Contribution
My Lords, I speak to both Amendments 180A, tabled by my noble friend Lady Coffey, and Amendment 206, which stands in the name of my noble friend Viscount Younger of Leckie and myself. Both amendments address the regulation of pensions and how the regulation is best exercised in the interest of scheme members and future pensioners.
It was the intervention of my noble friend Lady Coffey at Second Reading that first prompted me to reflect more deeply on the role of regulators. As my noble friend argued then, and has argued again today in speaking to Amendment 180A, this Bill misses a significant structural opportunity by retaining two separate pension regulators. I agree with her. There is something inherently odd about the fact that very similar pension products can be treated differently depending on whether they fall within the remit of the Pensions Regulator or the Financial Conduct Authority. That observation is not controversial; it is simply a reflection of how the current system operates.
I recall clearly the passage of the then Pension Schemes Bill in February 2020 and remember responding to amendments from across your Lordships’ House by explaining that personal pension schemes were regulated by the FCA, rather than the Pensions Regulator, and that imposing requirements on personal pension providers through that legislation would risk creating a patchwork of overlapping regulatory oversight. Providers, it was argued, would otherwise be required to respond to two separate regulators in relation to the same activity. That was the Government’s position at the time, and it illustrates that the existence of regulatory fragmentation in this area is not a matter of dispute.
A great deal of work has gone into managing the fragmentation, with strategic documents, dating back to 2018, seeking to grapple with the issue. The FCA and the Pensions Regulator have published joint regulatory strategies explicitly acknowledging the complexity that arises where their remits intersect and the need for close co-ordination. More recently, an independent review of the Pensions Regulator in 2023 again highlighted the challenges inherent in this divided regulatory landscape. Taken together, these developments point to structural issues in the regulatory ecosystem that can, at the very least, create confusion and the risk of inconsistency.
It was on the basis of that experience in government and of careful consideration since then that I sought to identify what might realistically be done in this Bill. I came to the conclusion that Amendment 206 represents a proportionate and pragmatic compromise. It would require the Government to establish a formal published protocol setting out clearly how the Financial Conduct Authority and the Pensions Regulator co-ordinate, how responsibilities are divided between them and how they communicate when regulating the pensions industry. The evidence shows that there is complexity, overlap and, at times, confusion between the two regulators. Stakeholders frequently complain of unclear lines of responsibility and the regulators themselves openly acknowledge that co-ordination is difficult, hence the repeated reliance on joint strategies and informal arrangements.
It was our sense that the problem is one not of outright contradiction but of opacity, complexity and accountability. Amendment 206 is, therefore, carefully targeted at the problem, which is clearly evidenced. It seeks to improve co-ordination and clarity without asserting a level of regulatory failure that has not yet been conclusively demonstrated. That does not place it in opposition to the argument advanced by my noble friend Lady Coffey; indeed, I would be very happy to work with her, as we did so constructively on previous pension legislation, to strengthen this area further.
In my view, a formal co-ordination protocol has three important virtues. First, it can evolve over time as the regulatory landscape changes. Secondly, it can be tightened if problems persist or new risks emerge. Thirdly, it can itself become the evidence base for any future decision to pursue more fundamental consolidation of regulatory functions, should that ultimately be judged necessary. For those reasons, I commend Amendment 206 to the Committee and urge the Government to see it not as an obstacle but as a constructive and proportionate step towards greater clarity, accountability and confidence in the regulation of pensions.