If you were designing a pension system from scratch today, you probably would not opt for dual regulation of its constituent parts.
But nor would you design so many variations of pension product. Whether we like it or not, we have abundant complexity from decades of policy changes, regulations and ultimately, product innovation.
But this history is not all bad.
The Financial Conduct Authority and The Pensions Regulator's joint strategy – entitled, Regulating the Pensions and Retirement Income Sector: Our Joint Regulatory Strategy – comes at a time when the state pension has already been simplified, almost 10m people have been auto-enrolled into a pension and the retirement market has been transformed to offer more flexibility for consumers.
And of course there are plenty of other initiatives already underway, such as the development of the pensions dashboard and the creation of a single financial guidance body.
You could argue that – aside perhaps from tax relief – the big ticket strategic questions for politicians on pensions have largely been answered. And we have relative consensus among parties.
There was clearly still some feedback from respondents that one regulator for pensions is enough, but it was in the minority.
I used to subscribe to this view, until I realised the value of having the specialism of TPR; something that could easily be lost if it were subsumed within a much larger organisation with a broader remit.
You only need to look at the rocket science involved in regulating defined benefit schemes to see this. It would be a bit like suggesting you combine the driving test for cars with those of HGVs, as if they were sufficiently similar.
You cannot fault the approach taken, with both regulators jointly consulting and running workshops around the country to gather feedback from key stakeholders. I attended the Edinburgh event and it was clear to me they were in listening mode.
There are two statements that stand out for me.
The first is the simple acknowledgement of the risk of: "people not having adequate income, or the level of income they expected, in retirement".
There is a subtle but significant distinction in this statement. In short, the second point is addressable if we can educate people sufficiently and achieve some level of engagement.
It is pleasing to see this general theme of engagement throughout the paper, and I am wholly supportive.
However, the first part of the statement is not necessarily solved by the second.
Key Points
- The Pensions Regulator and the FCA have published a joint strategy paper on retirement saving
- Education is a key aspect for getting people to engage with saving for the long term
- Consumers are starting to learn how to spot pension scams
In fact, it seems inevitable that for at least the many people already in the twilight of their careers, a lack of any pension saving to date cannot easily be rectified.
For this population, saving something now will definitely help, but many will not have what they will describe as an adequate income in retirement.
The strategies outlined in the paper are welcome, but we have to be realistic about the timescales over which they will make a notable difference to people’s retirement outcomes. The second statement that stands out is that the strategy seeks to “go beyond the traditional view of a pension pot as a passive receptacle for money”. While I do not believe anyone has ever described a pension that way in practice, the point is well made.
