Regulator cracks down on large schemes

Regulator cracks down on large schemes

The Pensions Regulator (TPR) is introducing one-to-one supervision for the 25 biggest defined contribution (DB), defined benefit (DB) and public service pension schemes, starting next month.

The approach, which will involve regular ongoing contact with trustees or managers and sponsoring employers of pension schemes, will be rolled out to more than 60 schemes over the next year, the watchdog announced today (17 September).

The goal of the regulator is to establish relationships with schemes whose size means they are strategically important regardless of whether they trigger TPR’s traditional risk indicators.

TPR is also introducing higher volume supervisory approaches from October, with the goal to address risks and influence behaviours in a broader group of schemes, it said.

This second type of intervention will be piloted with approximately 50 DB schemes to assess compliance with messages in TPR’s 2018 annual funding statement, specifically on whether schemes are being treated fairly when it comes to dividend payments to shareholders.

The announced changes by the pensions watchdog are the result of a recent review of the way it regulates.

Lesley Titcomb (pictured), TPR’s chief executive, said the organisation was in the process of implementing a radical shake-up to honour its pledge of being clearer, quicker and tougher.

She said: "Schemes across all sectors, whatever their size, can expect the volume and frequency of their interactions with us to increase so that potential risks to pension savers are identified early and put right before it becomes necessary for us to use the full force of our enforcement powers.

"Our new model is flexible – we will take a systematic approach to set out our expectations and will respond swiftly to emerging risks, taking tough action where necessary to tackle bad behaviour, including by corporate entities."

Ms Titcomb added that an important element of the regulator’s new approach will be the use of a broader range of communication channels to drive behavioural change, "by promoting greater understanding of what schemes need to do in order to comply with the law and demonstrate high standards".

She added: "This was a vital ingredient in the success of automatic enrolment amongst employers and we look forward to developing a closer relationship with schemes, both large and small."

The issue with dividend payments came to light with Carillion, where for several years the company had increased payments to shareholders while denying funds to plug its pension schemes’ deficits.

In its DB white paper, published in March, the government said it would consider if the introduction of a targeted mandatory clearance process for specific corporate transactions was necessary.