The problematic nature of UK pension fund regulation: Performing governance at the expense of innovation

Gordon L Clark

doi:10.1177/1024529420974608

Abstract

At the heart of UK pension fund regulation are quasi-compulsory codes of practices and tests of pension fund trustees’ competence. This regime of ‘soft’ regulation focuses upon the ‘performance’ of governance and is intrusive in terms of expected behaviour and board decision-making. Framed by defined benefit pension obligations in the private sector, it lacks rigorous standards of value when applied to defined contribution pensions. As such, pension ‘adequacy’ is discounted by the premium placed on performing governance in the market for financial services. The UK pension regime has hit a dead-end being neither fit-for-purpose in a world of technological disruption and financial turmoil nor capable of empowering those funds willing and able to innovate in the best interests of participants.

Highlights

At the heart of UK pension fund regulation are quasi-compulsory codes of practices and tests of pension fund trustees’ competence
The relevant US federal codes run to thousands of pages. While both countries share a commitment to funded workplace pensions whether defined benefit (DB), defined contribution (DC) or hybrids, it is believed that funded private pensions are regulated in quite different ways
The governance and management of UK pension funds is an everyday event sustained by accepted codes of practice

Summary

Introduction

At the heart of UK pension fund regulation are quasi-compulsory codes of practices and tests of pension fund trustees’ competence. It has allowed pension fund trustees and boards of management to persist with their own arrangements subject to oversight as to their fit with the latitude or scope for variations provided in codes of practice and their obligations under pension law.

Results

Conclusion