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08 Apr 2013

NAPF Calls For Slimmer, Clearer Approach To DC Pension Schemes

The National Association of Pension Funds (NAPF) backs the Pensions Regulator´s proposed improvements to defined contribution (DC) pensions, but fears that the changes cover just half of the market and that the code of practice could prove eventually “counterproductive.”

The regulator published its proposed code of practice for DC schemes in late March, which is aimed at improving their quality. In its response to the consultation, NAPF´s policy director Darren Philip noted that the code´s focus on trust-based DC pensions only leaves more than half of the DC market unaffected. The code´s nature is too prescriptive, which can drive employers providing trust-based pension schemes to switch to contract-based pension schemes.

The NAPF further warned that some aspects of the code have not been explained in detail, especially the part which talks about combining compulsory legal requirements with “best practice.” Instead, the association insists on drafting a “slimmer, clearer and objective-based code” and is also requesting that the regulator reviews the regulatory mechanisms to guarantee that all types of pensions, including contract-based schemes, will undergo quality improvement to meet high standards.

Philip went on to say that overall, the NAPF welcomes the regulator´s intention to enhance the quality of DC schemes, but since millions of employees are now being auto-enroled into pensions, the regulator needs to do its best to get them right.

Trust-based DC pensions are currently overseen by the Pensions Regulator, while contract-based DC schemes are under the regulation of the Financial Services Authority (FSA).

Copyright © M2 Bespoke 2013

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