The Pensions Regulator (TPR) CEO Charles Counsell gave a keynote speech at the Pensions Age Spring Conference on TPR’s current work and priorities.
Introduction
Thank you for inviting me to speak to you today.
This is the first speech that I have made for over two years in person and I’ve missed the opportunity.
‘Hello’ also to those watching online. The technology supporting hybrid events is providing us all with new ways of working and interacting. A positive outcome from a challenging time.
Being here feels both refreshing and familiar. With luck the next 25 minutes will be similar. I intend to refresh your knowledge of our work. Much of which you may be familiar with in the broader sense.
As we begin to live with a global pandemic, as opposed to avoiding it, our industry is moving into a new phase. A phase where we need to consider and manage the combined impact of several challenges.
The financial consequences of the pandemic and the current cost of living crisis are just two.
What I’m keen to avoid is seeing them escalate into a ‘cost of retirement’ crisis.
As an industry we need to encourage and support savers to keep saving. To help them understand that the impact of immediate financial pressures will not best be addressed by opting out of or reducing pension contributions or making a poor decision around transfers from a defined benefit (DB) pension.
To help them appreciate that investing – and saving – for their own future is worthwhile and prudent. Retirement costs are not just measured in pounds and pence. They are lived.
We supported trustees and the industry through the initial months of the global pandemic with guidance, advice and regulatory flexibility. We will continue to do so during this period of economic pressure, but that does not mean complacency should creep in. There are duties that remain regardless.
We must also be mindful of the emerging consequences of the war in Ukraine. Savers would not thank us for losing focus on our duties and I hope the guidance we offered in relation to investment in Russian organisations has helped many of you navigate these disturbed waters.
We are living in challenging times. In difficult circumstances it is our combined duty to sail a determined course. Some of what I will talk about today will be about making tough decisions. For TPR this means maintaining our determination to keep those running schemes from sailing too close to the wind. We all have a responsibility to keep the horizon in sight.
Please don’t fall into the trap of thinking that we will be relaxing our stance because circumstances are challenging. We will continue to be tough on the people we need to be tough on. Scammers, fraudsters, criminal gangs and those who fail to treat savers fairly should be mindful of our powers. And of our ability and willingness to prosecute or use our regulatory powers.
Our corporate view is firmly on the side of action. As evidenced by the priorities of our Corporate Strategy; bold and effective regulation, security, value for money, scrutiny of decision making and embracing innovation.
Let me explore some of these priorities and what we are doing.
Pension Schemes Act
Firmly in the ‘security’ area is our work to implement the Pension Schemes Act.
The overarching ambition of the Act is to strengthen protections for savers, increase our powers and align pension schemes with government ambitions to combat climate change.
I am not going to speak at length about this, but to summarise...
To help people understand the new duties and powers introduced by the Act we have:
- consulted and published a new criminal offences policy
- consulted and published an update of code 12, which explains the circumstances in which we may expect to issue a Contribution Notice
- published a consultation on draft policies, setting out our approach to new monetary penalty powers, overlapping powers and information-gathering
- consulted on new guidance to our monetary penalties policy supporting new requirements on climate change
- published new guidance for trustees and others involved in dealing with transfer requests
Still to come are consultations on revising code of practice 2 on notifiable events, the authorisation and supervision requirements for collective defined contribution (CDC) schemes, and updating code of practice 3 on funding defined benefit schemes.
We are also planning to consult on our new enforcement policy which will set out our approach to enforcement in relation to DB, defined contribution, hybrid and public service schemes. We will be publishing these soon in an easy to navigate form.
We’ll also consult on an update to the prosecution policy which will cover our overall approach in that area.
We will of course ensure all the relevant guidance and detail is easily available. If any of you want to invite technical specialists from TPR to address your own organisations or conferences, then please ask by sending us a speaker request from our website.
Pensions dashboard
Elsewhere and in our priority around innovation, the detail is being shaped around the pensions dashboard.
I have seen anxiety expressed in industry journals about the timing and ambition of this project. And these concerns are reflected in industry responses to DWP’s recent consultation on the draft regulations.
I recognise that it feels like we’ve been talking about dashboards as an industry forever. The project is moving on and I recognise that it is complex.
This is a hugely innovative tool that will enable savers to see their pensions in one place. The ‘back end’ making this possible, is a repository of highly sensitive personal data. It’s important the technical and policy aspects to enable this are watertight.
The kind of project that sails or fails on its robust security and quality of data.
We know this is a significant undertaking for industry. A lot of other regulatory activity is also going on requiring changes to data, systems and processes. We are planning a comprehensive programme to support trustees and scheme managers in getting ready for dashboards.
We’ll shortly be publishing interim guidance. We’ll be reaching out through media, industry events, one-to-one engagement to check in with you. We’ll also be writing to schemes with more than 100 members at least 12 months ahead of their duties in relation to the dashboards.
The consultation on the draft regulations is now closed. Responses are being considered by DWP. The first schemes are expected to be connected to the dashboard ecosystem and meet their dashboard duties in summer 2023.
No matter what size or type, schemes should be taking action now to make sure they are dashboard ready. The clock is ticking.
Specifically, we’d recommend the following actions.
- Include dashboards on your board agenda, if they are not already. And get the appropriate conversations going.
- Trustees and scheme managers will need support from administrators. Make sure you’re speaking with them to agree an approach.
- Accuracy of data is key for dashboards to be a success – so we are asking you to take stock of your data. Is it digitised? Is it accurate? This is particularly important for the data you will use to make sure you are finding the right person, matching savers to their pension and returning the right value. Those accessing the dashboard will expect the information they find to be accurate, and comprehensive.
Make sure that you and those who will be working with you to meet your dashboard duties are engaged and informed.
There is a lot of helpful information available. The Pension Dashboard Programme’s (PDP) information from MaPS including industry guides, information from PASA on data matching and our own guidance due imminently.
We will be supportive and pragmatic in our approach to compliance and enforcement. We will set out our proposed compliance and enforcement policy for consultation later this year. We will use the model we developed for automatic enrolment (AE) as a template.
But – and it’s important to stress – where we see intentional non-compliance, we will be assertive.
There is no excuse not to try and ready your scheme. We will use our powers, at our discretion, and where appropriate.
Having said that, I would like to echo the words of Richard James, the PDP’s programme director, who praised the data and dashboard providers that volunteered to work with them in the testing phase. And also, the countless individuals across the pensions industry who are engaging with DWP, MaPS, FCA and ourselves to shape the thinking.
If I may I’d like to extend my thanks to all of you who are advanced in your preparations.
Collective defined contribution
From that very specific project in the ‘innovation’ realm to another that is beginning to take shape.
From August this year we can accept CDC applications for multi-employer schemes.
We’ve been working with the DWP since 2020 whilst they’ve been developing regulations. These have now been consulted on and laid in Parliament.
The consultation for the code of practice ended in March and we are analysing the responses. This will be the first new code we are consulting on produced in our new modular format, making it easier to follow and implement.
The overall timeline is tight but following ministerial agreement we are working to a deadline of the code being in place no later than August.
Subject to meeting the authorisation criteria this will enable Royal Mail to meet their own commitments to launch their scheme by the end of the year.
It’s important to recognise that the code sets a benchmark for future entrants. And we’ll see what happens after August in terms of other entrants. The code will provide consistency in the way we assess any CDC scheme.
We expect the market framework for CDCs to develop quickly and we’ll update the code to include multi-employer schemes and further commercialisation as necessary.
Developing along similar lines is thinking about superfunds. With Clara having met our criteria, we remain keen for the government to introduce a statutory regime to support the emerging market. We believe the development of superfunds to be a positive addition to the pensions market.
Prosecutions
I spoke earlier about our intention to consult on our overall approach to prosecutions.
We have been busy in this area, taking action against fraudsters and criminals. You may be aware from extensive media coverage of the case we took against two fraudsters who conned 245 members of legitimate occupational pension schemes. Persuading savers to transfer their pension savings, worth about £55,000 on average into scam schemes under their control. The net sum of their illegal activity was £13.7 million.
The defendants have been jailed for a total of more than ten years and banned from acting as company directors.
This type of fraud is appalling. It’s devastating for victims and a blight on our industry.
You may also be aware of the success of our prosecution in respect of the former owner of Norton Motorcycles – Stuart Garner – who was given a suspended prison sentence for illegally investing pension schemes’ money into his business. He was the sole trustee of the three pensions schemes which invested in Norton Motorcycles.
He was also disqualified from acting as a company director for three years and ordered to pay our costs.
We lead work at a strategic level on understanding the wider problem of scams, fraud and criminal activity. Due to its opaque nature, it’s a difficult area to fully understand and assess. The scale is hard to determine, but we’ve recently been working with the National Fraud Intelligence Bureau to review the breadth and nature of pension scams to produce a new threat assessment.
We took part in an intelligence gathering exercise with partners including industry colleagues, the FCA, the Information Commissioners Office, the National Crime Agency, the National Economic Crime Centre and several local and regional police forces.
Further to input from our Project Bloom partner, the Pension Scams Industry Group, we also received valuable input from a range of schemes, administrators and service providers.
We will publish our findings in due course, but what we know is that this threat is both highly complex and sophisticated.
Actuarial Post reported that up to 5% of all pension transfers are estimated to be scams, with devastating financial and emotional consequences for scheme members. Our work here is particularly pertinent, and our threat assessment will be available to read online. We will continue our focus on improving the reporting of scams so that we can really understand the scale of the issue.
In related work, specific efforts continue to tackle pension scams.
Last November, DWP introduced new regulations to enable trustees to prevent transfers from occurring if there is a risk that the scheme member might be scammed.
To support this, we issued guidance alongside the regulations, and updated our pledge to combat pension scams, which continues to be a success and which I wholly recommend to you.
The Pension Scams Industry Group will also be updating their industry code of good practice on which the pledge is based.
We are also establishing a victim support process, led by MaPS. And our own scams strategy is due early summer.
Annual Funding Statement
Out now, indeed published yesterday, is our Annual Funding Statement (AFS). Which will be of particular interest to trustees and sponsoring employers of DB schemes. If your valuation dates fall between September 2021 and September 2022 then I’d particularly encourage you to take note.
As I mentioned earlier the current economic climate is volatile. It’s creating uncertainties that in the short term may seem troubling. The AFS advises that DB trustees should be alert to the possibility of their scheme’s funding position, investments and covenant being more volatile and potentially changing quickly.
Triannual valuations will be approaching at a time of high inflation, high energy prices, higher interest rates and slower economic growth. Which may impact global investment markets as well employer covenants.
It is unclear how the conflict in Ukraine and the sanctions imposed will affect UK schemes. A significant risk is the impact the conflict may have on the global economy. Schemes need to be alert to changes in liquidity demands and cyber risks; the longer-term impact on funding positions could be significant. Employer covenants could also be affected by indirect impacts on their customer base, supply chain or financing costs. For many businesses these factors will be coming on top of the ongoing challenges of COVID-19 and Brexit.
The AFS looks at these issues and more in some detail and I’d strongly recommend it for those of you managing risk and looking to the longer term.
Deficit recovery, setting a long-term funding strategy, managing risks through contingency planning, are all referenced in the document, which is available online now.
Value for Money
Turning away from Trustee obligations to another of our corporate priorities; Value for Money or ‘VFM’.
Our goal here is to enable assessments to be carried out on a consistent basis against a new framework. So that schemes can make meaningful comparisons.
Many of you provided feedback last year on our joint VFM discussion paper and the majority welcomed our approach. Supporting our joint regulatory efforts to work on this issue.
Together with the FCA we have analysed the responses and have committed to publishing a joint feedback statement setting out our next steps. This will be in late May.
There are several challenging policy issues that need to be resolved to develop a VFM framework. So, we are committed to working closely with DWP and the FCA. We have provisionally agreed a timeline and anticipate that the rules and regulations will come into force late next year, following a consultation. We are looking to take a phased approach, focusing initially on VFM in accumulation, in particular default arrangements of workplace schemes.
Automatic enrolment
To conclude, a few words on automatic enrolment.
Despite all the turmoil of the last couple of years and the current economic circumstances of the UK, employer duties have not changed.
The resounding success of AE is something we are committed to sustaining and developing. Over ten and a half million people have been automatically enrolled, with 1.9 million employers confirming they have met their AE duties.
We are mindful of the stresses of the current economic circumstances. However, I reiterate that the cost of living crisis must not turn into a cost of retirement one.
The long-term benefits of AE are too valuable to be lost to short-term volatilities.
Its important employers understand that their automatic enrolment duties continue to apply as normal. If an employer has even one member of staff, they must continue to support their employees by meeting ongoing legal duties.
These include paying the correct amount on time to the pension scheme; assessing new staff to see if they are eligible for a pension scheme, communicating this to them; and re-enrolling at the right time.
Advisers play a critical role in supporting TPR’s remit to maximise employer compliance with their automatic enrolment duties. It’s important that advisers keep supporting their clients with their ongoing legal duties.
Therefore, advisers need to be equipped with resources to be able to support their clients effectively. We’re asking advisers to help their clients understand what they need to do and by when.
We publish monthly information on automatic enrolment, derived from information submitted by employers when they complete their declaration of compliance.
Since July 2012, the start of our compliance and enforcement activity for automatic enrolment, we have used our AE powers more than half a million times.
As of December 2021, the figure stood at over 600,000: including inspections, compliance notices, unpaid contribution notices, fixed and escalating penalties.
I think that figure, one of many I could offer, demonstrates our determination and diligence – to regulate with vigour, to support the industry to do the right thing and to be tough on those who don’t.
Conclusion
It feels an age since I was properly able to speak directly to an audience.
I’m very thankful for the invitation and opportunity to talk to you today.
As you’ll have gathered, we have been busy in the interim.
Over the next period we must be alert to the cost of living challenges and the long term impact of COVID. We must be ready for economic turbulence and the challenges that brings. But I feel sure that by working together and keeping an eye on the horizon we will maintain the course we set out.
Continuing to deliver a pension system that in turn delivers good outcomes for savers.
Thank you.
