Pensions regulation is often criticised as being overly complicated and prescriptive, and arguably would benefit from higher-level regulations that give more initiative to trustees and scheme managers. Here, we present some of the regulatory bodies that employers should be aware of in pension matters.
Department for Work and Pensions (DWP)
The Department for Work and Pensions has enormous influence on the regulatory environment. It is currently considering a ban on consultancy charging; a decision is expected in February or March. Advisers had hoped that under new rules banning commission payments, an adviser that helped an employer set up a pension scheme could be paid a fee derived from members’ pension pots. Employers do not generally have to deal with the DWP direct.
Contact the DWP.
The Pension Protection Fund (PPF)
The Pension Protection Fund (PPF) is the safety net for members of schemes whose sponsors have failed or lost out through fraud.
If an insolvent employer’s scheme cannot afford to buy annuities for members at the level of compensation, its assets are transferred to the PPF, which invests it and assumes responsibility for paying compensation.
The PPF is funded by levies on all defined benefit and eligible hybrid schemes, which have a 20% scheme based element and 80% risk-based element, depending on the level of underfunding in the scheme and the probability of the employer failing in the following year.
Contact the PPF: Knollys House, 17 Addiscombe Road, Croydon, Surrey CR0 6SR Telephone: 0845 600 2541.
The Pensions Ombudsman
The Pensions Ombudsman adjudicates on complaints about how schemes are run, generally from members. It has just piloted a new process for dealing with cases, issuing an Investigator’s Opinion to both parties.
Contact the Ombudsman: 11 Belgrave Road, London SW1V 1RB Telephone: 020 7630 2200.
The Pensions Regulator (TPR)
While some regulations are laid down in Westminster and Brussels, The Pensions Regulator (TPR) and the Financial Services Authority (FSA) are directly responsible for how pension schemes operate.
TPR has to balance the conflicting aims of safeguarding members’ benefits and reducing claims on the pensions lifeboat, the Pension Protection Fund (PPF).
TPR has also issued codes of practice for defined contribution (DC) schemes, such as the six principles for good work-based DC. It has also set targets for record-keeping, which is particularly critical for DC schemes because contributions and investments must be executed at the correct time.
Contact TPR: Regulation enquiries: 0845 600 0707 Automatic-enrolment enquiries: 0845 600 1011 Levy enquiries: 0845 600 5666 Whistleblowing: 0845 600 7060.
The Financial Services Authority (FSA)
While The Pensions Regulator (TPR) looks after trust-based schemes such as defined benefit (DB) plans, the FSA is responsible for contract based schemes such as group personal pensions (GPPs) and stakeholder plans. This means the FSA will normally deal with providers such as insurance firms, rather than employers.
Several groups, such as the National Association of Pension Funds (NAPF), would like to see a single regulator for pensions, with the FSA’s responsibilities transferred to TPR. In practice, this is already happening because TPR is responsible for ensuring employers comply with auto-enrolment legislation, by setting up a qualifying scheme, monitoring their workforces and enrolling the correct employees.
Richard Wilson, senior policy adviser at the NAPF, says: “Having auto-enrolment makes this a completely different ball game.”
Contact the FSA: 25 The North Colonnade, Canary Wharf, London E14 5HS Telephone: 020 7066 1000 Customer helpline: 0845 606 1234 Customer services: 0845 606 9966.