Employers could abandon pension provision completely if the Pensions Regulator presses ahead with excessive regulation of defined contribution schemes, an expert has warned.
Paul Macro, head of defined contribution at Aon Consulting, fears many of the companies that set up group personal pension plans will simply walk away if they are bound by new regulations.
His comments came after a speech made by Tony Hobman, chief executive of the Pensions Regulator, who said that many of the UK’s small defined contribution pension schemes faced five risks. He defined these as:
- Poor administration
- Poor investment practice
- Unduly high charges
- Poor decisions on retirement choices
- A lack of member awareness.
Speaking at a South West and Wales pension conference, Hobman said the issues would be addressed in a regulatory statement to be published in April.
Organisations that do not comply with these new regulations could be named and shamed, and Macro warned that companies that had specifically set up group personal pension plans because of the light regulation could lose interest altogether.
“A number of companies are going to say ‘this is not what we signed up for’,” Macro told Personnel Today. “They will pay people money and say they can find their own scheme.”
Hobman had said little, if anything, to encourage employees to join defined contribution schemes in the first place, Macro said.
“Best practice guidelines would be more preferable to excessive regulation,” he added.