Regulatory capacity crunch?

This year could turn out to be a lucrative one for lawyers in the pension and investment sectors. Deciphering Brexit implications, ensuring compliance with IORP II and localised rulebook changes potentially coming to Ireland, the Netherlands and the UK (among others) will all keep the legal profession busy for years.

On the other side of this equation sit the regulators, and it is here where there are capacity questions. The IORP directive alone has introduced new flexibilities, limitations and even new pension vehicles in some countries, with the onus on national regulators to enforce compliance and report back to European supervisors. See pages 10-11 for a rundown of how IORP II has – or hasn’t – been implemented across the EU.

Capacity to enforce new rules is a particular issue in the UK. Often seen as ahead of the game on regulation and oversight, the UK’s regulators are facing a substantial increase in workload this year. Brexit – whatever form it eventually takes – will pose its own challenges, but the Pensions Regulator (TPR) and Financial Conduct Authority both face significant additional pressures. 

Among the items on the UK agenda are: a new authorisation regime for auto-enrolment providers, emerging commercial consolidation vehicles, potentially more stringent funding requirements, pension fraud work, and new rules emerging from the review of fiduciary managers and consultants. Of those, only auto-enrolment was mentioned in TPR’s annual report when explaining the projected 13.7% increase in its budget between 2018 and 2020. 

When rolling out amendments and additions to rulebooks, EU and national lawmakers must consider the added pressure this will put on their regulators. More rules with no more money or resources to enforce them will inevitably weaken enforcement and negate the impact of requirements designed to protect savers and pensioners.

Nick Reeve, News Editor

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