In response to the UK’s consultation on The Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2021, which closed yesterday, the Pensions and Lifetime Savings Association (PLSA) has called on The Pensions Regulator (TPR) to focus on the next phase of collective money purchase (CMP) regulations.
The PLSA welcomed the creation of an authorisation regime for CMP schemes and the accompanying regulations, and stated it was “important to have a robust authorisation regime for collective money purchase schemes that will engender trust with members”.
However, the PLSA noted that the current scope of regulations includes single employers and connected employers.
“We have previously commented that it is not clear that there is demand from employers to provide such schemes, particularly as many have already invested heavily in high quality individual DC provision,” said Craig Rimmer, PLSA’s policy lead, master trusts and standards, in its response.
He explained that master trust and multi-employer scheme members “are keen” to see the next phase of CMP regulations, which the pensions minister has indicated will cover industry wide schemes, multi-employer schemes for unconnected employers and the development of CMP schemes for decumulation purposes only.
“We support this intention,” Rimmer said, adding that the regulations “are sensible in taking into account the possibility of future tranches of collective money purchase benefits yet to be created that could accrue benefits at different rates”.
Furthermore, the PLSA also warned of concerns about the definition to qualify as a CMP scheme, which “appears at first glance to be quite loose, and would need careful and attentive authorisation review”.
“For example, some DB schemes have scheme rules that enable them to reduce benefits when the scheme is in deficit and an unscrupulous sponsoring employer may be tempted to do so by self-declaring their pension to be a CMP scheme,” it said.
The association stated that the concept of soundness, in respect of the scheme design, needs to be more clearly defined as currently it is open to interpretation.
In his response, Rimmer added: “Given the potential of CMP schemes to result in saver misunderstanding of benefit levels and the real danger of the development of intergenerational issues, it is important that trustees of CMP schemes are fully compliant with their TKU [trustee knowledge and understanding] requirements and operate at the highest level of capability.”
He said the pensions regulator should take account of the higher and somewhat defined benefit-like governance on levels of competency when drafting guidance.