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Dianne Morgan's speech at the Trustee Senate 2019

Friday 4 October 2019

Diane Morgan, Head of Relationship Supervision, discusses our new regulatory model to drive up standards.


Good morning.

I hope that you are all refreshed and looking forward to day two of the Trustee Senate.

I am delighted to join you to share with you what we are doing in my department at The Pensions Regulator (TPR).

As I hope you know we have completed a review of our entire approach to regulation.

Over last 12 months we have implemented a new regulatory model to drive up standards and tackle risk by engaging proactively with a larger proportion of the schemes and employers we regulate.

You might have previously heard from us because of a crystallising risk, in advance or just after you had submitted your valuation and recovery plan, we might have reviewed your chair statement or received a whistle-blower report that we wanted to discuss with you. We aren’t stopping our reactive event driven contact but have reorganised ourselves to do more than this.

Re-aligned our teams and supervisory approaches to enable us to be more proactive, in particular through relationship supervision and regulatory initiatives.

The relationship supervision department which I run is responsible for the structured engagement with the most strategically important schemes in the UK.

Relationship supervision

Our aim is to build strong ongoing relationships with schemes regardless of whether they would have triggered our traditional risk indicators. Schemes are selected based on a range of criteria including size, risk and previous interactions with us.

For defined contribution (DC) and public service pension scheme (PSPS) selection is mostly determined by size – member and assets under management.

For defined benefit (DB) will also consider risk – principally Broadly Hedged liabilities.

The department will also be responsible for the supervision of master trusts, DB superfunds and the collective defined contribution (CDC) regime.

By the end of this financial year we should be supervising around 140 schemes, now we’ve around 45 in supervision. More are added each month.

Once selected trustees should expect to have structured contact with us for at least a year, for some of the largest schemes our engagement is likely to be ongoing for much longer.

Relationship supervision involves regular and ongoing contact with trustees or scheme managers and sponsoring employers.

Our relationships allow us to gain a deeper understanding of our regulated community in general. We will use this understanding to inform our strategy and priorities going forward.

Examples of strong relationship

Whilst we are seeking to ensure that these schemes are meeting our expectations, we will work with the schemes to achieve this. We have already identified some good examples of best practice and we will look to capture and share these on an anonymised basis to drive up standards over all.

This should look and feel different – what do I really mean by strong relationship.

Let me share some recent examples:

  • Supervisor attending trustee meeting to discuss the DB code of practice and key features of the Future of Trusteeship consultation.
  • The head of trustees’ services contacting their Supervisor after the feedback report had been delivered at a full board meeting to ask for the supervisor to come and meet them and the Chair of trustees to discuss the strategic direction of the scheme.
  • During a meeting with the trustees the supervisor recognised that the recovery plan looked longer than they might expect and that dividends far exceeded contributions to the scheme. The supervisor was able to immediately obtain business analysis (BA) and actuary advice and within a week give the Chair a view on the recovery plan, linking their views clearly to the annual funding statement (AFS).
  • A chief financial officer (CFO) from the sponsor offering to provide quarterly about financial performance updates to the supervisor.

Single point of contact

So, what can you expect.

If you’re scheme is selected the chair will be told by letter. That letter will quickly be followed up with a call from your single point of contact. A supervisor from my department.

They will explain to you a little more about relationship supervision and arrange a time to discuss this in more detail. Ideally that’ll be face to face.

At that meeting the supervisor will take you through the evidence they would like to see.

No surprises in this list – our core interests are as you would expect. Governance, administration, systems and process, member communications and DB funding.

Our experience so far is that trustees or schemes managers can produce evidence in reasonable time scales and reasonably easily. Most schemes have invited their supervision to trustee boards meetings, and in some instances to subcommittee meetings and meetings with employers.

Supervision cycle

So, let me take you thought the supervision cycle. After the initial contact we would hope to get the information and evidence with need during the next few months.

If we identify sore thumbs or issues where we think there is room for immediate improvement – we will let you know.

My aim is that you have an open dialogue with your supervisor. They will seek clarification from you, and please do ask if you are unsure why you are being asked to supply some information and are unsure about what will happen next.

Once we have what is needed to complete our evaluation we will complete this review – it’ll probably take about a month, maybe two to do this – then arrange a time to provide you with feedback.

Again, no surprises here – at least not in usual circumstances – your supervisor will usually have shared initial thoughts with you. I spoke to one of my team earlier in the week and three of the four schemes she currently supervises have already put in place some of the changes ahead of receiving our recommendations – as they already knew what those recommendations would be.

Feedback report

I will share a little more about the format of the feedback report in a moment.

After you have the report, we will ask you to build and agree an action plan – we will keep in touch to track your progress. If you are a trustee on a DB scheme we will also proactively engage with you about your triannual valuation.

We are also using a different style of report to share our key findings. Our aim is that this is a much more accessible document. That our findings are clear, and trustees are easily able to link those findings back to the evidence they supplied and the relevant code of practice.

We will be clear about what we recommend where improvements opportunities have been identified.

We will ask that any recommendations are included in an action plan – and agree timescales for those actions to be completed.

This is a mock-up of a feedback report.

A couple of things to note – the assessment is RAG [red, amber, green] rated.

You can see the link back to the code.

The findings focus on good practice and areas for improvement.

There is a clear link from the findings to the recommendations.


We will be asking every scheme for feedback – please do respond if you are contacted! This is a new way of working for TPR and we want your views.

Early feedback that trustees didn’t understand enough about relationship supervision has resulted in us developing a factsheet to leave with each scheme after our initial visit.

Trustees welcome the less formal feedback report. They have said that “it is hard to argue that they shouldn’t have been challenged” about a specific issue, and that they will do things differently as a result.

We recognise the critical role trustees play in getting the best outcomes for members. Our experience to date is that most have welcomed our engagement and have found it valuable.

We have been told by one Chair that they welcomed the concerns we raised as it gave them an opportunity to have a really good conversation about service level agreements (SLAs) with their administrators.

Another that it enabled them to really demonstrate to subcommittee why a change was needed.

We have been alerted to significant events that we might not normally be told about and seen evidence of some great practice.

Over the next 12 months as we embed the supervision regime and bring master trusts, DB superfunds and CDC into relationship supervision – you may well see one of my team in a professional capacity, I really hope that will be a positive experience for you and your schemes, that we will work with you to deliver better outcomes for workplace savers, and that you’ll be able to see how relationship supervision will be an invaluable tool in the effective regulation of pensions in the UK.

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