An increasing number of workplace pension schemes will come under greater scrutiny from The Pensions Regulator (TPR) from next month as part of a significant shift in its approach to protect savers.
To reflect major changes in the political, economic and pensions landscape, TPR will be working proactively with more pension schemes through a new range of interventions to address risks sooner, clearly set out its expectations and take action where necessary.
The changes result from TPR’s major review of the way it does regulation, which is now transforming how the organisation works to safeguard member benefits. An update on the programme has been published today.
Key to the new approach is the introduction of a supervision regime to monitor schemes more closely, which will include higher and lower intensity interventions depending on the risks identified.
Chief Executive Lesley Titcomb said: “Following a complete review of our entire approach to regulation, we are now implementing a radical shake-up of the way we regulate to embed our pledge to be clearer, quicker and tougher.
“Schemes across all sectors, whatever their size, can expect the volume and frequency of their interactions with us to increase so that potential risks to pension savers are identified early and put right before it becomes necessary for us to use the full force of our enforcement powers.
“Our new model is flexible – we will take a systematic approach to set out our expectations and will respond swiftly to emerging risks, taking tough action where necessary to tackle bad behaviour, including by corporate entities.
“An important element of our new approach will be the use of a broader range of communication channels to drive behavioural change by promoting greater understanding of what schemes need to do in order to comply with the law and demonstrate high standards. This was a vital ingredient in the success of automatic enrolment amongst employers and we look forward to developing a closer relationship with schemes, both large and small.”
Dedicated, one-to-one supervision will be introduced for 25 of the biggest defined contribution (DC), defined benefit (DB) and public service pension schemes from next month, with this approach being rolled out to more than 60 schemes over the next year.
TPR will maintain ongoing contact with these schemes and in some cases their sponsoring employers, reflecting their size and strategic importance within the pensions landscape.
In addition to one-to-one contact, higher volume supervisory approaches are also being introduced from next month to address risks and influence behaviours in a broader group of schemes.
This second type of intervention will be piloted with approximately 50 DB schemes to assess compliance with messages in TPR’s 2018 annual funding statement, specifically concerning whether schemes are being treated fairly when it comes to dividend payments to shareholders. Hundreds of schemes are expected to experience higher volume supervisory approaches over time to tackle different risks across the pensions landscape.
- One-to-one supervision will involve regular and ongoing contact with trustees or managers and sponsoring employers of pension schemes. Schemes will be selected based on a range of criteria including size, risk and previous interactions with TPR. TPR will be building relationships with schemes whose size means they are strategically important regardless of whether they trigger our traditional risk indicators.
- Under higher volume supervisory approaches, TPR will be proactively contacting other schemes through calls, emails and letters with a view to tackling particular risks identified as part of our intelligence and horizon-scanning approach.
- TPR will analyse responses, and, if concerns are not properly addressed, schemes and sponsoring employers can expect an escalation in TPR’s approach with more intense regulatory activity. This could include face-to-face meetings to agree actions, issuing formal improvement notices or the use of enforcement powers.
- TPR’s new approach to supervision is in addition to the implementation of supervision by TPR of DC master trusts which must apply to TPR for authorisation from 1 October or exit the market (as required under the Pension Schemes Act 2017 and Occupational Pension Schemes (Master Trust) Regulations 2018).
- 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); 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).
Media Relations Manager