TPR to scrutinise ‘systemically important’ professional trustee firms
Professional trustee firms have become “systemically important” to the industry and will be a focus for regulation in the coming years, according to the Pensions Regulator (TPR).
In its new corporate plan for the next three years, TPR said it would “increase our focus on new and increasingly significant professional trustee entities” through the development of a dedicated oversight framework for the sector.
The regulator plans to engage more closely with professional trustee firms as part of measures to “ensure high standards” throughout the pensions industry.
It highlighted recent consolidation among providers of professional trustee services, leading to “concentration of the trustee industry”.
“Mergers and acquisitions across professional pensions companies have made these companies more systemically important for the delivery of good outcomes,” the regulator stated.
Over the next three years, TPR said it would begin working with some of the largest professional trustee groups as well as the largest and most significant pension schemes.
It said: “With professional trustee firms increasingly playing a significant role in the landscape, we will be able to influence progress and help ensure high standards across the industry.”
More broadly, the regulator said it would be making greater use of data to improve its monitoring of trustee standards, including developing a trustee register. More and better data would “inform efficient, effective and data-driven routes to improving trustee standards”, TPR said, as well as potentially leading to “targeted regulatory intervention programmes”.
Administration and consolidation
Elsewhere in the corporate plan, TPR reiterated its desire to see “fewer, larger schemes” through consolidation.
One of its key aims, the regulator said, was to continue working with the Financial Conduct Authority on the planned value for money framework to ensure “all savers receive value from their pensions”.
It said it would also work closely with relevant stakeholders to develop the regulation of defined contribution (DC) master trusts and defined benefit (DB) consolidators. DC schemes with less than £100m face particular scrutiny over delivering value for money as the regulator continues to focus on scale.
TPR chair Sarah Smart said: “The pensions market is changing to one of fewer, larger, schemes. This presents new risks and opportunities for savers and the economy. This year’s plan demonstrates how we will address these challenges to protect savers, enhance the pension system and support innovation.
“We will encourage innovation by helping trustees support DC savers into retirement and supporting DB models and options for consolidation that protect savers.”
Administration was also a key focus for the regulator in the immediate future, it said, as the industry prepared to connect to and roll out the pensions dashboard ecosystem.
TPR plans to engage directly with administration providers “to increase its ability to influence saver outcomes” and ensure all parties involved in the dashboards meet their requirements.
Nausicaa Delfas, chief executive of TPR, reiterated that the pensions sector should “expect us to engage differently with it in the future”.
The regulator is already developing a new internal structure to reflect the changing nature of the pensions landscape, and Delfas said this would involve investing in people, and developing its digital and data capabilities.
An ‘ambitious’ strategy
Nigel Peaple, director of policy and advocacy at the PLSA, said: “The Pensions Regulator’s strategy is ambitious, covering many of the priority policy areas for our members: the DB journey, value for money, how to access pensions at and through retirement, small pots, trusteeship, scams and collective defined contribution funds.
“Some of the operational changes signalled will need care and be balanced against maintaining the usual functioning of the regulator, but, with good progress already shown in TPR taking a more risk- and data-led approach, we are very supportive of the improvements these changes will bring to TPR’s supervision.”
Patrick Heath-Lay, chief executive officer at People’s Partnership, provider of The People’s Pension, said: “We welcome TPR’s commitment to the delivery of a value for money metrics but it’s vital that these apply to the entire defined contributions pensions market, not just workplace pensions. We urge TPR and the FCA to ensure there is a plan to make these metrics consumer facing as soon as possible across all DC schemes.
“As it stands, hardworking people are completely in the dark when it comes to understanding whether a pension provider is likely to represent good value.”
Simon Kew, head of market engagement at Broadstone, said the regulator’s plan “offers continuity rather than revolution” with a focus on existing measures and policies.
“It is positive to see a focus on embedding existing policy to ensure positive progress for members and savers rather than following the temptation for constant innovation,” Kew said. “Stability and continuity are essential to help stakeholders collaborate, build on these positive developments and drive long-term impact.
“While it may be not be the glitziest area in pensions, sound data and best-in-class administration will be at the heart of making many of these reforms a success so scheme managers and trustees must be prepared for further regulatory cajoling on this matter.”
Further reading
A new-look Pensions Regulator (26 February 2024)
TPR boss outlines consolidation drive (13 March 2024)
Time to consolidate the regulators? (Opinion, 18 March 2024)