Looking through the lens of the regulatory telescope

At the most strategic level, the regulator's success framework and corporate priorities are meant to "stand the test of time", so it’s good to see that its established external focus on good governance and administration, security and good outcomes for members and employer compliance, hasn’t been blown off course – even with the current rate of change across the pensions policy landscape.

But what about the layers of regulatory involvement and interest that sit below those more lofty ambitions?

Where, in practical terms, can it be expected to focus its oversight in the months ahead, let alone over the next three years?

Auto-enrolment rolls on

Well, it’s certainly no surprise to see auto-enrolment is still firmly in the frame. The regulator has already done much to establish its role and regulatory credentials here, but it clearly has few illusions about the challenge it now faces in getting very large numbers of very small employers into the system – and indeed it has already made clear its willingness to use its full suite of powers to ensure compliance.

It seems equally clear that the regulator expects that the management of covenant, funding and investment risks will be based on a more detailed and accurate understanding of those issues, together with a greater level of integration than might have been the case in the past

Much of the immediate regulatory focus, however, is surely going to be on the governance standards and charge controls that are about to be introduced, and the quality and effectiveness of communications on the pension flexibilities.

It’s also clear that the regulator will want to demonstrate it is on top of its new remit over the governance and administration requirements of public service schemes, with a toolkit already available for use on its website and a new code of practice and regulatory strategy scheduled to come into force very shortly.

It has highlighted its concern over “evolving pension scam models” in the plan, and the disruption and prevention of these is obviously going to continue be a prominent feature of its oversight.

DB risk management

The plan reinforces its intention to further develop its defined benefit risk systems and filters.

It’s perhaps worth pausing here to remind ourselves that in some respects, the new DB code appears to offer greater levels of flexibility to trustees in their approach to the triennial funding process.

In return, however, it seems equally clear that the regulator expects that the management of covenant, funding and investment risks will be based on a more detailed and accurate understanding of those issues, together with a greater level of integration than might have been the case in the past.

And in both its proactive and reactive contact with schemes it may well expect to see substantive evidence to that effect.

Just to reinforce the point, it has increased the key performance indicator in the plan that “trustee boards with a DB scheme fully integrate risks with respect to scheme funding, scheme investments and covenant” to 69 per cent.

Everything else

Areas such as defined ambition, automatic transfers, the capability of scheme trustees and governing bodies, mastertrusts and EU legislation all feature in the new plan too, although some of these must be less obvious candidates for immediate regulatory activity.

And since there’s a fine line between a sober reflection on near-term regulatory priorities and regulator question-spotting, perhaps we should just leave it at that for now.

Tony Hobman is chair of the advisory board at Lincoln Pensions