Retirement savers are being unfairly targeted by the “hidden costs” of rising administration charges, according to Tom McPhail, a governor at the Pensions Policy Institute.
McPhail made the remarks in response to the Department for Work and Pensions issuing a consultation on increasing the general levies that pension schemes will be required to pay from April next year to March 2030, the result of which could see the costs rise by as much as 9 per cent in this time period.
“We need to think really hard about how we can reduce the hidden cost of regulation (of pensions), rather than just always adding more and more regulation,” says McPhail in comments made to Corporate Adviser.
The DWP is proposing higher rates to address a funding shortfall and cover the increasing costs of said regulation, including through The Pensions Regulator and The Pensions Ombudsman.
McPhail countered this claim with a call to merge regulatory bodies, particularly with a perceived overlap of responsibilities within the Financial Conduct Authority and TPR.
McPhail says: “You’ve got two different regulatory authorities, both regulating essentially the same institutions providing the same services to the same customers.
“Someone needs to bang their heads together, and actually just find ways to merge the institutions because underlying all of this is because as a country where we’re just going bust, we’re living beyond our means.”
McPhail was also critical of areas such as Task Force on Climate-related Financial Disclosures reporting for pension schemes, arguing that it was “highly paid, intelligent, skilful people spending large amounts of time and money putting together a load of reporting data that largely doesn’t get read.”
He went on to predict that costs of pension administration would only increase as schemes later seek to fulfil legal obligations passed as part of the Pensions Schemes Bill, such as the upcoming Value for Money framework. Former pensions minister Guy Opperman has been previously critical of VfM in its current form, warning that it risked becoming an “exercise in bureaucracy”.
McPhail was also previously head of policy at Hargreaves Lansdown, and is a trustee director at Aviva.
The DWP has been contacted for comment.
