Opra, the UK body responsible for regulating the governance of work-based pensions, needs to build on its achievements by focusing more closely on the risks to the members of pension schemes, according to a report published to Parliament today by Sir John Bourn, the head of the National Audit Office.
The report concludes that Opra has encouraged better governance of pension schemes. The number of reports of breaches of pensions law made to Opra has been falling. And Opra has stepped in to appoint trustees to pension schemes in difficulties, resulting in pension scheme members gaining access to £159 million of assets between 1998/99 and 2001/02. Since 1997 there have only been three cases serious enough that the Pensions Compensation Board has had to make compensation payments. Opra’s activities to inform and educate pension scheme trustees are well regarded, and their work more generally seems likely to have improved the way schemes are run.
Opra has had limited information on the effect that its interventions have had in improving governance and how many schemes have suffered serious problems. This has constrained its ability to identify risks to pension scheme members. The report recommends that Opra should have more detailed information on the schemes it regulates and on the outcome of its work. Much of Opra’s work has focused on dealing with reports of breaches that pose a low risk to scheme members. Some 60 per cent of cases have been of late payments of pension contributions where the impact on scheme members is negligible – the payment has often been made by the time that Opra take action and nearly half of the payments were less than 10 days late. The report recommends that Opra raise the threshold for the reporting of breaches of the Pensions Act.
Handling a large number of cases has restricted Opra’s ability to target more important risks to pension scheme members but Opra has been improving their targeting processes as their understanding of the risks has improved. The report recommends, and Opra is committed to developing, distinct regulatory responses to different types of scheme.
Finally, Opra has not clearly articulated how its work should protect pension scheme members. The Pensions Act does not set out its functions or objectives and Opra’s view of its power has been restrictive. It is now starting to develop such a statement.
The Department for Work and Pensions are currently considering wider reform of pensions and pensions regulation and will shortly publish a green paper on pensions and the final report of the quinquennial review of Opra. The National Audit Office’s report recommends that their conclusions and suggestions for improvements in the way that Opra regulates pensions should inform the decisions that the Department take.