This has been a highly complex and far-reaching exercise, one that has probed deeply into our ways or working and which has challenged accepted cultural norms and perceptions at The Pensions Regulator (TPR).
We began by gathering views across the industry on how people want us to operate, and then by designing a set of regulatory approaches that are fit for purpose for the next five to ten years.
Industry stakeholders and our own staff told us that as a regulator we needed to be clearer in our expectations, quicker to act and tougher in our approach towards those who break the rules.
We have responded and our latest TPR Future report sets out in more detail how we will be working proactively with more pension schemes through a new range of interventions to address risks sooner, clearly set out our expectations and take action where necessary.
We have not stepped away from being bold. One of the key outcomes of the TPR Future programme is to take a far more hands-on, supervisory approach, interacting with high risk schemes on a regular basis to spot issues at a very early stage rather than relying on routine engagement at three year valuations or scheme returns.
This new supervision approach is a milestone for pension regulation. It is a sea-change in how we will be interacting with the industry and it should leave employers and scheme trustees in no doubt that we are now a very different regulator.
I would like to make clear that this is not about us moving to a more punitive approach, one where enforcement is the driver for our involvement. This is about building closer and better relationships with schemes on a risk-based basis, so that together we can spot problems sooner and act before we need to consider the use of our more stringent powers.
So how will this work in practice?
For the first time, we will be launching dedicated, one-to-one supervision of, initially, around 25 of the biggest defined contribution (DC), defined benefit (DB) and public service pension schemes. This number will grow to more than 60 in the next year or so. We will maintain ongoing contact with these schemes reflecting their size and strategic importance within the pensions landscape.
But we are not stopping there. We will also be supervising a far broader group of schemes through higher volume supervisory approaches, such as letter, calls and emails, to address risks and influence behaviours. 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. Hundreds of schemes will experience this approach over time.
We’ve thought long and hard about how make this approach work. We’ve learned through the successful roll out of automatic enrolment just how vital good communication is when it comes to changing behaviours. Using a broad range of communication channels and regulatory interventions will play a crucial role in embedding our new approach, which is geared towards preventing problems from developing in the first place.
Where our concerns are not properly addressed, schemes and sponsoring employers can expect us to take a more directive approach, which could ultimately escalate to issuing formal improvement notices or using our enforcement powers.
By Lesley Titcomb
Chief Executive Officer