The UK should consider allowing a single regulator to take the lead on defined contribution (DC) regulation but not pursue a merger of the Financial Conduct Authority (FCA) with The Pensions Regulator (TPR).

The Pensions Policy Institute (PPI) said it was unclear whether there would be benefits to the launch of a single regulator, rather than having trust-based schemes overseen by TPR and contract-based arrangements supervised by the FCA. 

However, it questioned why TPR had, in contrast to the FCA, no duty to protect the overall integrity of the pensions market and said that, in absence of a single regulator, one of the two bodies should be asked to lead on matters of pension regulation.

Melissa Echalier, senior policy researcher at the PPI, noted that comparing the two regulatory regimes was difficult, as they were for types of provision that had developed over many years.

“However, the implementation of automatic enrolment in which trust and contract-based pensions have been used for similar groups brings into contrast the two regulatory regimes, and it is clear they both have strengths that could helpfully be used by the other regulator,” she added.

The PPI said the FCA’s focus on preventing adverse events was “valuable” when there were new and emerging priorities within the market, pointing to the growing importance of master trusts.

The FCA’s current approach to authorisation and monitoring of companies is stricter than the rules applied to master trusts, regulated by TPR, the PPR noted, with interviewees contributing to the report warning that the lack of supervision risks leading to poorer outcomes for savers if a master trust is forced to wind up.

The concerns around entry requirements for master trusts have not gone unnoticed by TPR.

Its chief executive Lesley Titcomb recently hinted that the Master Trust Assurance Framework – so far only completed by four schemes – could be made mandatory for all providers.

The acceptance by those interviewed by the PPI that merging regulators would not be “straightforward” echoes concerns by the government, with former pensions minister Steve Webb saying a single regulator was not one of his concerns.

New pensions minister Ros Altmann has stood by remarks from both her predecessor Webb and Treasury ministers that the government was not considering further change.