Regulation of work-based DC pension schemes

There are a number of different bodies involved in the regulation of work-based defined contribution (DC) pensions. DWP and HM Treasury are responsible for policy and regulations and, in addition, there are three regulatory bodies: The Pensions Regulator (TPR), the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

In July 2012, the National Audit Office expressed concern that there was no single body leading on regulating DC schemes, setting objectives or measuring performance. In April 2013, the Work and Pensions Committee expressed concern about “regulatory gaps” and recommended that the Government reassess the case for establishing a single regulator.

In its triennial review of pension bodies published in January 2014, the Government said that the question of whether there should be a single regulator was the one that attracted the widest range of responses. There was no consensus about the need for change or what the most appropriate way forward might be (although there was consensus that in the short-term, the focus should be on auto-enrolment). The Government concluded that while a single-regulator might be able to do more to ensure consistency of approach, it would give rise to a different set of issues. It concluded that there was no structure that was clearly and unambiguously better than the one already in place. However, significant changes in pensions were in prospect with the implementation of auto enrolment, and the issue would need to be reviewed at a later date.

This note aims to provide an overview of the regulatory arrangements for work-based DC pensions and the arguments for having one regulator or two. Measures to improve the quality of work-based DC pensions within the existing regulatory framework are discussed in more detail in Library Note SN 6956 Improving outcomes for DC pension savers (September 2014).