Partner Rosalind Connor comments in Pensions Age on the pace of reform within the pensions industry
The pace of policy and regulatory reform has been ‘breathless’ in recent years, with criticism that some regulatory developments are short term in their outlook. However, there are concerns around the time and costs of complying with reform, along with unintended consequences, such as companies moving away from trust-based schemes.
Trustees may also struggle to balance between what the law requires, what the regulator suggests and the fundamental interests of their scheme when implementing change. Regulation can sometimes be too prescriptive, with tension between small schemes who may want or need more direction, and larger schemes that want and can manage flexibility.
Ultimately, what is desired is policy and regulation focusing on the ‘big picture’, with schemes allowed to find and apply their own methods of achieving goals.
On the changes to policy and regulation and the pace of the reform, Rosalind Connor commented:
“Inevitably it is both too fast and too slow. Some changes are proposed with very little warning, whereas others, such as the treatment of DB consolidators, seem to drag behind the movement of the markets.”
In relation to scheme trustees facing the issue of resources being pulled in different directions, she further commented:
“Trustees are caught between what the law says, what the Regulator or other interested parties suggest they should do, and the fundamental interests of their scheme. These are all competing for their time and attention, and time and money is spent sorting out the competing positions, before even starting to implement.”
Rosalind further commented “a lot of the proposals and ideas are of course good ones, and many well-run pension schemes look at a lot of what is presently required of schemes and think firstly that they are already quite compliant, and secondly that they are glad that others are being required to do this too.”
“However, there are problems and challenges even for the best run schemes with compliance from time to time, and other, perhaps smaller and less well-resourced schemes can find it a significant challenge.”
“On top of this, there is a great deal of scepticism on whether the schemes that can best benefit from direction and guidance, those without regular advice and input from experts, will be at all compliant, leaving a risk of over-engineering for schemes that are already in the right direction, whilst those most in need of guidance remain oblivious to what is asked of them.”
She added “there is a growing suggestion that pensions regulation puts no store by the duties of trustees, and how seriously those duties are adhered to, or by the professional expertise or judgment of advisers. Regulating on specifics may of course do something to prevent those specific problems, but in practice, ensuring that trustees and their advisers look at the big picture and do the right thing for their schemes and the schemes’ beneficiaries leads to much better outcomes. This message seems increasingly lost in the current regulatory climate.”
Rosalind concluded that “the problem is that pension schemes are pushed to focus on the latest issue, and it is easy for them to lose sight of the overall objective – providing members’ benefits – in the scrum to keep up with the latest campaign.”
Read Rosalind’s comments in Pensions Age.
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