UK – The Occupational Pensions Regulatory Authority has called for the planned new pensions regulator to have clearly-defined responsibilities, saying that current pensions law lacks definition – which it admits has restricted its operations and caused frustration.
The government proposed a new pensions regulator with a boosted budget and wider powers in its Green Paper in December.
“We believe that the ideal pensions regulator should have statutory objectives,” says Opra’s chairman Harriet Maunsell. She says the new regulator should focus on four main areas.
They are: breaches with a “significant detrimental impact” on members’ benefits; breaches that carry a criminal penalty; possible mis-use of assets or contributions and poor standards of trustee stewardship.
“At times the Pensions Act 1995 has restricted how and what we do, in a way that we have found frustrating,” Maunsell says.
“We know that others expect us to be able to investigate matters which, because they are not breaches of the Pensions Act, are outside our powers. We want to focus on the real risks to members, and we want the remit to be a flexible regulator rather than a prescriptive one.”
She says that existing legislation goes into great detail about how occupational pension schemes should be run – at the expense of an overall view of what it is trying to achieve. “However, the overall purpose of the Pensions Act is not defined – either in outline or in detail,” she writes in an Opra bulletin. She says Opra always “assumed” that the purpose of the Pensions Act was to make pensions safer.
The experience of the last five years, Maunsell says, has given Opra a good idea of what the real risks to pension schemes are. It says it prefers a looser regulatory environment; it is now reviewing its guidance to statutory reporters such as scheme auditors and scheme actuaries to give them more discretion in deciding what needs reporting.
Opra acknowledges the frustration some have felt. “So far, Opra has been a regulator of processes, not of outcomes. This is clearly not what pension scheme members and the public expect.”
The new regulator is to have a budget of around 20 million pounds per year. The Green Paper proposes that the new regulator’s extra costs are to be funded through a levy on occupational and personal pensions.