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In its response to the TPR’s consultation on the Code, the NAPF supported the Regulator’s efforts to improve DC pensions. But it warned that the Code’s remit to tackle only trust-based DC pensions means that it will not affect more than a half of the DC market. And the overly prescriptive nature of the Code may push employers offering trust-based pension schemes into contract-based pension schemes.
The NAPF also raised concerns about the lack of clarity around parts of the Code. The Code conflates compulsory legal requirements with ‘best practice’. The NAPF is calling instead for a slimmer, clearer and objective-based code. It is also urging a rethink of how workplace DC pensions are regulated to ensure that all types of pensions are targeted by any efforts to improve their quality. The NAPF is arguing that there is a strong case for the Pensions Regulator to take a greater role in regulating all workplace pensions, including contract-based schemes.
Darren Philp, Policy Director, NAPF, said: “We support the Regulator’s overall aim of improving defined contribution pensions. With millions of workers now being auto-enrolled into these pensions, it is essential that the Regulator focuses on getting them right. All pensions should meet high standards, so we are disappointed that the proposed Code does not cover contract-based schemes. This raises important questions about how workplace pensions are regulated. We strongly believe that any effort to improve the quality of pensions should target all types of pensions.
“We are also concerned that this Code risks being counterproductive. This Code is highly prescriptive and, by focusing on only trust-based schemes, there is a danger that companies offering these pensions will decide to drop them in favour of contract-based pensions, which may not be in the members’ best interest.”
Currently, trust-based DC pensions are regulated by the Pensions Regulator, while contract-based DC pensions are subject to the scrutiny of the Financial Services Authority (FSA).