The Work and Pensions Committee has questioned the leading candidate to take over as chair of the Pensions Regulator regarding potential conflicts of interest.
Sarah Smart, the government’s preferred pick for the role, was appointed interim non-executive chair at TPR in April and is senior independent director of the regulator’s audit committee.
She holds a number of other roles in the private sector, including co-founder of consultancy company SmartCats, managing partner of Greys Estates Partnership, and an advisory board member of Codigital.
Her husband, Fraser Smart, is chief executive of the British Airways Pension Scheme, a fact which drew the attention of committee chair Stephen Timms MP.
I don’t think it detracts from our ability to manage the regulation of that scheme in any way, so I see no reason why we would need to introduce that potential conflict
Sarah Smart, TPR
Smart said that her husband had opened discussions with his employer about ending his involvement with the scheme as soon as he learned she was the government’s preferred candidate for the TPR role, though because of the “seniority of his position” it would be irresponsible for him to walk away immediately.
“Discussions are ongoing, but the current position is that Fraser would stay on to see through the valuation that is currently in progress, which it’s anticipated will finish in September of this year, and then we’ll seek to [start] the handover.”
She added that if it became possible for him to depart sooner “that opportunity will be taken”.
TPR chair would not be involved in case work
Timms asked: “How credible is it that you would have no involvement at all with anything to do with that scheme?”
Smart said that, as has happened in the past, another non-executive board member could be drafted in to work on cases arising to do with the BA scheme, but ordinarily it would not be for non-executive board members to be involved at all, as TPR has “expert teams” to do case work “on a day-to-day basis”.
Asked whether she thought she would be able to have nothing to do with the scheme indefinitely, Smart replied that for the duration of her term, that would be “perfectly doable”, adding: “I don't think it detracts from our ability to manage the regulation of that scheme in any way, so I see no reason why we would need to introduce that potential conflict.”
Asked by Timms whether the issue had been raised either during the panel interview or in a subsequent discussion with the pensions minister, Smart said it had been mentioned in the former but that she had not had a discussion with the minister, not only on this point but “at all”.
The committee raised the point that, at present, TPR does not see fit to publish potential conflicts arising from “connected parties” in the public register, a point Smart said she had asked to be reviewed — a process that is expected to conclude in time for a board meeting in May.
Nigel Mills MP pressed the point, asking whether it really would be possible for Smart to perform every aspect of the job while shielding herself from any information that had to do with “one of the biggest pension schemes [in the country]”.
Smart reiterated that she thought it would be possible, given that expert teams would be dealing with specific schemes on a case-by-case basis, not the chair. But she conceded that were she appointed, a role for her husband “within a very significant pension scheme” would be inappropriate, and so he would not be applying for similar roles after stepping down from BA.
Committee member Sir Desmond Swayne MP then queried Smart’s continued involvement in the development of an investment-monitoring tool with SmartCats, a company she co-founded with Fraser Smart.
Swayne questioned whether her appointment as chair of TPR might unduly influence prospective clients of the business.
In response, Smart proposed that “if I’m appointed, I would have no role in any discussions in terms of the use of the tool by any entity that is regulated by TPR. And my involvement is not publicised in any way or used to publicise the tool to that audience”.
SmartCats would be appointing additional personnel to take on that role and she would be reducing her involvement accordingly, she said.
Empower TPR to deal with superfunds
Later in the hearing, Scottish National arty MP Chris Stephens asked whether Smart believed the regulator had sufficient powers to do all that is necessary to fulfil its remit.
She said that, though TPR uses the “full extent” of its existing powers to deliver “maximum benefit and protection for savers and members”, there were areas where the regulator could “act differently” or “encourage the industry to act differently”.
“I think a key area where we’re clear that additional power is required at the moment is in the area of superfunds,” she said.
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“We do see consolidation as something that is potentially very beneficial for members. But it has to be done in an appropriately controlled way. We have an interim regime at the moment, and we’re working very closely with all those entities who are seeking to be active in this area.
“We’re also giving appropriate guidance to trustees in this area. But it remains a voluntary regime, and so one where it may be difficult to exercise our authority if there are individuals or entities who seek to not work with us on the protection of savers,” Smart continued.
“Our job is to constantly evaluate the risks within the system, both now and emerging, and have a thorough conversation and collect data as to whether there are other areas where greater authority or greater powers would be useful.”
