The National Association of Pension Funds (NAPF) warned that The Pensions Regulator's (TPR) proposed code of practice for defined contribution (DC) schemes risks being counterproductive.

Although the NAPF said it supported TPR's efforts to improve DC pensions, it said that the code's remit to tackle only trust-based DC pensions means that it will not cover more than half of the DC market.

The NAPF also raised concerns about the lack of clarity around parts of the code combines compulsory legal requirements with 'best practice'. Instead the NAPF called for a slimmer, clearer and objective-based code.

Darren Philp, NAPF policy director, said: "All pensions should meet high standards, so we are disappointed that the proposed code does not cover contract-based schemes. This raises important questions about how workplace pensions are regulated. We strongly believe that any effort to improve the quality of pensions should target all types of pensions.

"We are also concerned that this code risks being counterproductive. This Code is highly prescriptive and, by focusing on only trust-based schemes, there is a danger that companies offering these pensions will decide to drop them in favour of contract-based pensions, which may not be in the members' best interest."

The NAPF is calling for a rethink of how workplace DC pensions are regulated to ensure that all types of pensions are targeted by efforts to improve their quality.

The organisation argued that the regulator should take a greater role in regulating all workplace pensions, including contract-based schemes.

Currently, trust-based DC pension are regulated by TPR, while contract-based DC pensions are overseen by the Financial Services Authority (FSA).

First published 28.03.2013

monique_simpson@wilmington.co.uk