UK – The UK government must reassess the case for a single pensions regulator, according to a parliamentary committee as it warned that part of the country's pension sector risked being subject to "less coordinated and rigorous" oversight than needed.

Publishing its report on governance and best practice in workplace pensions, the work and pensions select committee also urged the Department for Work & Pensions (DWP) to reconsider its stance on capping pension charges, questioned how successful pension minister Steve Webb's defined ambition proposals could be and urged the department not to focus on Super Trusts to the detriment of smaller, employer-backed funds.

Dame Anne Begg, chairman of the committee, said the UK government should reassess the case for a single regulator of workplace pensions, the creation of which was suggested in a National Audit Office report last year.

She added that all scheme members should be protected from "poor" governance, regardless of whether they were in a contract or trust-based arrangement.

"We do not believe this is always the case under the current regulatory system, and evidence from the regulators failed to convince us otherwise," she added.

"On the contrary, we are concerned that current gaps in regulation will be exacerbated by the fact we now have not two, but three regulators involved – the Pensions Regulator, and the new Financial Conduct Authority (FCA) and Prudential Regulation Authority, set up to replace the Financial Services Authority (FSA)."

Neil Carberry, director of employment and skills at employer lobby group CBI, dismissed the need for a single regulator.

"The Pension Regulator's own analysis shows that standards of governance are equally rigorous across both trust and contract-based schemes," he said.

Julian Webb, head of defined contribution and workplace savings at Fidelity Worldwide Investment, backed Carberry.

He argued that, while there is a case for better coordination among the various regulators, a single regulator ignores the "wider market" in which UK pension products operate.

Others, including Caroline Escott of sustainable investment association UKSIF, backed the call for consolidation.

"In our evidence to the committee, we called for a more 'joined up' approach to pension scheme regulation," Escott said.

"We are pleased the committee's recommendations recognise the problems of today's fragmented approach."

Malcolm McLean, consultant at Barnett Waddingham, expressed surprise that the government would not want to seize the opportunity by merging regulators to cut costs.

"The suspicion remains that the main driver for holding to the status quo is reluctance on the part of both parent departments – the DWP for TPR, the Treasury for the FCA – to let loose of the pension brief and cede responsibility and power to the other," he said.

The committee report also questioned the effectiveness of the FSA's former regulation of the contract-based market, noting that it deployed resources wherever it perceived the biggest risk – in the past few years, the banking sector.

"We are concerned this risk-based approach to regulation means the regulator will not start focusing its attention on workplace pensions unless or until something goes wrong," it said.

The report further called for a review of pension products and schemes with high charges, and said regulators should take action with these "outliers" where it was deemed necessary.

It also suggested the DWP review its decision not to cap charges for auto-enrolment compliant schemes every two years, starting from next year, adding that the department should act "without hesitation" if members were at risk of high charges.

A similar concern was reflected in its call for the ban of so-called active member discounts, whereby higher fees are levied at the pension savings of deferred members.

Also addressing the government's approach to consolidation, through the 'pot follows member' initiative, the committee insisted that all auto-enrolment funds were "free of high charges", a matter the government is likely to address by mandating quality standards for schemes able to receive pension pots as part of the initiative.

It welcomed the government's intention to promote the further development of large-scale, multi-employer trusts – the Super Trust concept championed by the National Association of Pension Funds – but warned that smaller employees would be likely to prefer their own pension fund.

In a likely rebuke to comments from TPR chairman Michael O'Higgins that economies of scale for auto-enrolment was a requirement, the report said: "We believe the government and the regulators should remain focused on ensuring members of smaller schemes have the same access to good governance arrangements as those in well-run large schemes and Super Trusts."

The report concluded by noting that defined ambition (DA) pension funds would only be available to a "small minority" of workers, but nonetheless said the DWP should continue examining ways to encourage interest in DA and seek to make the approach viable before the introduction of the single-tier state pension reforms.

However, it insisted that the government remain focused on guaranteeing that auto-enrolment funds offer high governance standards and reasonable charges.