In an episode that has potential for many sequels, the Pensions Regulator has turned its hand to time travel with a report on the conclusion of Phase 1 of its TPR Future project.
TPR Future involves an assessment by the Pensions Regulator (TPR) of the way in which it complies with its statutory duties and how it intends to combat the challenges of encouraging continuing compliance in future. The project is set against the backdrop of recent increased use by TPR of its statutory powers to take enforcement action against trustees and employers (as well as professional advisers in some cases) who fail to comply with their legal duties.
Whilst the report suggests, at least at face value, that TPR Future is primarily concerned with a behavioural shift, it is important that stakeholders – especially trustees – do not interpret this simply as a form of internal TPR business planning. The devil is in the detail: the report contains some important messages for those involved in administering pension plans. In particular, it alerts trustees that TPR will engage with trustees to assess how they are meeting TPR’s standards and use its enforcement powers more widely when it finds failures.
Like Doc Brown examining the inner workings of his DeLorean time machine, those involved with administering pension plans should be inspired by the report to scrutinise their existing governance processes. Failure to do so in this new regulatory environment could result in a less than smooth passage through the space-time continuum!
The report is divided into two key sections. The first addresses TPR’s existing statutory objectives – with a strong focus on member protection – and public perception of TPR’s approach to meeting those statutory objectives. The reported feedback is largely positive, e.g. “Our stakeholders feel we take a pragmatic and principled approach and our increasingly proactive communications and sharper focus on emerging issues was welcomed”; although it does contain some suggestions for improvement, such as “being clearer and being more prescriptive about what we actually want [stakeholders] to do to meet their legal duties”.
The second section of the report deals with five “opportunities for change” identified by TPR, which it proposes to implement in due course. As an indication of how quickly those opportunities for change are likely to be brought into force, a further report on the success of their implementation is expected in spring 2018. In other words, trustees can expect a noticeable change in approach by TPR in the near future. The five opportunities for change are:
- Clarifying identity and improving engagement: TPR will clarify how responsibilities are split between TPR and other organisations it works with, such as the Financial Conduct Authority and the Pension Protection Fund. It will also review the relationships it has with trustees and trustee advisers.
- Setting clear expectations: TPR will provide clarity on the standards and behaviours expected of trustees (including examples of good and bad practice), provide appropriate guidance for master trusts, take action against anyone not meeting those standards and publicise actions it has taken.
- Improving regulatory oversight: This will involve monitoring and reporting on TPR’s regulatory requirements, collecting information and intelligence from a wider range of sources, collecting appropriate data and using better supporting technology, being more visible in certain areas (such as engagement with small pension plans), meeting with trustees so they can explain how they are meeting TPR’s expectations, and undertaking more thematic work to assess emerging risks.
- Using a wider range of regulatory interventions: TPR will continue to test wider and swifter use of its powers, push boundaries so that it uses its powers “to maximum effect” and lobby the government if it finds that any powers are no longer fit for purpose.
- Being more efficient and effective: In order to improve its regulatory performance TPR proposes to create a more adaptable approach to meeting challenges, nurturing a culture of trust to enable staff to use skills and knowledge and be open to challenge, streamline governance and clarify accountabilities and decision-making authorities, and review and refine processes to ensure there is an “optimal blend of resources working on each process”.
Trustees should look out for future TPR publications in relation to governance (in particular further communications relating to 21st century trusteeship, which is mentioned in the report) to ensure that they keep up-to-date with TPR’s expectations.