The Pensions Regulator Implements New Approach to Supervising Workplace Pension Sector

The Pensions Regulator (TPR) has unveiled organizational adjustments to bolster its strategic transition in supervising the workplace pensions sector. As the pensions landscape undergoes rapid transformation toward a more competitive environment characterized by fewer, larger schemes, both risks and opportunities for savers and the broader economy are evolving.

In response to this shifting regulatory landscape, TPR is taking proactive measures to ensure that pensions continue to yield positive outcomes for savers while reinforcing its regulatory oversight. Effective from April onwards, TPR will establish three distinct regulatory functions aimed at safeguarding, enhancing, and fostering innovation in the interests of pension savers:

    Regulatory Compliance: Focused on safeguarding pension savers' interests by delivering regulatory compliance services efficiently     and effectively, with targeted efforts directed at schemes and employers.

    Market Oversight: Geared towards enriching the market by strategically engaging with pension schemes and other stakeholders     who influence savers' outcomes, with particular emphasis on delivering value for money and promoting responsible trusteeship.

    Strategy, Policy, and Analysis: Tasked with leveraging insights from TPR's regulatory approach and external sources to refine the     regulatory framework and facilitate market innovation in the best interests of savers.

These initiatives will be reinforced and facilitated by essential supporting functions, including Operations, Digital, Data and Technology, and People.

Chair of TPR, Sarah Smart, said, “We are moving from a fragmented pensions landscape of thousands of small schemes to an environment of fewer, larger schemes. That means we need to change our regulatory approach to protect savers in the future.

“The market should expect us to engage with it differently from now on. Our new structure means we will be swifter to address compliance failures and market-wide risks while being more dynamic in our industry engagement and bringing innovation to the fore.”

Meanwhile, Chief Executive of TPR, Nausicaa Delfas also added,“We have to make sure that workplace pensions work for savers. Our organisational changes are about bringing our talented and capable colleagues together to protect, enhance and innovate in savers’ interests.”

Over the past decade, significant changes have swept through the pension landscape, marked by the widespread adoption of automatic enrolment, which has normalized saving for millions of workers and tilted the scale toward defined contribution (DC) schemes. Master trusts have emerged as the preferred choice for the majority of employers, capturing 90% of DC memberships. Moreover, a staggering 82% of savers are concentrated within the largest five schemes by assets under management.

Concurrently, there has been a noticeable shift among employers away from defined benefit (DB) pensions, with only a mere 4% of schemes remaining fully open. Many schemes are now contemplating various strategies to fulfill their promises to savers, including exploring options presented by new consolidation vehicles like superfunds that are entering the market.

This evolution signifies a fundamental transformation in the pension landscape, transitioning from a model characterized by one employer and one scheme to a dynamic and competitive marketplace featuring a multitude of master trusts and consolidation vehicles vying for prominence.

Source: The Pensions Regulator