RESTRUCTURING OF THE UK REGULATORY REGIME
In May and June 2011 the Bank of England and the FSA published their approach documents for the new Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).
Under the new arrangements, the FCA will be equipped with a variety of powers to support its statutory duty to protect consumers from detriment. Among others, it will have powers to ban the sale of particular products from a given financial institution for up to 12 months, take action over misleading adverts or promotions, and disclose consequent disciplinary actions against individuals or firms. It will also be able to initiate referrals to the Office of Fair Trading.
The primary focus of the PRA will be on financial stability issues and the resolvability of firms that pose a threat to the financial system at large. Acting under the instructions of the Bank of England’s Financial Policy Committee to tackle issues of micro-prudential concern, it is intended that the PRA will bring about a proactive intervention regime to deal with firms that get into difficulties.
These changes are profound and likely to have a significant impact on the regulatory environment for financial services companies in the UK.
LAUNCH OF THE GOVERNMENT’S PENSION AUTO ENROLMENT RULES
From October 2012, the phased implementation of the Government’s auto enrolment pension scheme will provide a large stimulus to the workplace pensions market. Every employer will be obliged to provide group pension arrangements for its full workforce, with employees who do not currently have workplace arrangements, being auto enrolled into a new or existing scheme or the default NEST scheme. Implementation has been delayed for smaller firms, but all employers must act by September 2016.
PRESSURES ON THE PROVISION OF FINANCIAL BENEFITS BY THE STATE
The desire to reduce the UK’s budget deficit has accelerated the Government’s intent to look at the balance between financial services provision from the private sector and the state. This is a complex area and changes may not be realised in the lifetime of this parliament. Areas where the state could look towards the insurance industry to replace state benefits include long-term care, disability benefits and private sector pensions. Legal & General is currently involved in consultations and working parties in all these areas.