UK – The UK government has said contract-based pension funds could be forced to set up member committees overseeing pension arrangements, with the Department for Work & Pensions (DWP) recommending this occur at the level of provider rather than individual scheme.
Responding to the work and pensions select committee's report on governance from late April, the government once again said it was opposed to the creation of a single pensions regulator, a move urged by the committee.
Addressing calls in the parliamentary report for better governance in workplace pensions, the DWP noted that forthcoming quality standards on defined contribution (DC) would apply equally to contract and trust-based funds, thereby setting minimum governance standards.
In its response, the department said: "There are a number of facets to good governance, but one critical element we wish to explore is whether all schemes should have a body overseeing them that represents the interests of members."
It noted that, in the case of trust-based arrangements, trustees also provided such oversight – but acknowledged it would not be realistic to force certain funds to set up such committees.
"It does not seem proportionate for all of the small and micro employers that will be setting up pension schemes as part of automatic enrolment to put individual governance arrangements in place," it said.
It instead suggested that committees above each individual contract-based fund could handle oversight.
"This could be at provider level, or some intermediate arrangement, though we would not wish to preclude employers who wish to set up governance committees from doing so," it said.
The creation of a single pensions regulator, recommended by the committee in its initial report and by a previous National Audit Office study, was unsurprisingly ruled out.
The DWP noted that the current arrangement – whereby the Pensions Regulator monitors trust-based funds and the Financial Conduct Authority is charged with oversight of the insurance sector – was "sound".
"However," it added, "as the market is evolving in response to automatic enrolment, it will always be necessary to test whether the regulatory interventions in relation to particular issues are effective."
Opposition to a single regulator does not come as a surprise, as junior Treasury minister Sajid Javid previously told a National Association of Pension Funds conference that no reorganisation of the current system would occur.
The DWP did not directly respond to the committee's lukewarm reception of its defined ambition (DA) agenda.
While conceding that the majority of employers would use DC schemes for automatic enrolment, it "welcomed" the committee's comments on DA and added that it would seek to put in place the necessary regulation to allow greater risk-sharing by 2016.
The committee had previously said the DWP's focus should remain on DC regulation while it investigated DA funds, noting that they would only be a viable option for a "small minority" of workers.