The pensions industry has urged caution over proposed plans merge a number of financial regulators into one ‘mega-regulator’.
These plans were initially proposed on the campaign trail by Liz Truss. Now she has been confirmed as the next prime minister, there is speculation as to whether these ‘kite-flying’ proposals will proceed into policy in the future – particularly given the number of urgent issues in the new government’s in-tray, which include the escalating cost of living crisis, a potential winter energy shortage and the ongoing war in Ukraine.
AJ Bell head of policy development Rachel Vahey says that merging regulators is a complex task. “Each has specific duties and tasks, and in the meshing of the regulators it would be important to make sure that the key protections of each are still carried out.”
However she adds that in the pensions sector there may be some benefits to merging the two main regulatory bodies: The Pension Regulator (TPR) and the Financial Conduct Authority (FCA).
“There could be a case for merging the FCA with the Pension Regulator to create just one regulator responsible for all defined contribution pensions. This would help bring consistency for all pension consumers, meaning they get the same level of protection regardless of the background surrounding how the pension is established. It would also be easier for providers implementing new rules, who have found in the past that two sets of rules from two regulators are contradictory in practice.”
She adds: “This review could include a closer look at the role the Financial Ombudsman plays, and the extent to which it should support and uphold the FCA regulations.
“As Truss gets her feet under the desk at Number 10 we will see whether the threat of a mega-financial regulator was mere chest beating designed to send shock waves, or whether she truly believes this is the right way forward to protect consumers.”
