TPR opens investigations into 9 DB schemes over funding concerns

In a blog post published on Wednesday, Nicola Parish, TPR’s executive director of frontline regulation, wrote that the regulator had contacted 411 DB schemes to check whether they had considered the risk that their sponsor covenant had weakened.

“We used external analysis, together with our own scheme information, to identify employers that may be less able to support their DB scheme due to the impact of the pandemic and ongoing economic uncertainty,” she said.

Of these, 73 per cent said they had read TPR’s guidance and discussed it with their advisers. TPR is working with those that have yet to do so to ensure that they do consider the risk.

Parish confirmed that 5 per cent said they believed their covenant had not weakened. These schemes have been asked to provide evidence to demonstrate this, and some may be investigated further.

An additional 30 schemes were subjected to a more in-depth engagement exercise, these being deemed most at risk of a deteriorating covenant situation.

TPR has opened investigations into nine schemes (eight from the smaller group of 30 schemes and one from the main group) to determine whether “further action” is needed to protect savers.

“We remain clear that trustees are the first line of defence for savers. We, as the regulator of workplace pensions, will support trustees where appropriate,” Parish wrote.

“But we will use the full force of our enhanced powers if we feel a scheme is not being treated fairly by a sponsoring employer, or if a trustee board is not acting in the best interest of savers.”

In her blog post, Parish made another attempt to reassure those who fear that the regulator’s new criminal powers are dangerously vague and broad.

Previous attempts have met with short shrift from an industry concerned that, however benign TPR’s intentions might be, fear of the new powers could scupper necessary corporate activity, such as mergers and acquisitions.

“Employers who are doing the right thing should not be worried about these new powers, which give us more options to punish wrongdoers. We hope their existence will be a deterrent in themselves. We are also exploring how our new information-gathering powers may be used for our existing cases,” Parish wrote.

She said that “initial feedback” suggests that the powers are resulting in better engagement by employers and other stakeholders with pension schemes.

“We think good engagement with pension scheme trustees should have been ‘the norm’ before, but we’re glad the new powers may be helping to redress the balance of power where schemes’ interests have not been appropriately respected, and put trustees firmly at the negotiating table,” she continued.

“Of course, it’s not just criminal powers which will help improve outcomes. The [Pension Schemes] Act brings in a broad package of powers relating to DB funding, notifiable events, investigation and information gathering, as well as high fines.

“Trustees have a pivotal role to play. We are there to support them through guidance and enforcement action if needed. Together we can — and must — ensure savers remain at the heart of all we do.”