Call for pensions protection

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The Committee of Public Accounts said the regulator had made good progress in the area of final salary schemes, but had done far less in the "considerably riskier" area of defined contribution schemes.

It said that while it had information on 99% of final salary schemes in terms of membership, it had data on just 32% of defined contribution ones.

The committee called on it to identify which defined contribution schemes presented the highest risk and direct its effort towards them.

Under final salary schemes, companies state how much a members' pension will be worth on retirement, based on the number of years they have been a member of the scheme and their pay before they stop work.

But under defined contribution ones, firms only state how much they will pay into the scheme, leaving individuals to shoulder the risk of investment volatility and increased life expectancy.

There has been a steep increase in the number of people who are members of defined contribution schemes in recent years, as companies close their more expensive final salary pensions to new members.

But the committee warned that there was a lack of understanding among members of these schemes of the risks they faced, and the Pensions Regulator had done little to improve this.

The MPs called on it to review with City watchdog the Financial Services Authority the adequacy of the information that was provided to members about their likely pension and work to fill any gaps.

Edward Leigh MP, chairman of the committee, said: "The Regulator has made good progress on regulating final salary schemes but far less in the considerably riskier area of money purchase schemes. This is especially important given the increasing emphasis on money purchase schemes. The Regulator must now target the riskiest of those schemes."