DWP reviews UK’s pensions regulator making 17 recommendations addressing future challenges

The UK’s Department for Work and Pensions (DWP) has reviewed The Pensions Regulator (TPR), offering 17 recommendations to address future challenges, “both strategically and operationally”, DWP’s report disclosed.

The report also concluded, however, that TPR is “broadly well-run and well-regarded” by its main stakeholders.

The review was undertaken by DWP to ensure that TPR remains fit for purpose, and whether it is still required as a public body, it was announced. It was undertaken during the early part of 2023 and led by Mary Starks as the independent lead reviewer.

The report gave consideration to:

• whether TPR is well set up to do its job within the wider systems of pensions and financial regulation;
• whether TPR is well set up to adapt and respond to future challenges;
• whether TPR is well governed, efficiently run and appropriately funded;
• how well TPR is managing relationships with its key stakeholders;
• opportunities to undertake activities in a more efficient manner.

The report added that TPR had some notable successes in its track record, for example the implementation of automatic enrolment, and also pointed out that the Regulator has a coherent strategy focussed on clear outcomes with the interests of savers at its heart, holding itself to account against a range of key outcome and performance indicators.

Starks said: “Some regard it as overly risk averse, and in light of current policy debates about regulation and growth I explored TPR’s risk-appetite and stance on growth in this report.”

She added that TPR has grown “significantly” in recent years, reflecting the addition of new responsibilities.

“With further remit expansion in the pipeline, there is a risk that TPR grows inexorably unless it can bring about a step-change in its ways of working – which it plans to do through digital transformation. TPR’s main challenge is pursuing its digital agenda in a way that meets its strategic ambitions yet provides enduring value for money,” Starks said.

She highlighted that the are big shifts underway in the UK pensions sector, as it transitions from a defined benefit to defined contribution basis, looks to increase contributions, and starts to explore new models such as superfunds and collective defined contribution schemes.

The key recommendations – which centred around three themes – in DWP’s report relate to addressing future challenges, both strategically and operationally.

Firstly it focused on risk and growth. The report said that following the liability-driven investments (LDI) event last autumn and broader policy concerns about productive finance, the question of how UK pension funds are invested has come under the spotlight. It added that it is important that TPR plays an authoritative part in these policy discussions, as an informed and expert voice aligned with the interests of savers.

It then focused on compliance and enforcement. The report acknowledged that TPR has a throughful approach to driving compliance by both employers and pension schemes, based on facilitating and encouraging compliance where possible, backed up by enforcement action as necessary.

It added that this is effective at driving compliance but leaves some stakeholders questioning TPR’s appetite to punish wrongdoing. It pointed out that it is important that TPR is known for taking tougher action when necessary.

The last theme focuses on digital transformation and value for money. According to the report, TPR has grown significantly in recent years reflecting additional workload associated with EU exit and the pandemic, as well as the addition of new responsibilities. To avoid inexorable growth as its remit expands, it said TPR must find ways to discharge existing functions more efficiently, and plans to do this through digital transformation.

The report was finalised before the chancellor of the exchequer’s Mansion House speech on 10 July, where a series of measures were announced to boost saver outcomes and increase funding liquidity for high-growth companies through reforms to the UK’s pension market.

It does not set out an explicit timeframe for implementation of the recommendations but Starks said she believes the majority could be implemented within the coming year.

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