THE FSA has no plans to extend its powers to cover occupational schemes at present, but says it will look again at the issue if commission through trust-based arrangements becomes prevalent. Some providers have said they will offer pension business on a trust-based basis, offering both the ability to sidestep the requirement of the RDR and also to allow employers to rebate contributions to staff thatleave within two year. Experts have pointed out that the FSA has no jurisdiction over occupational schemes, and that changing the law to give them such power would require primary legislation.
But other providers, including Scottish Life and Friends Provident are urging Government to ensure a level playing field between trust- and
contract-based pensions. The FSA says: “We agree that there would be potential for firms to select the occupational pension route in order to avoid our regime. To address this, we have looked at the possibility of banning commission on investment products linked to occupational pension schemes used as alternatives to GPPs and bring forward proposals to this effect in this CP. We do not feel that it is necessary at this stage to investigate extending our regulatory scope, but will revisit this if the market develops along occupational scheme lines.”
James Ward, director of UK Corporate for Friends Provident says: “We need to go further to create a truly level playing field between different types of scheme. For example the rules on refunds of contributions in the first two years will become a more important factor for employers once auto-enrolment is implemented.
New regulation puts more focus on these differences and regulators need to take coordinated action to ensure customers’ best interests are protected.”
