16 November 2018

Commercial Risk Europe: Pensions regulation: a tougher approach

Globally, the regulatory burden on corporates is on the increase. This is particularly true in relation to workplace pensions, and anyone who is involved in managing corporate risk will need to understand how this shifting regulatory landscape might impact on their business.

In the UK, The Pensions Regulator (TPR) has set out its new approach to pension scheme regulation in its latest TPR Future Report, Making Workplace Pensions Work. The mantra of “educate, enable, enforce” has been replaced with “clearer, quicker, tougher”.

TPR was criticised by the Work and Pensions Select Committee for its handling of BHS and Carillion.

That criticism has undoubtedly influenced TPR’s approach, although it can be seen to have started taking a stricter approach from about three years ago.

A challenge for TPR is that it has to regulate in very different areas: legacy defined benefit schemes, employer compliance with automatic enrolment, master trust schemes set up by pension providers, and public sector schemes. TPR’s new internal regulatory model is aimed at being flexible enough to cover all of these disparate areas.

TPR has identified four key outcomes to achieve:

• Participation – an increase in participation in workplace pensions
• Protection – protect members and the Pension Protection Fund
• Accountability – to hold to account those subject to regulation from TPR
• Confidence – to increase people’s confidence in the security and quality of workplace pension savings.

Ten main risks to achieving these outcomes are identified. Some of these are specific to defined benefit (DB) schemes, such as the risk of insufficient funding in DB schemes or a failure to strike the right balance between scheme funding and allowing employers to invest.

Others are specific to automatic enrolment, such as the risk of employers failing to comply with the duties to provide pensions to their staff. But others cut across all pension schemes subject to the TPR’s oversight, such as the risk of poor scheme governance or administration, leading to poor member outcomes or a loss of benefits.

Full article on Commercial Risk (subscription required)

© Commercial Risk Europe