Patrick Ring

Governance and governmentality: a discussion in the context of UK private pension provision

Abstract While the governance of pension schemes, and the risk this poses for pension savers, is a prominent issue in current pension debate in the UK, this paper places that debate in, arguably, the more important context of the governance of individual behaviour. Using the concept of governmentality as a means of interpreting the course of recent UK pension policy and its attempts to influence individual saving behaviour, it critiques that policy. The paper then goes on to consider the effect of the introduction of personal accounts upon the pensions landscape, and in particular its potential to push forward the governments recent approach to pension provision. It argues that these reforms, rather than furthering individual saving for retirement, may alternatively create the very real possibility of undermining it.

Pension Confusion, Uncertainty and Trust in Scotland: An Empirical Analysis

In the context of the new automatic enrolment requirements for all eligible employees to make pension provision for their employees, and the importance of trust in pension provision, this article utilises data from the Scottish Social Attitudes Survey, which, in its 2005 wave, asked correspondents specific questions regarding pension provision. We integrate two different empirical approaches in order to achieve a more robust understanding of pension confusion in Scotland. We find that pension confusion is dominated by pension uncertainty and myopia, but these may be reduced for those working in the financial sector. We consider the implications of these findings for the relationship of trust between employers and their employees, as well as for trust in government pension policy more generally.

) The ‘Pillared-Privatisation’ of Pension Provision in the European Union: The Case of the United Kingdom

Across the European Union, national governments are re-assessing the institutional mechanisms through which pension provision is delivered. This articles sets the debate within the wider context of the ‘pillared’ structural analysis often adopted by international institutions when discussing pensions reform. It then sets out a detailed discussion of developments in the UK, arguing that the UK is moving towards a model of reform akin to that promoted by the World Bank – referred to here as ‘pillared-privatisation’. The themes of this model indicate more means-testing, greater private provision, and a shift of the burden of risk from the government to individuals. An assessment is then made of the implications of UK developments for other EU countries. It is suggested that while there are strong reasons to think that other countries will not travel as far down the road of ‘pillared-privatisation’ as the UK, this should not be taken as a ‘given’.

Taking notice of risk culture – the regulator’s approach

Following the financial crisis and a series of mis-selling and ‘rigging’ scandals in the financial services, organisational culture, and particularly the risk culture of organisations, has come to be regarded as a key issue for both financial firms and their regulators This paper considers the extent to which regulatory published notices, ‘Final Notices’ (FNs), relating to breaches of the regulatory Handbook, are able to provide lessons, or pointers, in the development of ‘appropriate’ cultures. By undertaking a qualitative content analysis of all the FNs in 2012, we examine the extent to which FNs draw attention to issues of culture, and to the regulator’s analysis of the drivers of culture published as part of its treating customers fairly (TCF) initiative. The analysis finds that, although not easy to extract, there are important learning points in FNs relating to organisational culture, and in particular to the factors driving behaviours and outcomes that are signs of poor culture. This paper suggests that, whilst it may not be for a regulator to dictate firms’ culture, it could do much more to make use of the content of FNs as a learning tool for firms; particularly in the context of its cultural framework for TCF. This would support the ‘outcomes-based’ approach being espoused by the UK’s regulators.

A critical analysis of depolarisation

The Financial Services Authority (FSA) is about to implement wholesale reforms of the regulatory structure of advice in the retail financial services sector. Instead of having to choose between a “tied adviser” or an “independent financial adviser” (IFA) under a “polarised” regime, consumers will have a much wider choice in terms of the range of products and scope of advice available under the new “depolarised” structure. In undertaking these reforms, the FSA aims “to improve consumer outcomes” by dealing with what it argues are market failures in the retail financial services market. This paper assesses whether the FSA’s final blueprint for financial advice can provide the improved consumer outcomes the FSA intends. It critically examines the issues of choice and quality for both products and advice, as well as considering the extent to which the reforms will create the kind of “empowered” consumers the FSA appears to expect. It argues that the reforms may not appreciably address the market failures the FSA sets out to remedy, and suggests that this is due to the likely inability of consumers to understand and take advantage of the new marketplace that is being created. This paper suggests that much greater emphasis should have been placed on financial education and extending the availability of advice before attempting such radical reforms.

“Risk” and UK Pension Reform

“Risk” is a word that has become common currency in the financial services industry in general, and in the pensions industry in particular. This article critically examines its use in the context of the current debate about UK pension reform. “Risk” is used by a broad spectrum of interests to discuss a wide range of pension issues in a variety of contexts. The article outlines key theoretical perspectives on the nature and construction, or conceptualization, of risk. Their relevance to debate and policy initiatives, particularly public pension policy, is examined. It is suggested that current government policy is failing to carry with it those to whom the policy applies; that reforms implicitly, if not explicitly, underestimate the importance of “security”; and that failure to conduct a much broader debate about the fundamental notions of work, retirement, saving and security may simply condemn the UK to interminable pension reform.

The retail distribution review: Retail financial services; regulation; financial advice market review

Purpose - The purpose of this paper is to review the effect of reforms to the UK’s retail advice sector as a result of the Retail Distribution Review (RDR). Design/methodology/approach - The paper takes the form of a review of the RDR in the context of the Financial Advice Market Review (FAMR). Findings - There is a lack of clarity, experienced by both consumers and financial advisers, concerning the nature of “advice”. This results from the use of an array of regulatory and non-regulatory terms. Whilst enhancing professionalisation and reducing commission bias, the RDR is failing to address the needs of many financial consumers – identified by many as an “advice gap”. It is argued that the focus of the RDR, and previous reforms, on addressing market failures may be misplaced. Practical implications - The paper provides an analysis designed to help in the process of developing a retail advice sector that meets the needs of consumers, in the context policy reforms placing more emphasis on the responsibilities of individuals for financial planning. Social implications - The study has the potential of better outcomes for consumers and reputational returns for the financial services sector. Originality/value - This paper is a review of the current regulatory issues facing financial advisers and retail consumers in the context of the RDR and FAMR.

Trust: a challenge for private pension policy

It is generally accepted there has been a shift from defined benefit to defined contribution provision in the United Kingdom and elsewhere, along with which comes a shift of pension risk to individuals. Having trust in defined contribution arrangements, and those involved in providing them, may be regarded as a strategy for coping with that risk. As the United Kingdom moves to adopt widespread auto-enrolment defined contribution provision in an attempt to increase retirement savings, these issues of risk and trust become even more important. Pension providers and regulators are aware of this, although the extent to which they can successfully enhance trust remains open to question. What may be crucial is the ability of individuals to “actively” engage in the development of trust in defined contribution pension provision. This relies on the structure of the United Kingdoms new auto-enrolment and National Employment Savings Trust framework, along with the positive engagement of employers, in tackling what has generally been a lack of public understanding and interest in pensions. The potential success of such reliance is open to question.

FSA Consultation Paper 121 and the move to depolarisation ‐ A critical analysis

The Financial Services Authority’s (FSA) Consultation Paper 121 suggesting depolarisation in the retail financial services sector has generated a great deal of debate. The motivation for the reforms, primarily to improve the position of the consumer, cannot be disputed. Nevertheless, in attempting such a wide‐sweeping change, it is clear that the reforms could bring difficulties as well as improvements. This paper argues that, to the extent that the current polarisation regime is detrimental for the consumer, this can be addressed without dismantling the basic framework of the current advice system. It acknowledges that there is a need for greater consumer education in this area, and that more needs to be done to address the needs of lower‐income consumers. Nevertheless, it is argued that the advantages anticipated as a result of the more radical reforms in the Consultation Paper are likely to be accompanied by problems that could negate the overall benefit accruing to consumers.

Analysing the reform of the retail financial advice sector in the United Kingdom from an agencement and performativity perspective

The Retail Distribution Review of the regulation of financial advice resulted in a series of reforms to the UK retail advice sector in 2012. This is the latest in a series of initiatives addressing what are identified as market failures in the UK’s retail advice sector. This article uses the notions of performativity and agencement to elaborate and explain the processes by which reforms based on the economic theory of market efficiency have failed to address adequately consumer financial advice issues in the UK. The result has been a range of unresolved and unexpected problems. It is argued that the lack of success of a series of regulatory reforms intended to improve access to advice for UK consumers is destined to continue as long as the notion of market failure dominates regulatory reform.