (clearly a veteran of such internal organisational change!). There were mutterings from the floor.
Well the lady in charge at TPR- who I happen to like very much – is from the FCA and – for all I know- she may be reading this. If she is, she will have a much better idea of what to do than me. But what is clear is that something has to be done.
The PPI paper- which is well worth reading – is robust – it pulls no punches. It lacks the connection with the shop floor that we found in the OFT report and suffers from a lack of awareness of what is going on – on the buy-side.
But that’s my job- our job- the job of those involved in the day to day implementation and management of workplace pension schemes.
For what it’s worth, the best of tPR and the best of FCA would be a world-class DC governance team, we need strong leadership – and tPR have it. FCA have no leader since the demise of Martin Wheatley. But if it continues to make the strides it has done since it’s rebrand (and under Wheatley), I think it is inevitable that – if it not fully merged, the tPR’s DC governance team – should and will be reporting to the FCA before too long.