Smart: Trust is key to ensure TPR’s powers are applied fairly

Smart said on Wednesday that trustees that “take good advice and pay good attention” to the decision-making processes made on behalf of scheme members should not be concerned, and that the regulator’s powers are in place to protect the interest of savers.

The Pension Schemes Act 2021 outlines two criminal offences surrounding actions that could result in a potential detriment to accrued benefits. Following the publication of the guidance, the industry raised concerns that normal business activity could trigger the offences and that any person involved in the scheme could be liable for criminal prosecution.

“Member trustees need to be cognisant of the fact that they’re doing a really important job which has high expectations on them, but they should be supported in doing that,” Smart said.

“First of all, it should be explained to them exactly what the job is that they’re volunteering for taking on, they should be supported in their training and education, induction, and that continues all the way through that they hold that job, and they should receive good advice and be well supported on making decisions.”

She added that trustees that have a good understanding of their role and “take good advice” have “nothing to fear from the criminal sanctions that we, as a regulator, have”.

In April, an Aon survey, produced as part of its response to the consultation on the powers, revealed that fewer than one in five viewed the regulator’s draft policy as “adequately clear”.

Smart said: “The MNTs who I’ve worked with have always put so much heart and effort into everything that they do, and [have] been well guided and well supported.

“I think for them this isn’t a concern, because it’s something that really doesn’t reach their radar, because they’re not trying to use that position to the detriment of savers, which is what the criminal powers are designed for.”

She likened TPR’s criminal powers to the criminal offence of reckless driving, saying that common judgment is key.

“We have faith in the system that if we have to drive on the other side of the road, the police would understand the rationale for doing that,” Smart said.

“We understand that the system is flexible — that there is a danger there that we could fall prey to the offence, but we have faith in the system that it will be applied appropriately.”

She added that the regulator still needs to earn the trust of the industry through evidenced and transparent decision-making processes.

“I understand that trust is an important part of the relationship between the regulator and the industry, and it’s a really important factor as part of a healthy, well-functioning regulatory environment,” she said.

"We need to earn the trust and continue to earn the trust of the industry through our behaviour, our decisions, and being transparent about how we make those decisions.

“So that’s really key for me as well in the regulatory activity that we undertake, and how we engage with the industry in terms of explaining the decisions we’re making.”

Smart added that she hopes the regulation will be continued and maintained by successive leaders of the watchdog.

To bolster TPR’s engagement on a series of issues, especially on climate change, she said that it will set up a series of panels whereby TPR “can listen to industry, to savers, and to employers to help us with some of these new questions we are asking ourselves”.

She added that environmental concerns are “one of the areas we’d like to talk to people about on this panel, how we can measure that”.