UK - The Pensions Regulator (TPR) is planning to make pension administration and employer covenants its key points of focus in 2010.
In its 'Corporate Plan 2010-2013', TPR recognised the growing trend towards defined contribution (DC) schemes, and noted the 2012 pension reforms will increase the regulator's workload in addition to the increased activity relating to the economic downturn.
It stated: "In 2009-2010 our regulated community was still dealing with the impact of the difficult economic climate. We expect that a combination of employers' adjustments to the persistent effects of the downturn and their preparations for the workplace pension reforms will lead to a high level of activity in our industry in 2010-2011." As a result it estimates its budget will see an increase of £1.3m for 2010-11.
The Corporate Plan, which is likely to be reviewed later in the year to account for the 2012 reforms, focuses on five strategic themes:
Within these, TPR revealed it intends to maintain a close understanding of the development of the advisory and provider market. It stated providers of services to the pensions industry and pensions providers "have an important role to play in delivering outcomes to members of contract-based schemes, and who can be the most significant factor where they provide bundled services to trustees in trust-based schemes"
In particular, it warned "pensions administrators, whether in-house or third party, will be an increasing focus for us, as we look to improve standards of data and administration across the industry".
TPR has previously highlighted its plans to improve pension administration, but the Corporate Plan pointed out the forthcoming workplace pension reforms, including auto-enrolment, "provide a compelling reason to focus on standards of administration across schemes and in 2010 we will focus heavily on this area". This will include the processes that control employer payments to schemes and maintenance of accurate member records. (See earlier IPE article: TPR cracks down on poor pension admin)
An additional area of focus will be on the employer covenant, with TPR planning to issue further guidance on how this should influence scheme funding targets and strategy. This will also include a review of guidance on contingent assets, and guidance on employers that withdraw from multi-employer schemes.
"The employer covenant remains the bedrock of the UK funding system.Therefore, where employer actions reduce the reliance on the covenant, we are concerned to ensure that it is replaced with adequate security. We will also continue to focus in 2010-2013 on ensuring that the trustees review and regularly monitor the employer covenant. There is already a high baseline of 83% of trustees of DB schemes reviewing the employer covenant annually but in 2010-2013 we expect this to increase further," stated the document.
Preparations for the 2012 reforms include the development of a "graduated approach to enforcement" related to employer compliance, alongside plans to build a communications programme where the employers are segmented to allow the delivery of appropriate messages to each audience. (See earlier IPE article: UK regulator to unveil auto-enrollment enforcement strategy)
Overall, TPR noted the next year will include work on understanding how the changes in the economic climate and pension trends affect the trustee model, and review how trustees can continue to take decisions in the best interests of scheme members. Key issues relating to this include situations where employers are disengaged, and where because of their size, some schemes are "heavily reliant on providers of bundled products".
Tony Hobman, chief executive of TPR, added: "Our goal will be to maintain a sharp focus on protecting members' pension benefits and the PPF, taking regulatory action if necessary, without creating unnecessary burdens on businesses."
In response to the TPR business plan, the National Association of Pension Funds' chief executive, Joanne Segars, said: "The Pensions Regulator's corporate plan strengthens our case that the time has now come to put all pensions regulation under one roof."
She continued: "With the Regulator now planning to step up its activities on defined contribution pensions - an area where the FSA is already involved - it makes no sense to have pensions regulation shared by overlapping bodies. The FSA's responsibilities for group personal pensions and stakeholder pensions should be transferred to The Pensions Regulator, creating a simpler, slimmer and more understandable regulatory system for everyone."
If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com
No comments yet