TPR has published papers setting out its regulatory approach, a new code of practice and a regulatory guidance document and is asking the industry for views on all three documents.
It also wants master trusts to be able to demonstrate independent assurances that they comply with its DC quality features to ensure conflicts of interest do not arise. It says this is necessary because of the significant numbers of workers expected to be automatically enrolled into this segment and the low barriers of entry for providers.
The regulator has also published initial analysis showing good alignment between the DC quality features and FSA requirements for work-based personal pensions.
Later in 2013 it expects to produce a final version of analysis of how member benefits are protected in work-based personal pensions. It will also agree joint working protocols with the FSA, and its successor bodies, to determine how breaches of the law should be dealt with between regulators.
Chief executive of The Pensions Regulator Bill Galvin says: “Where we find schemes fall short of the standards we have set out, we will expect them to improve. Some smaller schemes may find this challenging and decide that the interests of their members would be better served in another type of arrangement.”
TUC general secretary Frances O’Grady says: “We particularly welcome the focus on pensions company sponsored mastertrusts where there are real concerns about conflicts of interest. Many of these were set up to exploit the loophole that allows employers to get their contributions back through short-service refunds – but this runs completely counter to the interests of members.”
Key elements of the package of measures published for consultation today include:
• A set of 31 DC quality features covering key areas such as contributions, investments, governance standards, administration, value for money, converting a pension pot into a retirement income and member communications.
• A ‘comply or explain’ regime – occupational DC trust-based pension schemes will be expected to adopt a disclosure framework to demonstrate how they comply with the DC quality features, or to be able to explain any inconsistencies. Disclosure will require trustees to consider what processes are in place that ensure the presence of the each feature. Schemes might choose to disclose this information via their annual report.
• A Code of Practice for occupational DC trust-based pension schemes that provides practical guidance on the requirements of pensions legislation and sets out standards of conduct and practice expected of those responsible for running schemes. Standards set out in the code will be a key reference as to whether enforcement action is necessary.
• The DC Code should be read in conjunction with regulatory guidance setting out good practice standards in areas such as value for money, transparency of costs and charges and member communications.
• Where trustees fall short of the standards expected the regulator can issue notices directing compliance with the law, fines and remove trustees and replace them with new ones.