The Pensions Regulator (TPR) intends to publish a new strategy for raising the standard of trusteeship in the coming months, with good governance a key priority for the year ahead.
In its latest Corporate Plan, published this week, TPR set out four core priorities for its regulation of the industry as well as its intention to continue its own development.
These include:
- Ensuring good outcomes for pension savers when they join a pension scheme, through a focus on auto-enrolment compliance;
- Improving the quality of pension scheme operations and governance, including an “increased emphasis on improving the quality of scheme administration”;
- Making sure pension schemes offer value to savers, as well as investing in “productive assets and innovative products, where it is in savers’ interests to do so”; and
- Ensuring good outcomes at retirement through improved value for money and protection from scams.
“The market is changing, along with the expectations of trustees. Schemes must be well governed, powered by high-quality data, and open to innovation.”
Sarah Smart, TPR
Investment governance and trustee standards
The regulator emphasised that good pension scheme governance was “foundational to the pensions system”.
To reflect this, it said it intended to develop a new strategy for raising the standards of trusteeship, which it said would “help inform our compliance and oversight approach to the market”.
By raising standards, with a particular focus on investment governance, TPR hopes to ensure that “all savers benefit from diversified investments”.
The regulator also indicated that the wider investment environment, including trade and geopolitical tensions brought about by US trade tariffs, also required trustees to have a strong grasp of investment issues.
“We expect volatility to persist for some time as the impacts of trade tensions and central government policy responses feed through,” TPR said. “That is why our firm focus in the year ahead will be on making sure that all schemes have high standards of investment governance with trustees who make good decisions on behalf of savers in all economic conditions.”
The regulator also said it wanted to “bring trusteeship into line with other professions and corporate governance standards, including improving the quality of scheme administration”.
Its work will also include strengthening its oversight of professional trustee firms, which TPR has previously described as “systemically important” to the UK pensions industry.
Domestic investment ‘not in conflict’ with return targets
The focus on investment governance reflects the government’s drive to get more pension schemes investing in illiquid asset classes such as UK-based private equity and infrastructure, which could be new areas for some trustees and will require different skills to monitor and assess.
Recent debate around this has centred on the threat of mandation, but TPR emphasised that investing in “diverse assets” that can benefit the UK economy did not necessarily conflict with trustees’ overarching aims to generate investment returns.
“We… support investment in diverse assets where they have the potential to generate higher returns for savers and benefit the UK economy,” TPR stated.
“The two do not have to be in conflict. That is because a growing economy means better jobs, higher pension contributions, and more options in retirement for millions of pension savers.”
TPR’s expectations as the pensions landscape shifts
Nausicaa Delfas, TPR’s chief executive, said: “Our focus remains clear: to protect, enhance, and innovate to deliver genuine value for money.
“The Pension Schemes Bill will reshape the market, driving consolidation into mega schemes that can boost governance, scale up savings, and support the UK economy.
“Building on this, real progress depends on industry-wide collaboration to ensure people get the retirement they deserve. That is why we will be focusing on raising standards of trusteeship and investment governance, driving value for money in pensions schemes, and creating default retirement solutions for pensions savers.”
Sarah Smart, TPR chair, added: “The market is changing, along with the expectations of trustees. Schemes must be well governed, powered by high-quality data, and open to innovation. Those that can’t deliver should consider consolidation, in the interests of savers.”
What to expect from TPR in the year ahead
As well as focusing on trusteeship and governance, the regulator also outlined several specific areas of work that it planned to introduce or continue.
These included working with the Department for Work and Pensions to develop regulations for collective defined contribution schemes and defined benefit superfunds. TPR will also work to ensure pension schemes have adequate “data hygiene” as the rollout of pensions dashboards edges nearer.
Elsewhere, the regulator said it would establish a data and information sharing arrangement with the Bank of England to help monitor systemic risks and “ensure pension schemes do not present a threat to financial stability”. TPR will also publish more analysis and reports around liability-driven investment strategies.
For smaller pension schemes, it will continue to push for consolidation by urging trustee boards to “undertake a detailed value for members assessment”.
