The Labour Party would consider removing pensions from the Financial Services Authority’s (FSA's) remit, according to Shadow Pensions Minister Gregg McClymont.
Mr McClymont said: “There is this concern that the FSA has too much on its plate. If we accept that vision, then we have to ask who is the best regulator. The broader point is that we need London and Edinburgh to be world leaders in the provision of financial services and competition is increasing. In financial services as in other sectors, the UK is competing with the Far East, but we must be the gold standard and a lot of that has to do with transparent products and (rigorous) regulation.”
His comments follow growing concerns in the industry that SIPP regulation is facilitating sales of so-called early pension release or "pension reciprocation plans". These schemes usually involve encouraging a member of the public to transfer either a contract based or final salary scheme fund into a self invested personal pension and the subsequent targeting of that individual with alternative unregulated investments, such as carbon credits, forestry or land overseas, often with some kind of incentive or "rebate". Some advisers, who are often based offshore, have simply made off with the fund – "known transferred funds’" amounted to nearly £200m by the end of 2011, according to the FSA.
The FSA, the Pensions Regulator (TPR) and HM Revenue & Customs (HMRC) took the decision to announce a joint statement warning the public against these schemes. The difficulty is that some of the perpetrators avoid breaking the letter of the law, often by weaving between the regulators. For instance, some early pension release schemes are based on "loans" which are are said to be ringfenced by the pension scheme. Other schemes offer early pension release by paying an introducer’s fee to the adviser who then passes it back to the client.
Toby Parker at the FSA said: "These people are very good at ducking between us, TPR and HMRC, ensuring they fall between the cracks in the regulation. It is also very difficult to monitor and regulate because each scheme is different.”
Author: Ceri JonesCeri Jones has been writing about pensions for 25 years, first editing Pensions & Employee Benefits magazine and subsequently the FT's Pensions Management magazine in the mid-1980s.