Redesigning Regulation of Pensions and Other Financial Products

Posted: 29 Feb 2008

See all articles by John Nugée

John Nugée

State Street Global Advisors

Avinash D. Persaud

affiliation not provided to SSRN


We observe that financial regulation is ever-growing, with the latest area to experience increased supervisory attention being pensions. Yet this has not made the financial world or consumers safer, and for pensions in particular there are unexpected and undesired consequences. We explore the current policy approach to supervision, which is 'bottom up', i.e. assessment and regulation of individual institutions, with the aim of making the financial system safe by making each institution safe. We show that this is both damaging (because it stifles innovation) and does not work (because risk will always be squeezed from the regulated institutions to the less regulated and less seen). Instead, we advocate a 'top-down' approach, which focuses on making the system safe first. We conclude that once you have made systems safe, detailed supervision of individual institutions is less necessary, thus reducing the burden of supervision. We believe that this approach will lead to a more suitable and diverse treatment of different risks that will increase both systemic and consumer safety. 'If you have ten thousand regulations you destroy all respect for the law', Winston Churchill (1931). 'The ultimate result of shielding men from the effects of folly is to fill the world with fools', Herbert Spencer (1891).

Suggested Citation

Nugée, John and Persaud, Avinash D., Redesigning Regulation of Pensions and Other Financial Products. Oxford Review of Economic Policy, Vol. 22, No. 1, pp. 66-77, 2006. Available at SSRN:

John Nugée (Contact Author)

State Street Global Advisors ( email )

State Street Financial Center
One Lincoln Street
Boston, MA 02111-2900

Avinash D. Persaud

affiliation not provided to SSRN

No Address Available

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