LONDON (Reuters) - Britain’s financial watchdogs want to beef up scrutiny of companies providing pension schemes to up to 8 million people who will be automatically enrolled into a workplace savings plan following a government campaign.
The Pensions Regulator and the Financial Services Authority (FSA) launched a consultation on Thursday for money purchase pension plans - known as “defined contribution” (DC) schemes - looking to introduce a tighter regulatory regime and a Code of Practice for Britain’s companies to follow.
The government-backed auto-enrolment scheme, where people are required to opt out rather than opt in to retirement saving, could lead to 5-8 million additional workers being signed up for pensions and will likely be DC pensions.
“We cannot assume that they will be engaged investors or that they will take control of their savings once they have been automatically enrolled,” the Pensions Regulator said.
Pension trade bodies and business lobby groups have issued warnings about over-regulated pension schemes.
The Confederation of British Industry (CBI) said over-regulation damaged final salary-linked pension plans when the government required all such pensions to become index-linked to inflation in 1997, adding extra service costs.
“The Regulator needs to avoid placing extra burdens on schemes that are already well-managed and focus on the schemes and providers that are struggling to deliver good outcomes for savers,” Darren Philp, a policy director at the National Association of Pension Funds, said in a statement.
The FSA has responsibility for supervising and regulating around 2.5 million work-based personal pension members.
The two regulators have developed six principles that cover pension contributions, investment decisions and protection of scheme assets.
The final version of analysis and joint working protocols will be published later in 2013, the Pensions Regulator said.
Reporting by Sarah Mortimer; Editing by Mark Potter