Last year our Chairman Mark Boyle spoke to you about TPR. He shared news about some of the larger cases we’d been dealing with, about the roll out of automatic enrolment and about the Green Paper.
Reverberations from those big cases echo throughout our industry. AE has sustained its hugely positive impact. And the Green paper became White and generated the consultation announced here yesterday.
How things change. And how they stay the same.
I recently announced that I’ll be leaving TPR. I’ve not made any decisions as to what I’m going to do next, but making that decision prompted me to reflect. Today I thought I’d look at some of the things TPR has achieved and consider challenges ahead.
TPR is undoubtedly a very different body from five years ago. We’re a quicker, clearer, tougher regulator. We’ve changed and continue to change; working to reflect the complex pensions landscape in which we operate.
We’re also a growing organisation. We secured additional funding from DWP to support our frontline regulatory work, including DB regulation, Master Trust authorisation and the implementation of our new regulatory model, of which more shortly.
We’ve already increased our proactive DB casework (where we discuss a valuation with trustees and the sponsoring employer in advance of its submission date) by 90%. We find it much more effective to be in contact with the parties before aspects of the valuation get set in stone; that way we can make our expectations clear.
The extension to our powers proposed in the White Paper and set out in the consultation document published yesterday will make us a more effective regulator. We are working closely with Government and stakeholders to bring it to life and to ensure that the theory is made workable in practice. Your contribution to these consultation exercises will be key, so please take the opportunity to have your say.
In DB regulation, Parliament has given us a mandate to protect pension savers and the PPF.
We have to make complex decisions to maintain a balance between a strong employer and well-funded schemes. Given recent events though, I think it’s important to remind you that we don’t run businesses and we can’t stop companies going bust.
We’re actively seeking to learn lessons from situations such as Carillion, so that we can better protect members of pension schemes. We accept that in the past the balance struck between members and employers was not always right. Going forward, this is an area where you can expect to see us being clearer, quicker and tougher.
My decision to leave will not stop the changes already in train at TPR. Our Chairman and Board have emphasised the need to press on and we have an excellent leadership team in place to take this work forward.
But I would like to say that I’ve been very touched by the response of industry colleagues to my news and I’d like to thank everyone for their supportive messages and comments.
I’ve had quite a journey since I began at TPR and I’m very proud of what we’ve achieved. I’ll give you just three examples:
- Automatic enrolment has helped nearly ten million people start saving for retirement. It’s involved more than a million employers confirming that they’ve done what they need to. I believe it’s one of the most culturally and economically significant pieces of public policy to be deployed in recent years and it’s made innovative use of behavioural science and digital journeys in achieving this.
- We secured £363 million for members of BHS pension schemes and £329 million for Coats members, taking the amount secured through initiating anti-avoidance action to over a billion pounds. Our actions in Nortel, and Box Clever show that we won’t be put off from pursuing good outcomes for members and the PPF
- We secured eight successful criminal prosecutions for offences as diverse as failure to provide information, wilful non-compliance with automatic enrolment duties and recklessly providing false or misleading information. Just some examples of the use of enforcement powers for the first time or in innovative ways.
We’ve also learned lessons. We were challenged on our swiftness to action and we’ve been criticised for not using our powers as readily as we might. And we’ve commissioned an independent review of the communication with members during the Tata/British Steel restructuring.
And though some of the things happened when the ‘ask’ of TPR was different, the messages have hit home. They are part of the reason for change within our organisation.
It’s also been interesting to discover that people – the public at large – want to know more about TPR.
One outcome brought about by the high profile news coverage of the past couple of years is that it has made people think more about their retirement, specifically about their workplace pensions. As a result we – and organisations like the FCA – have had to re-think our public messages and how to engage with pension savers as effectively as possible.
It’s a welcome challenge to explain our work to audiences beyond the informed ones we most often address; but we have to recognise that we can’t and shouldn’t do it alone, it requires really effective partnerships with organisations like TPAS and the Single Financial Guidance Body that will replace it; with the PPF and with our fellow regulators, especially the FCA
The case for change at TPR is pretty clear. In order to regulate in a way that reflects the current pensions landscape TPR has to change. We have to alter the way we work; whether it’s in regulating DB, DC or public service schemes, in authorising or supervising Master Trusts or in ensuring compliance with automatic enrolment obligations.
We need to work in a way that reflects our ageing population and our changing population. There’s a world of difference between Baby Boomers and Millenials, and we have to understand that and address the challenges it poses.
And we need to be alive to the priorities of the Government of the day and manage ongoing global economic uncertainties, including the impact of Brexit.
In my remaining months I’m keen that our ‘TPR Future’ programme progresses as far as possible. This is our programme to change our working culture and practices; how we do regulation day to day. It’s already having an effect on the way we work. Our ‘Clearer, Quicker, Tougher’ strapline is a shorthand summary of what we’re seeking to achieve, but I’d like to explain a bit more.
We undertook a wholesale review of our approach to regulation, including our largest ever consultation with you, our stakeholders. We then worked out what we think we need to do differently. This April we began implementing a new regulatory model; at its heart is ensuring that we put significant amounts of our resource on the most significant issues, but also that we have contact with a wider range and number of the schemes that we regulate; that we support those trustees, employers and others who are doing the right thing to continue doing so and that we take quick and effective action against those who don’t.
We expect to have completed implementation of this new way of working within the next 18 months. Later this year we’ll be holding a stakeholder event to brief those we regulate on how it will impact on them and what you can expect that’s different from the way we work now.
We’re changing our whole approach to regulation. As I’ve said we are using data and insight to identify risks or opportunities earlier and to target our interventions better.
We’ll be having contact with a wider range of schemes, not just larger ones or ones that pose immediate problems. We’ll look at smaller schemes and sometimes use a thematic approach - grouping together similar schemes, or schemes facing similar challenges - to see if we can identify common concerns and work out the most effective way to address them
Shortly we’ll be initiating ‘dedicated oversight’ with an initial group of schemes of all types. This will mean having ongoing supervisory relationships with approximately seventy five higher risk schemes. This means we’ll be in touch with the trustees, and the sponsoring employer too, on a regular basis, not just at the time of the triennial valuation.
We’ll also be setting up a programme of gradually less intensive supervision as we work down the ladder of risk posed by schemes, and for the avoidance of doubt, the risks I’m talking about here are those that reflect our objectives of protecting member benefits, protecting the PPF, and promoting good governance and administration of schemes.
I’m keen that TPR Future isn’t just seen as an inward looking process. There will be changes for the industry as a whole as we develop our ways of working. You’ll notice a change in attitude and approach. Those we regulate can expect change from us.
We’ll be quicker to spot and respond to emerging issues. We have more frontline regulatory staff on the ground and more to come, which means we can do more. We’re already being clearer and more directive about what schemes must do. We’re making better use of data to enable us to target the right schemes. And we’re using a wider range of communications, oversight and enforcement tools.
One example of how we’re taking a more front-footed approach with schemes is the GKN/Melrose takeover When we became aware of the possible takeover of GKN, we moved quickly to explain, both by letter and face to face, our concerns about the potential impact on pension schemes to both GKN and Melrose, directly to the employers. Our efforts, reinforcing those of the trustees, led to improved protections for the scheme in the event of the completion of a takeover. Previously, we would have worked more behind the scenes and through the trustees.
You may have already witnessed aspects of our tougher approach; we’re using more of our powers, more often. For example:
We’re issuing fines more readily and holding Trustees to higher standards. You’ll have seen the fine on Smart Pensions this week.
Some of our interventions have raised eyebrows among those in this audience and I particularly want to mention the matter of issuing fines in relation to Chair's statements.
Today we’re publishing updated guidance to ensure we’re clear about what we expect and in terms of enforcement actions already taken, we’ve conducted a review and are issuing some revocations in order to be fair and consistent.
We are policing the submission of Chair’s statements that comply with the minimum legal requirements more actively and we are increasing our focus on the quality of the content. That said, it’s also important that we act fairly and proportionately and that schemes are able to avail themselves of the review mechanisms built into the law as a safeguard.
In other areas, we’ve used our powers under section 16 of the Pensions Act for the first time, to obtain a court order requiring scammers to pay back money they’d taken from pension schemes.
In the courts, as I’ve said, we’ve seen eight successful prosecution cases for failure to provide information, wilful non-compliance with AE duties and recklessly providing false or misleading information.
We issued a fine to a professional trustee for failing to maintain registrable information.
Between January and March we used our powers to enforce governance and administration rules sixty two times.
In the same period, we used our information gathering powers forty five times and we appointed trustees to 103 schemes to protect members’ benefits.
And these are enforcement examples. Don’t forget the wider set of regulatory tools that I mentioned. We are currently testing an extension of our proactive contact ahead of triennial funding valuations to smaller DB schemes.
And we’re writing to trustees of small DB schemes. Setting out our expectations and views on the strength of the employer covenant and asking questions about key risk areas: including governance, investment and funding.
You may expect more of the same.
Although this may well be my last formal address at PBUK, I’m keen to promote conversations about emerging issues.
These are challenges on the nearer and the further horizon; things I’m guessing the next CEO will have in their inbox
It’s my bet that they’ll include ‘Consolidation’, DB Superfunds and dealing with stressed schemes.
I understand that Consolidation is an area DWP will consult on later this year. Among all the things in the White Paper it’s probably the ‘greenest’ in terms of development. It’ll need some serious thought and - I’m hopeful of - meaningful input from stakeholders.
Consolidation already takes place in many forms; like schemes using third party administration or fiduciary management services, asset pooling or combining governance with a DB master trust. Consolidation can mean reduced costs per member, as well as achieving scale needed to govern more complex investment strategies.
There’s been some debate about our role in regulating DB Superfunds and what an appropriate regulatory regime looks like. Some commentators feel we don’t have the experience, while others suggest it’s something we should be responsible for.
I’d point to our considerable experience in regulating the funding, governance and administration of large DB schemes. We’re already implementing the authorisation and supervision regime for Master Trusts. As part of the White Paper, DWP are proposing a similar authorisation regime for DB Superfunds and we’ll be working closely with them during the consultation phase.
So far, we’ve seen a couple of commercial consolidation propositions emerging in the market, however, indications are that stressed schemes may not be attractive for these potential entrants.
For these stressed schemes, we continue to work with trustees, sponsoring employers and the PPF to try to reach the best available outcome. This may include a need to compromise the level of benefits that members may receive, winding up the scheme to maximise the scheme’s interest in the sponsoring employer, or a restructuring under a mechanism called a Regulated Apportionment Arrangement (RAA), which normally involves members transferring to the PPF.
Whatever the solution, we’ll be working with DWP to consider possibilities and develop ideas. It is of course Government that set policy. Currently the White Paper is where policy is, and it’s from there we take our cue.
But effective regulation is not just about legislation and powers; it’s about how you put the theory into practice in day to day regulation and about how you deploy your valuable resources.
It is something TPR excels at. It’s something I’m very proud of. We are ready to be still bolder. I’m delighted and energised by the way my colleagues are already embracing changes to our ways of working.
By taking this new approach, we will be doing things we’ve not done before. This contains an element of risk, but I’ll paraphrase the recent comments of Baroness Jeannie Drake about our enforcement work. She said ‘Where the case is good, where they feel the strength of their powers, then they should be culturally prepared to go, and be prepared to lose, because sometimes you gain from losing.’
I’m certain we’ll win more often than we lose.
Our changes in approach are already being recognised and we were pleased that the PPF felt able to say in evidence to the Select Committee that in their view ‘the TPR Future programme and TPR's 'clearer, quicker, tougher' approach has already led to significant changes, including increased use of existing powers and changing attitudes within the wider industry’.
That’s a significant endorsement from a key stakeholder.
I’d also like to note our tenacity. We don’t shy away from seeking justice and redress, for example in pursuing those who see to avoid their duties to fund a DB scheme and we will pursue with vigour organisations and individuals that flout the rules.
But it requires us to dig and commit for the longer term. In the ‘Box Clever’ case, it’s been running for seven or so years and the targets of our action have appealed at every stage, including on matter of process.
We will not stop until we have seen such cases through to the end.
The flip side of this assertiveness is that we might find ourselves criticised for being overly punitive. As a regulator you can be blamed either way, for being too soft or for being too harsh, it comes with the territory. My colleague Nicola Parish will be taking part in a panel on compliance later today and I’d encourage you to participate in the debate on ‘proportionality’. And I’d encourage you to remember that effective regulation is not solely about enforcement; it’s about deploying the full range of tools available, as effectively as possible.
Big journeys are taken with small steps. Every step of the way on my journey, TPR has sought to improve and enhance what we do. And though I’ll be handing over my boots (steel-capped of course), I’m very proud of the work we’ve done, of the changes we have made and I’m mindful of lessons still to be learned. I’m also grateful for the support we’ve received and I include you in offering thanks for the help, advice and constructive criticism that’s been offered along the way.