TPR: We need the marketplace to innovate to deliver in the new pensions era

At TPR, we want to create a pensions system that gives people a sustainable income in retirement, provides security and value for all, and supports UK prosperity. That means the industry will need to innovate to help deliver a modern system providing long-term value for savers and a secure income at retirement.

The success of automatic enrolment means more than 22 million people are now in a workplace pension – but there are still 14.6 million people under-saving for retirement.

We can’t go back to an era where the image of retirement was a gold watch and a handshake, but we can create a future where people benefit from better-performing schemes, with more transparent information, and with clear default options at retirement.

To achieve this, all of us have a role to play. Government – with its reform agenda, setting the market towards fewer, larger well-run schemes. Regulators – protecting savers and working to enhance the pensions system and support innovation in their interests. And pension schemes and innovators – to play their part by bringing forward the products and services that pension schemes demand.

With the current Pension Schemes Bill and the work of the Pensions Commission, we have a chance to usher in a new era for UK pensions.

TPR is supporting the government’s reform agenda, setting the market on a course to fewer, larger, well-run schemes that deliver value compared to their peers, with product innovation giving savers clearer choices at retirement. 

Innovation in DB

With healthy funding levels, defined benefit (DB) schemes have options for their endgame.

That might be well-funded schemes securing member benefits with an insurer, running on to generate surplus to improve member benefits, or potentially unlocking investment for economic growth. For less well-funded schemes, the best option might be to transfer to a superfund to provide the benefits of greater scale and security. 

At TPR, we want to see products and services emerge to serve these various needs.

“Our vision is that everyone has a sustainable income in retirement. That vision may be ambitious. But, if we all work together, it is entirely achievable.”

Nausicaa Delfas, the Pensions Regulator

Innovation in DC

In defined contribution (DC), the Value for Money framework will enable decision-makers to look beyond cost to investment outcomes. Better value for money has the potential to deliver almost £20bn worth of benefits over the next 10 years, with the lion’s share going to savers.

Moving the dial on returns matters: for the average saver who started saving at 22, a 1% improvement in investment returns over the lifetime of saving would mean a 30% bigger pot. We need innovators to think about how they can support trustees as they strive for more.

We also need innovation and creative thinking when it comes to default retirement plans. Only one in five savers has a plan for how to access their pension. People need help and support in this incredibly complex decision, and we need new and creative default pathways that genuinely meet diverse saver needs.

Strong governance, administration and data

The industry is ripe for innovation – but to succeed, it must have solid foundations of strong governance, administration and data.

In administration, there are persistent challenges: legacy systems, uneven investment, inconsistent data quality, and variability in performance.

Dashboards will bring a huge focus to individuals’ pensions – and, of course, the information savers receive has to be right. Artificial intelligence is already here and must be used responsibly with an emphasis on good governance and members’ outcomes.

Innovation will remain a top priority for us. We launched our Innovation Support Service last year specifically to make it easier for industry to engage with us. If you want to discuss a new idea, please get in contact.

Our vision is that everyone has a sustainable income in retirement. That vision may be ambitious. But, if we all work together – government, regulators, industry – it is entirely achievable.

Nausicaa Delfas is chief executive of the Pensions Regulator.