The interview: Lesley Titcomb, chief executive of TPR

Pensions Expert: In your written submission to the Work and Pensions Committee you have requested several new powers, such as the capacity to request more frequent valuations from defined benefit pension schemes that are at risk. Can you say more about this?

Lesley Titcomb: The simple point is, at the moment schemes have to complete a triennial valuation every three years, and they have to submit it to us within 15 months.

That’s quite a lengthy period where effectively the information could be quite old by four-and-a-half years into this. There may be a case for saying that certain schemes may need to revalue more frequently.

But the other question is, could the valuations be submitted to us quicker? That’s a question about whether the employer and trustee and actuary and so on can come to an agreement more quickly, but the indications are that, for example, with the new technology available to actuaries the process could be speeded up.

PE: What is the average time schemes take to submit valuations?

Titcomb: I think most of them would take the majority of the 15-month period, but I can’t answer that definitively.

PE: Another point in your submission is that you want to have greater investigatory powers, including the ability to make people appear for interview. Do you find at the moment you can’t do your job effectively?

Titcomb: The power to compel interview is one that other regulators have. It’s quite an important, strong power, so it has to have proper checks and balances around it, but it is one we don’t have at the moment, so most of our investigations tend to be very document-based.

We can ask to speak to people, and they can do so voluntarily, but we feel it would be useful in certain cases, to be used with care, to have that ability to compel somebody to come to an interview with us.

PE: You have also requested the power to seize documents. Why do you feel you need greater powers there?

Titcomb: We have a power at the moment, but it doesn’t operate in the way it does at other regulators, where we can seize the documents that we need, take them away, review them and bring back the ones we don’t need. We’re only allowed to take the ones we need, which means in practice it’s a difficult power to make operate, because you’re on their premises and you’ve got to go in and you’re only allowed to take exactly what you know you need – and you don’t know until you’ve reviewed what’s there.

PE: Since BHS it’s been debated whether the regulator should have more say in corporate activity. How would you decide when to step in?

Titcomb: We are working with the Department for Work and Pensions and we are doing some thinking about how precisely this power should work, but it seems to me – and this is the view that the regulator has expressed so far – that it should apply in limited circumstances.

So, for example, where a scheme is underfunded beyond a particular threshold. We’re still doing some further thinking on precisely where that should be.

PE: Currently you have about 500 employees; how many do you think you would need if all these powers were granted?

Titcomb: It depends where thresholds and so on are drawn. We have a very good group of 500 staff. And they have many great capabilities, commercial, legal, actuarial – the question is would we need to build on those.

For example the pensions bill; that’s going to need us to, if it goes through parliament, authorise mastertrusts. We don’t currently authorise schemes, we just take the list that’s handed over to us from HM Revenue & Customs, but the process and the mindset and the capabilities needed to authorise a mastertrust are similar to those of the activities that go on in the organisation already.

So some people will be able to switch across and do that kind of work, but equally there may be volume considerations, where we may need to recruit more people. But we don’t know the precise impact of that. Now that we’ve got the bill published we can work that through and see what that would be.

PE: How will the new pensions bill affect the mastertrust universe and, if there is consolidation, how will you ensure an orderly unwinding of mastertrusts?

Titcomb: The bill gives us new powers if it goes through parliament; those new powers are very welcome but it will be a while as that goes on, so we will need to engage with them in the meantime.

It’s also a fact that when new regulatory scope is introduced there’s very often fallout within the market because entities decide it’s not worth going through the process, or they don’t think they’d meet the standard, so they decide to exit the market.

Now we’re very keen that they do that in an orderly way, and we’re standing ready with any trusts that find themselves in that position. So our message to them is that they should come and talk to us as quickly as possible if that’s the decision that they take.

PE: What if they don’t?

Titcomb: Hopefully we’ll become aware of the situation anyway and will be able to step in and work with them to ensure that the employers they’re servicing can continue to meet their, for example, auto-enrolment requirements, and that the members can be transferred to an alternative arrangement as smoothly as possible.

PE: About consolidation, you already said in your submission to the select committee that it “may be worthwhile exploring” if private sector schemes can consolidate. Now the DB Taskforce has come out and said so too. How would this work in practice?

Titcomb: As a regulator we don’t have any power to force it at the moment. A small amount of it happens naturally within the market. So we think it’s worth exploring some of the things that could be done to nudge more of that.

I think it’s not just about DB, but there is as much if not more of a challenge in the defined contribution world. So I think there is a lot more work to be done on that. And a second question is, what role if any would there be for the regulator in that?

PE: There has been a lot of debate around whether DB is affordable. Is it affordable?

Titcomb: Well we’re clear about this in the narrow sense in which we look at affordability, which is schemes’ ability to meet the pensions that they’ve got to pay next week and in six months’ time.

It’s clear that it’s a hugely challenging environment for DB schemes. The vast majority of them can navigate their way through this and can continue to pay the pensions that are due, and can continue to work at improving their funding positions. I think that there are indeed some sponsors who possibly could pay more into the scheme if they wish to do so.

So we don’t think that there is a big systemic affordability problem that is going to cause large numbers of employers to go bust or schemes to end up in the Pension Protection Fund, but there is no doubt that for a group of schemes in particular it’s a very, very challenging environment. And we work with them as closely as we can to try and help them through.

There are people out there who are expressing wider views about the desirability of employers putting so much money into DB schemes in terms of, for example, intergenerational fairness.

So there is clearly a valid wider debate to be had, but from the point of view of us as a regulator, in the narrow sense of affordability, while it remains challenging there is not a systemic problem here.

And you can’t just think about a fairness issue like this in isolation. There are obviously particular issues about the division of employer reward strategies and what packages they offer to people and that’s one issue; but there are all sorts of social and demographic questions to take into account. The intergenerational fairness point is not unique to pension provision. That’s one aspect of a larger question.