The Pensions Regulator (TPR) today welcomed new proposals designed to improve its ability to intervene to protect pension savers.
In its white paper, Protecting Defined Benefit Pension Schemes, the Department for Work and Pensions (DWP) sets out a suite of measures that will strengthen the funding of defined benefit (DB) schemes and improve TPR’s powers to act against employers who fail to treat schemes fairly.
The proposals will support TPR’s ongoing drive, under its TPR Future initiative, to be clearer, quicker and tougher in the way it regulates.
One of the key aspects of the new package is to set greater clarity around the existing funding standards and TPR will now start discussions with stakeholders about how this might work, including how to revise its DB Funding Code of Practice to set out its expectations of trustees and employers.
Lesley Titcomb, Chief Executive of TPR, said: “We called on government for more effective powers and so we welcome the proposals.
“Planned improvements to our scheme funding, information-gathering and anti-avoidance powers will enable us to be clearer about what we expect from employers in relation to scheme funding and tougher where a scheme is not getting the funding it needs.
“Furthermore, strengthening the notifiable events framework will improve our regulatory grip and will ensure we are sighted sooner on planned transactions that could pose a risk to scheme members.
“We will now work closely with government to develop the White Paper’s proposals, including fines and criminal sanctions, to ensure they are proportionate, act as an effective deterrent and work in practice.
“The best support for a DB scheme is a strong employer and we believe the current flexible funding framework, which allows employers to balance growth with meeting pension benefits, remains the right approach and we will aim to retain this flexibility in any new approach.”
- TPR will be working with DWP to develop all the proposals in the white paper, including in relation to consolidation, chair’s statements and to ensure communications to members are clear and informative.
- TPR’s review of the DB funding code and regulatory approach to DB scheme support will ensure trustees and employers have the support and tools they need to manage their approach to scheme funding effectively and to place the funding regime on a sustainable footing for the years ahead.
- The code will clarify expectations around existing funding standards, for instance by being clearer how TPR assesses the prudence of technical provisions (TPs – the scheme-specific funding standard which pension schemes must target); the factors to consider in determining appropriate recovery plans (RPs); and a scheme’s long-term strategic aims.
- TPR will work with industry on setting out acceptable boundaries for TPs and RPs (or their individual constituents) and help trustees assess the effectiveness of their funding and investment strategies and risk management plans in delivering the scheme’s long-term funding objectives. This is not about a ‘one size fits all’ funding framework – these parameters will sit within the existing ‘scheme-specific’ legislative regime and we expect there may be some cases who will sit outside the parameters, but they will provide clarity on what may be considered appropriate.
- TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of TPR’s functions under Part 3 of the Pensions Act 2004 only).