The Pensions Regulator has released its corporate plan. Sara Benwell explores what trustees need to know
The Regulator has published its new corporate plan, which lays out the organisation’s priorities for 2016-2019.
While the plan primarily talks about the activities TPR is planning over the next 12 months, there are strong indications as to what the watchdog is expecting from schemes and therefore the issues that should remain at the top of trustees’ minds.
Five key learnings for trustees
1) Mastertrust governance
Top of the regulator’s list is mastertrust governance. Amid growing concerns about regulation of this sector TPR has announced that it will work with ICAEW to develop a revised version of the mastertrust framework to reflect the requirements of the new DC code.
If there are concerns about the governance of particular mastertrusts, TPR will engage directly with them to check the skills and experience of their trustees and the sustainability of their business models.
TPR says it is also engaging with the FCA and government to identify unmitigated risks to members of mastertrusts and agreeing the necessary steps to safeguard member benefits.
Trustees that sit on mastertrusts should ensure that their scheme has obtained the assurance framework as TPR has indicated that it will be working with employers to ensure they pick schemes that hold this qualification.
Governance will be an ongoing concern and trustees of such schemes may find there is increasing pressure to prove that the scheme is up to scratch.
2) DB funding
One of the main risks identified by TPR in its corporate plan is the current investment outlook and its potential impact on scheme funding.
The plan said: “We will continue our risk-based approach to achieve appropriate funding outcomes through proactive and reactive case interventions, and guide trustees and employers through our expectations in current market conditions via the annual funding statement.
“Our work with government and European partners will help to ensure the current and future challenges to DB benefit provision are met within a flexible and efficient regulatory framework.”
Trustees need to be confident that their plans for meeting funding challenges will pass muster. They should ensure that they are using the new covenant assessment and integrated risk management guidance to strength test the investment approach.
For trustees of public service pension schemes, the focus will be on record-keeping, internal controls and communications.
3) Stopping the scams
Protecting consumers from scams remains high on TPR’s priority list. The Plan said: “We are currently leading Project Bloom; a taskforce including the government, other regulators, financial services bodies and criminal justice agencies to combat scams; and are raising awareness with trustees and scheme members via our ‘scorpion’ campaign.”
Companies that try to evade pensions liabilities remain firmly within the regulator’s sights, with the watchdog promising to “apply the full range of [its] powers appropriately to the risks, testing the extent and application of powers we have previously not used.
Since the Donna Hughes versus Royal London case, there have been concerns about the powers that trustees have when it comes to stopping people from transferring their money into a suspected scan scheme. Trustees should follow the regulator’s guidance carefully when concerned about a member’s decision.
4) The DC code
TPR will be ensuring that it’s new DC code is implemented, including the requirement on schemes to provide timely and accurate information
The Plan said: “we will take action on non-compliance with new DC requirements for a chair’s statement and implementing charge controls, and enforce the ban on member-borne commission fees.”
Trustees should stay apprised of the rapidly evolving DC governance landscape to ensure that they are meeting with regulatory guidelines. With DC governance remaining high on TPRs priority list, schemes that do not comply with the new governance codes could be in for a rough ride.
The Regulator has said that it will if necessary, facilitate the creation of a pensions dashboard and other tools such as pensions passports in partnership with the FCA and government partners.
All trustees will likely be affected by the creation of a pensions dashboard and so should follow progress on this issue carefully to establish what might be needed from them and when.
Last year was a busy one from a regulatory perspective with plenty of new guidance shaping the way that trustees need to work. This year looks set to be no different and trustees should keep a close eye on communications coming out from TPR.
Governance is taking centre stage and trustees may feel more comfortable if they can show that they have been operating within the regulators guidelines.