Good afternoon everyone. Thank you for accepting our invitation and welcome to our annual Stakeholder Conference.
This year’s stakeholder conference is a rather unusual one for me. It’s the last I’ll be attending in my current role. In February I’ll step aside as CEO and as I may not be afforded the opportunity again, I’d like to begin by thanking you all for the support, advice, commentary and guidance you have offered over the years.
I say that both in a personal capacity and also on behalf of TPR. We appreciate the views of others and welcome the variety of opinion within the industry. We believe that appreciating diversity improves outcomes and as holders of different and sometimes challenging points of view, your input has helped shape our outlook and approach for the better.
Better relationships, better ways of working, better regulation; delivered by a quicker, clearer, tougher regulator.
It’s been a personal project of mine to try and humanise the Regulator; to make us more approachable and accessible. From the feedback we received recently [Stakeholder Perception Report 2018] it seems this approach has paid dividends.
Stakeholders tell us that we are easier to speak with, more open and responsive to criticism.
Last year we shared the plan we had developed through our ‘TPR Future’ programme to review the way we work. Since then a lot has happened, including the publication of DWP’s White Paper, and a number of headline-making cases.
Today I want to update you on the progress we are making in implementing those changes. How we are working differently and presenting ourselves in a new way. How we are working to deliver alongside this the aspirations of the White Paper and how our plans for the future are taking shape. And further changes to come.
There will be a series of events this afternoon where we will be inviting you to share your views with us. The breakout sessions are an opportunity for you to let us know what you think. Please feel free to be as bold, complimentary or critical as you feel.
As an indicator of change, we thought it time to adopt a new logo. [Indicating logo] This is our magnifying glass or radar or as one wag put it, an aerial view of a cup of tea. But then who doesn’t look forward to a happy and well funded later life with a cuppa? To me it signifies scrutiny, curiosity, investigation and intelligence.
We want people to know what we’re about and our new logo represents that. We’ve also updated our typeface and together these are indicators of the changes TPR is making, many of which will raise our profile and help people to understand what we do.
An upswing in high profile cases has undoubtedly given us a bigger platform. It’s been a pleasant surprise to discover the general public are interested in us and want to know more. I thought we were only of interest to trustees and specialists within the pensions industry and the occasional rogue tycoon but it seems we have an appeal beyond that.
We’ve chosen to launch our new logo in tandem with this increased interest and also to coincide with our scams campaign.
I’m hoping you’ll have seen the TV adverts or heard the radio spots produced jointly with the FCA. We’re really proud of the campaign and the response it has provoked. According to our research, millions of people have seen it and continue to engage via social media.
A campaign like this illustrates the key message I want to leave you with today, which is that effective regulation is not just about enforcement (by which I mean using our powers to punish those who break the law or don’t abide by rules); we know we can also make a positive impact by influencing behaviour, by reducing risk and harm and by acting proactively. We know from colleagues that there was a dramatic uptick in visits to the ScamSmart website following the launch of the campaign. Several thousands of people checking in to get more information and understand how to protect their savings.
The campaign is aimed primarily at consumers, to alert them to the warning signs of a pension scam. It addresses the sense of indecision and overwhelming choice that some people feel as they plan for retirement.
We want people to have the opportunity to think rationally and take time before making a decision about their pension. And be aware that there are people out there who want to exploit that moment of decision for their own gain.
Though the messages in the campaign are aimed primarily at savers, they also reach out to employers, advisers, providers and trustees.
The approach taken is powerful and emotive, and clearly positions the scammer as the ‘bad guy’, rather than making the victims feel like they’re the ones in the wrong. This is important because we know that scams are under-reported. Victims often feel embarrassed about their mistake and don’t want to come forward. Creating a ‘bad guy’ makes victims feel less responsible for their misfortune, and will encourage them to report the scam. Or, even better - recognise a scam in the first place.
While we all wait - with interest - a final decision about cold calling, this campaign puts front and centre the danger of being taken in by unsolicited offers and places the blame firmly with the perpetrator and not the victim.
FCA Joint Strategy
We have also been working with the FCA on our Joint Strategy which we expect to publish shortly. We’ve jointly hosted conferences across the country as part of a drive to work even better with our regulatory partners and to hear from our those we regulate, their advisors and representatives about how we and the FCA can deliver a comprehensive and consistent framework of regulation, communication and services to those engaged in the provision of pensions.
Alongside these changes in presentation, outreach and collaboration we are also changing the way we go about the business of regulation on a day-to-day basis. These are changes that will alter the way we work with and relate to employers and schemes.
We are developing a new operating model and new methods of engagement; informed by feedback from stakeholders and by learning from recent experiences.
We began a process of reviewing the way we work back in 2016, wanting to make sure the way we work took account of changes in legislation, and that we remained alert to contemporary concerns.
You told us you wanted us to be clearer in our expectations, quicker to take action, and tougher when we issued sanctions. That ‘clearer, quicker, tougher’ idea has become something of a mantra. If TPR were a stick of rock that’s what it would say through the middle. But it really does encapsulate our new approach.
We’ve been working on a change programme we dubbed ‘TPR Future’; a plan to determine the operational changes that need to be in place and a way to involve staff and stakeholders. Much of this has been internal, but it’s a journey the entire organisation has been part of.
We have developed a new way of working that is predicated on the idea of risk-based supervision. Our regulatory relationships and interventions with schemes will increase in intensity depending upon the risks we have identified, and the responses of those we regulate as we challenge them to address those risks.
We have drawn on what we learned from the implementation of AE and you may notice similarities in the employer journey we used to implement automatic enrolment, using escalating contact and intervention to bring about compliance.
We have also recognised the danger of focusing only on short term issues and are developing our capability to look further out across a five to ten year horizon and identify developments and trends which could impact on our industry and those who operate within it. This is proving a fascinating exercise and will inform our work and help to identify long term risk and promote awareness, discussion and debate across the wider industry. You can expect to see us discussing a number of these topics externally over the coming period.
Our new operating model also seeks to make better use of the data available to us, so that we can identify risks quickly and efficiently across a wider range of schemes, including smaller DB and DC schemes.
Up to this point we have tended to be reactive in our response to risks, and our resources were focused on the larger, crystallised risks.
This meant that smaller, emerging issues had capacity to grow and we could miss a chance to ‘nip them in the bud’. It also has meant that we tended to focus on some of the biggest pension schemes and employers given the potential impact upon members or the PPF if something goes wrong. The resource applied to smaller schemes, and in particular, to smaller DC schemes, was limited.
We want to have better ongoing knowledge of schemes and employers through supervision, rather than only intervening through a case at a point where things have gone awry.
Employers and schemes will therefore find we engage more regularly and earlier in order to try and stop problems escalating. Our ambition is to ensure schemes are always well managed and maintain high standards A more ongoing, supervisory approach should mean fewer slip into poor behaviours or reach the point where our approach becomes more directive or punitive.
We are not going to become an enforcement-heavy, highly punitive regulator. We don’t consider ‘deterrent’ the sole or primary driver for judging our effectiveness. We are building a model that gives all schemes and their employers early, and in some cases repeated, opportunities to identify problems or potential pitfalls and put things right.
In extreme cases, we will proceed straight to enforcement, but for the most part there will have been opportunity to avoid that eventuality. Should we have to use enforcement measures, they will come as no surprise to recipients.
This approach is also designed to drive up standards and tackle risks through ongoing contact rather than, for example, just focusing on triennial valuation exercises for DB schemes. It reflects that we need to focus more on standards of governance and administration, which cut across all the schemes we regulate, not just on the funding position of DB schemes.
The most visible and immediate change it that this autumn we will introduce dedicated supervision for around 70 pension schemes [60 DB, DC and PSPS over the coming year or so, plus 10 master trusts as part of the MT legislation] with a supervisory manager being given specific responsibility for our relationship with and oversight of, one or more schemes.
We have selected a group of DB, DC and public service pension schemes for such supervision, based on assessments of size, impact and risk (including funding risk and previous compliance behaviour). We will be in ongoing contact with the trustees or managers of each scheme, and where appropriate, the sponsoring employer too. The scheme will thus have a dedicated point of contact at TPR.
Schemes lower down the risk ladder can expect a less intensive approach,relying more on techniques such as thematic projects or campaigns aimed at a group of similar schemes or a sector. The frequency of regular contact with such schemes and the point of contact are still being worked out and we will have more to say on this.
What I can tell you is that from next month, this 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.
Another area where we’ll have more to say over the next few months is in relation specifically to trustees and their responsibilities in governance and administration. We try to hold a mirror to the industry, to help it reflect on the wider pensions landscape. The results of our most recent DB and DC surveys tell us that while bigger schemes are generally well managed; smaller ones tend to suffer from poor governance of a lack of oversight.
We have been addressing this for a while now with clearer information about our expectations and through our 21 Century Trustee project. It has underlined, though, that the industry at large needs to make sustained efforts to help make improvements where poor governance persist. So we are inviting your views on ‘what next’ for the trustee model in one of our breakout sessions this afternoon. We’ll also be asking whether consolidation is the answer for some of these smaller, struggling schemes in another session.
As I mentioned earlier, this is the last time I’ll address you in this particular role. There is a process in train to appoint my successor, but for obvious reasons I’m not involved in that. Our Chairman however is training his diligent eye on all those involved and he and our Board is determined that the work to implement out new approach must continue. The direction of travel is clear.
This is our challenge:
- Work with the DWP to develop and implement the DB White Paper proposals.
- Complete TPR’s transformation and implementation of new regulatory approaches under our TPR Future programme, including investing in and delivering some key systems to support our new ways of working and developing our peoples capabilities as well.
- Keep on being ‘clearer, quicker and tougher’.
- Authorise and supervise the master trusts who seek approval under the new legislative framework.
- Build even stronger partnerships with Govt, the FCA and new Single Financial Guidance Body to secure the financial future of pension savers.
- Work with DWP, HMRC and others to build on the successes of automatic enrolment and to encourage further saving through workplace pensions.
And I’m quite sure there will be new challenges ahead, not least as we consider the impact of master trusts, consolidation and the pension needs of each successive generation, but I’d like to take a moment to look at the successes of the last few years.
- 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 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.
- Our powers are proving effective in achieving redress for members.In cases where we have initiated anti-avoidance action by issuing a Warning Notice we have achieved recoveries in excess of a billion pounds, often through the use of settlement thereby avoiding a costly litigation process.
- We resisted legal challenges in the Nortel and Lehman cases in the High Court, Court of Appeal and Supreme Court, in a case that established that our anti-avoidance powers are effective in insolvency and in complex cross-border administrations.
- We successfully prosecuted 11 offenders for failure to provide information, wilful non compliance with automatic enrolment duties and recklessly providing false or misleading information.
This is just a selection. But the pensions landscape is volatile and changing and we are determined to keep a step ahead.
In order to regulate in a way that reflects the current pensions landscape TPR has changed. We have changed way we present ourselves and the way we work. We, and the industry at large, need to work in a way that reflects our changing population. There’s a world of difference between Baby Boomers and Millennials and we have to understand that. We need to address the challenge and start thinking about intergenerational wealth distribution, the impact and opportunities of social media, the pension futures of workers for whom a series of jobs is more likely than a career with a single employer. And the self-employed.
We need to be alive to the priorities of the Government of the day and manage the consequences of ongoing global economic uncertainties, including the impact of Brexit. About which we wait, with the rest you, with bated breath.
Effective regulation is not just about legislation and powers; it’s about putting theory into practice, deploying resources effectively, listening to a wide range of views and influencing behaviour.
It is something TPR excels at. It’s something I’m very proud of. It’s the core of our new operating model.
We are committed to making better use of communication to drive behavioural change. By promoting greater understanding of relevant duties and what is needed in order to meet them, we intend to reduce the need to intervene.
Our communications will use of a broader range of channels from direct mail, to interactive digital tools to visits and events.
We often find ourselves having to strike a balance between being assertive and being supportive. As a regulator you can be blamed either way for being too soft or for being too harsh it comes with the territory. But living with compromise and finding ways to make that work are part of our DNA.
There will remain events that are outside our control or remit, but for which we are perceived to be responsible. Our commitment to respond swiftly remains undiminished and delivering our part of the framework Parliament has set to protect members’ interests is paramount. We believe that the new operating model will improve our ability in that regard.
Today we meet in sight of the Houses of Parliament, a place I’ve become all too familiar with. Exchanges with the Select Committee over the last few months have left a lasting impression. I’ve learned to try not to take things too personally and find a balance between accepting responsibility, including for things that occurred before my time, and shrugging off personal attacks.
I have mixed feelings about leaving. I’ll miss my colleagues and I’ll miss the challenges, the variety, the stimulating interactions that I have with you, our stakeholders. I wish you all the very best for the future; I genuinely believe the pensions industry and those who save through it will benefit from the changes that we are making.