The Pensions Regulator (TPR) has signalled to the industry that it will be making a step-change in enforcement, warning that regulatory compliance is not optional.
In a key note speech at the recent Professional Pensions Live event, TPR chief executive Nausicaa Delfas said schemes must get the basics right on data quality in order to deliver on key areas such as the Pensions Dashboards Programme and offering value for money.
Poorly performing pension schemes would come under ever greater regulatory scrutiny to ensure they meet TPR’s expectations.
Nausicaa Delfas said: “Regulatory compliance is not optional. You will see a step-change in our enforcement approach – going out into the market, at scale, to ensure schemes have high quality data and deliver value for members.
“The stakes have never been higher. Savers will soon be interacting with their personal data as never before through pensions dashboards and the value for money framework.
“Failure to meet the deadlines is not an option. That is why we will be engaging hundreds of schemes asking them to account for how they are measuring and improving their data and will be taking action where trustees are failing to meet our expectations.”
28 million DC memberships
The chief executive noted that the defined contribution (DC) market had continued to grow and consolidate and now stands at over 28 million memberships with £158 billion assets under management.
At the same time, there has been an 11% reduction in the number of schemes year on year. The vast majority of savers, some 90% of memberships are in master trusts, where rapid growth is expected to be concentrated in just a handful of schemes.
In defined benefit (DB) pensions, schemes continue to close – just 4% of private sector pensions schemes are open to both new members and future accrual. Funding levels across the market are at the best in living memory – with more than 80% of schemes fully funded.
She set out TPR’s regulatory roadmap for pensions that featured driving value for DC savers, security for DB members and higher standards of trusteeship for all.
MHM’s view
We do not disagree with the TPR chief executive and her intention to implement a step-change in enforcement and to increase regulatory scrutiny, providing this comes with a fair degree of proportionality, recognising the resources available in both time and money.
Participants in the pensions industry all want to see it working well in an ordered and efficient structure, achieving what TPR wants in terms of the best possible decisions made transparently and giving value for money.
However, we do sound a small note of caution. Take the Pensions Dashboard Programme for example. It is a huge project in an IT sense, aiming to provide information in a way that is clear and beneficial to members.
What it is not about, however, is how the pensions industry manages schemes and delivers benefits to members, it is just a new and better way to inform and engage scheme members.
We must be careful to ensure that the desire to achieve compliance does not divert precious resources from the primary aim of delivering the right benefits to the right members at the right time.
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