The FCA's Nike Trost says we are in a “period of real change”
We are in a “new era of pensions”, which “brings new challenges”, The Pensions Regulator (TPR) director of policy and pensions reform Joey Patel says.
Speaking at the Pensions UK Investment Conference Patel said the pensions system "must provide value" to savers – highlighting the need to "move away from cost only towards a more holistic view".
Patel confirmed the value for money framework – which TPR, the Financial Conduct Authority and the Department for Work and Pensions have recently consulted on – "has the potential to address challenges" in the sector, while FCA head of asset management Nike Trost added we are in a "period of real change" noting there is "still a lot of work to be done by us and the industry" to address value.
Speaking on the same panel, People's Partnership deputy chief investment officer Phil Butler noted VfM is "at the core of providing a good pension", arguing the industry must "move away from cost and towards investment".
The audience believed the VfM framework will make a difference with 70% during a poll agreeing it will change schemes' investment strategies. However, Butler argued the framework "moves the dial but won't change strategies".
Trost added the framework is "one of many pieces of the puzzle", and together with things such as the Pension Schemes Bill and the Pensions Commission "will change how schemes think about asset allocation".
Patel added with many changes happening across the sector, "we don't want knee jerk reactions and uninformed decision making, we want sensible decisions when looking at investment strategies".
Butler also noted when it comes to data, "transparency and comparability are critical", adding the sector must "give members the ability to make choices". Patel added the VfM framework is an "iterative process and once in place will still be iterative" and "members need to understand if their schemes are offering value".
Referencing the capacity issues the industry is currently facing, Patel said the government is "looking to reduce the burden on schemes" adding: "We can't eradicate the burden, but I wish we could".
In terms of using its powers to punish schemes not aligned with VfM rating metrics, Patel said the regulator is reticent to use powers and will "give schemes the opportunity to show us they can lift themselves out of amber or red" before it uses its powers as this is the first time schemes will have had to contend with this.
Trost added the decision has not been made yet on expanding the scope of the framework to non-workplace pensions and highlighted the industry "needs to focus on setting this framework before expanding it".
