Millions of people are gaining a private pension for the first time as employees paying into obligatory workplace schemes. However, three different regulators currently oversee the sector, which the Work and Pensions Select Committee believes is a recipe for disaster.
MPs are particularly concerned about potential disputes over newly enrolled members with little knowledge of the industry being forced to pay consultancy fees when setting up a new pension.
“The government should reassess the case for establishing one body with sole responsibility for regulating workplace pensions,” said committee chair Dame Anne Begg MP. “This body must be invested with sufficient powers to ensure that all members of workplace pension schemes are given the level and consistency of protection they need.”
The committee says that having multiple watchdogs – the Pensions Regulator, the Bank of England’s prudential regulation authority, and the Financial Conduct Authority (FCA) – raises the prospect of gaps emerging in the regulatory system.
Pensions expert Tom McPhail of Hargreaves Lansdown said the MPs are “right but for the wrong reasons”.
“The only workable answer is to roll all of the Pensions Regulator’s activities into the FCA and for the FCA to have sole responsibility for all aspects of the pensions system,” he insisted.
Other issues raised as part of the committee’s inquiry include the poor financial literacy of many workers and the need to ensure workers shop around for an annuity on retirement.
Earlier this week the government confirmed plans for small pension pots to follow employees when they move to a new job, in an attempt to cut the number of dormant accounts.