The regulator is not striking the right balance in its 'clearer, quicker and tougher' approach on enforcement, according to this week's Pensions Buzz respondents.
The 83 industry professionals who took part in the survey also answered questions on whether the Financial Conduct Authority (FCA) is right to retain its rule that advisers on defined benefit (DB) transfers should start with the assumption that transfers would be unsuitable, and whether schemes should be required to re-tender for advisers after a fixed period.
Four in ten of this week's respondents believed The Pension Regulator (TPR) is not striking the right balance in its new approach and commitment to be "clearer, quicker and tougher". Although 34% said there was a good balance, just over a quarter said the regulator was not being tough enough and 14% said it was being too tough.
One commented that TPR needs to bare its teeth more frequently, while another said "where it needs to be tough it is weak, and where it not necessary to be tough it is too tough". Strong powers already available are sadly underused, said another.
Tough might not be the right word, said one, and suggested "over-zealous in trying to protect the PPF" instead. Another admitted it was "caught between a rock and a hard place".
However, 34% believed the regulator was striking the right balance. While its approach is right, "TPR is already under-resourced", highlighted one respondent.
The majority of respondents believed the FCA was right in retaining its rule that advisers on defined benefit (DB) transfers should assume transferring funds would be unsuitable. Of these, one added that contingent fees should also be banned.
There are, however, exceptions to every rule and so the premise should be that retention within a DB scheme should be the norm, explained another, but each case still needs to be investigated on its own merits as "that's what advisors are paid to do after all".
Almost a third disagreed, with one commenting that it should be left up to what is in the "best interest of the pensioner". One pundit said: "It's ignorant of the wider picture, is inconsistent with pensions freedoms and, to an extent, is lazy regulation. That's not to say there shouldn't be controls and careful management."
The starting position should be that these are completely different products, said one, while another said it was only right if the point was to ban all DB transfers.
Almost two thirds of respondents disagreed with the Competition and Markets Authority's working paper suggestion that schemes should be required to re-tender for advisers after a fixed period.
However, many were divided on what the ‘fixed period' should be. Some said no more than three years, others suggested three or five, a few suggested six, while a couple said every 10 years.
One pundit explained that it depended on the adviser. "A change to legal advisers loses much of the history associated with the scheme so needs to be considered carefully… actuaries perhaps should retender every third valuation as effectively much of their input is based on member data which should be easily transferrable through spreadsheet files", they said.
A third of respondents agreed with the CMA's possible proposal. "This is a decision for the trustee. We do not need tick-box governance", said one. "If it ain't broke, don't fix it," complained another. Re-tendering regularly is a good idea but should not be mandatory, said others, while another pointed out that it would only burden schemes with unnecessary costs.
Schemes should retender only when they have concerns about the quality of advice they are receiving, or think they are being overcharged for the advice they are receiving, said another.
Over half of this week's respondents disagreed with the suggestion that, if a trustees' calculation of a DB funding deficit was greater than that calculated by the employer, the company be required to move closer to the trustees' valuation.
Of those that disagreed, one said the question highlighted an underlying issue that it is unfair that employers are being asked to fund their scheme as if they might go bust tomorrow. Another asked: "Why assume the trustee is always right? Setting the funding level should be done in partnership and with common understanding and goals. Adopting this approach makes nonsense of the integrated risk management approach advocated by TPR."
Just under a third agreed. One explained that trustees have a duty to be more conservative than the employer, because "it all falls on them if the employer fails". Another said the scheme's actuary should have the final say. Another concluded that both parties should agree beforehand on the technical basis and subject the results to a sensitivity analysis.
Almost all (90%) of this week's respondents believed actuarial valuations of DB deficits are worth worrying about, even if they are volatile. Of the 36% who said ‘a lot', one commented that a big deficit with say a 10% margin for error was still a notable deficit, and should therefore be taken seriously.
Another explained, "it is easy to sweep an issue under the carpet using the excuse of volatility, but the reality is that any deficit is calculated using a whole series of assumptions, and if this shows a scheme to be in deficit, then there needs to an action plan to close the gap".
Of the 54% that said ‘a little', one commented that volatility was an unwelcome fact of life for schemes and they should just learn to live with it. "A succession of deficits are a matter of concern. I am old enough to remember when our main worry was ensuring that we did not get caught for a tax charge as a result of ‘over-funding'," said another.
Only 6% disagreed. Of these, one explained: "There are no circumstances in which the DB funding actuarial valuation numbers are anything more than an indicative representation on which to decide contribution requirements."
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