NAPF annual conference – ‘Be careful what you wish for” – Norgrove

Responding to the publication of a NAPF report into the regulatory burden of UK pensions, Norgrove accepted its findings that DB schemes in the UK do exist under a high level of regulation, but said this was a consequence of adopting a scheme specific approach that allowed greater flexibility in funding levels.
The report, published tomorrow, compares the levels of regulation in the UK, Australia, Germany, Ireland, Holland and the US across plan design, security of benefits and governance.
It found the UK is most restrictive and expensive when it comes to DB plan design because of the cost of mandatory indexation for pensions in payment and deferred benefits. The UK’s DC pensions were the least costly and most flexible, however.
UK pensions performed well on benefit security, but domestic DC plans came bottom of the table for governance when compared to their overseas counterparts.
Presenting the report, Ruth Goldman, chairman of the NAPF Benefits Council said: “This report concludes we are out of step on mandatory indexation. We are middle range when it comes to DB governance, although when you consider that the majority of very small schemes we have, this places a disproportionately high burden on these schemes. And UK GPPs are out of line because there is no fiduciary duty on employers with regard to schemes.”
Norgrove said: “We could have a high solvency standard – Solvency II for example, and a good deal of regulation could be thrown away. In the UK we have opted for a more pragmatic solution, hence the heavier regulatory requirement.
“I note that the cry for lighter touch regulation is less than it was given the current state of the market. Weaker regulation tends to have a relation to stricter funding requirements. Be careful what you wish for.”