The Pensions Regulator

The major changes contained in the Pension Schemes Bill – particularly the shift towards larger schemes and introduction of a regulatory regime for superfunds – are driving much of TPR’s work at the moment. It aims to ensure that the government’s policy intent is delivered and that the market can capitalise on the opportunity this offers.

TPR plans to introduce a framework for the oversight of professional trustees. About half of all UK schemes now use a professional or sole trustee model, with research showing that the largest ten firms of professional trustees govern more than £1tn of assets. Adopting a risk-based approach, TPR has begun extending its oversight to the main trustee firms. It hopes to collect data and foster a culture of open regulatory dialogue with professional trustees, enabling it to assess risk and then work with the industry to identify mitigations. It has no new powers in this area but will consider how it could use its existing powers should that prove necessary.

TPR has implemented a new DB funding code (applying to valuations from 22 September 2024) intended to ensure that schemes meet the goals of improving outcomes, safeguarding security and reducing reliance on employer support. The code requires schemes to adopt a long-term objective and align their investment and funding strategies. Reflecting the growing number of options available to trustees, TPR has also released guidance on how to consider their long-term plans and integrate their preferred option into their endgame planning.

Many schemes struggle with poor data quality and underinvestment in technology. TPR believes that combining better data with new digital solutions will mean clearer choices for savers, as well as reducing costs, increasing efficiency and streamlining reporting. It has various initiatives to support change in this area and has been targeting schemes, based on the data scores reported in their returns, to ask how they are reviewing and improving their data. With the final deadline for connecting to pensions dashboards coming up fast, TPR is encouraging schemes to see this as an opportunity for innovation and improvement.

TPR is upping its activity around climate change, building on the existing governance requirements for certain schemes in relation to climate-related risks and opportunities. In July it announced plans for a voluntary net zero transition plan template fit for occupational schemes. It has also set up an ESG hub on its website as a central resource for information on matters such as climate change. TPR recently published a report on climate change adaptation, noting that the market approach will need to evolve as consolidation in the market increases, meaning more schemes may find themselves with undiversifiable systemic risk exposures. While the main statutory obligations currently centre around reporting, TPR has said disclosure alone is not enough: it should be business as usual for trustees to consider climate change and other ESG factors as part of wider decision-making.