Taking a look across the generations, The Pensions Regulator (TPR) has set out its blueprint for the future of pensions regulation in a 15-year strategy aimed at protecting savers in the short and long term. The strategy focuses on TPR’s commitment to evolve from a scheme-based view to one that puts the saver at the heart of all that it does.
Understanding Pension Savers
In order to move the focus to pension savers, TPR has adopted a new analysis based on different groups of savers by generation. TPR has recognised that each group is likely to have a different level of reliance on different pension systems and, therefore, face distinct challenges that will each require a tailored approach.
The four generations are set out below with a summary of their common characteristics and TPR’s focus for the future:
|Saver||Baby Boomers||Generation X||Millennials||Generation Z|
|Year of birth||1946 – 1964||1965 – 1980||1981 – 1996||1997 – 2012|
|Timeframe for accessing pension||Moving into retirement over the coming 15 years||15 – 30 years||30 – 45 years||45 years +|
|Common characteristics||More exposure to DB schemes||Mixture of DB schemes (albeit less than baby boomers), DC schemes and master trusts||To the extent they are saving, most will be automatically enrolled and making the statutory minimum level of contributions||For those that have commenced their working life, they will most commonly be automatically enrolled into a DC scheme|
|Risks||Long-term economic volatility, as well as financial strain in the wake of COVID-19, has meant that many DB schemes are not sufficiently funded to meet promises made to these savers.||These savers may have given little to no thought as to how they will manage financially in retirement. They may not be aware that a few years of statutory minimum contributions is unlikely to be sufficient.||Changes to employment patterns, including zero hours contracts and “gig” economy work, could make pension saving a challenge and lead to a proliferation of small pots. This cohort may not have savings outside of pensions.||Many of this generation have not yet started saving for retirement. They will face unique challenges, some of which are yet unknown.|
|Focus for the future||Security
Tackling pension scams
Enabling good saver decision-making
Regulatory developments that drive greater transparency and simplicity
|Driving participation in workplace pensions
Ensuring value for money
|Investing in analysis and insight to understand the needs of these savers as they emerge|
TPR has noted the significant structural shift in the pensions landscape from one that was largely dominated by DB schemes, to now having a vast majority of savers in DC schemes. While TPR considers that balancing the current and future needs of the two types of scheme is a central challenge, Charles Counsell OBE has commented that this shift “means that it is a natural evolution to go from a scheme and employer-centric approach to regulation, to one with savers at its heart.”
TPR has identified a set of eight overarching trends that it considers will shape the future of retirement savings:
- Changes in the nature of work and retirement mean that people are now earning money differently to the traditional employment models. This is expected to have an effect on pensions as people start saving later in life and, as a result, a growing number will work at least part time in retirement.
- Shift in the balance of the marketplace with fewer, more professionalised, trustees emerging in lieu of employer and member nominated trustees.
- Reduction in membership of DB schemes means that the priority will be on addressing funding gaps and putting in place clear plans to meet promises made to savers.
- Growth and consolidation of the DC market leading to opportunities for enhanced saver outcomes through better governance, administration and value.
- Suppliers will innovate and integrate with the anticipation that some providers will expand to operate across the full pension supply chain.
- Growth in the demand for stewardship as a means of delivering sustainable benefits, not only for pension savers but also for the economy, environment and society.
- Accelerating technology-driven change in the pensions industry. TPR considers that the pensions dashboard may act as a catalyst for driving these advances and is expecting to work with industry more widely to embrace and embed technology.
- Regulatory frameworks will evolve in line with the transformation of the marketplace and wider landscape.
In light of TPR’s aim to ensure savers’ pensions are enhanced and protected both now and in the future, TPR has set the following strategic goals:
- Savers’ money is secure. TPR aims to secure promises made to savers in DB schemes, as well as ensuring that DC schemes deliver good quality outcomes. TPR will work with partners across the pensions industry to act against pension scammers.
- Savers get good value for their money. TPR will actively pursue value for money throughout the pensions system, whether that be through investments or the costs and charges of administration, and intervene where expectations are not met. TPR will work with its regulatory partners, including the FCA, to bring out a consistent framework for assessing value for money.
- Decisions made on behalf of savers are in their best interests. TPR will scrutinise decisions made, as well as monitor those who are making the decisions that impact savers’ outcomes. TPR will intervene where it considers poor decisions may lead to bad outcomes for savers.
- Innovation to meet savers’ needs. TPR will encourage innovation by facilitating the development of technology and the sharing of good practice by collaborating across the market.
- TPR is a bold and innovative regulator. TPR aims to transform the way it regulates in order to put the saver at the heart of its work.
While the strategy sets out TPR’s 15-year vision, the detail behind the day-to-day work will be set out via three-year corporate plans. Keep an eye out for our communications detailing TPR’s more specific plans in the future.