In the world of financial regulation, language is always carefully coded. It is akin to the choreography of a mating ritual. Both the regulator and the regulated are aware that the purpose is to persuade, cajole and even threaten without using language that would generally be seen as intimidatory.
That explains the shock in the insurance sector over the past fortnight at a blunt threat by the Pensions Authority to prosecute anyone it finds using a certain pension product – a single-member pensions scheme common among business owners for the flexibility it grants as they start saving for retirement relatively late in life.
These schemes have been around for years. But under new EU rules they are no longer seen as compliant, and a deadline of July 1st was put in place to usher them out. No one disagrees, apparently.
The issue is that the EU regulation has been around for six years, but no one in Government or elsewhere managed to put in place an arrangement that would meet the new rules while also providing this group – about 12,000 each year – with a pensions scheme that meets their needs. The plan was understood to involve tinkering with the rules for PRSAs (personal retirement savings accounts) but it hasn’t happened.
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Having sat across the table for months discussing the new compliance regime and knowing another deadline in 2026 is in place for all existing single member schemes to convert to new arrangements, the industry was confident no hardline approach was imminent and that the necessary arrangements for a new, compliant product would emerge in the budget.
Either both sides were getting their messages mixed up, or the regulator thought better of such a compromise at the 11th hour.
In any case, the pensions regulator, which is chaired by former top trade unionist David Begg, has succeeded in scaring the insurance industry off the pitch even though it doesn’t even regulate them and its threat of prosecution is, for them at least, a hollow one. It could, of course, have a word in the ear of the Central Bank, which does supervise the life businesses but there is no indication it has. In any case, the incendiary nature of this dispute means that the mandarins on North Wall Quay will be well aware of what’s going on. They have studiously avoided getting involved.
Meanwhile, thousands of people will be effectively blocked from making provision for their retirement by a regulator whose role, in part, is to encourage the expansion of pension coverage. Doesn’t sound like a win-win.
