The UK’s pensions regulator is planning to gradually shift its focus from defined benefit (DB) pension schemes to defined contribution (DC) savers under its corporate strategy for the next 15 years.

Presented today in a provisional form for discussion, the strategy divides and analyses savers by generation – baby boomers, generation X and millenials – looking at how their profile will change over the next 15 years and detailing TPR’s for the different groups.

“Our focus must change from a scheme-based view to one that puts the saver at the heart of all that we do,” said chief executive officer Charles Counsell. “This strategy centres on our commitment to pension savers.”

For baby boomers, TPR intends for its core objective to be protecting savings outcomes, while for the generation X and millenial generations it would be enhancing savings outcomes.

“For younger savers automatically enrolled into DC pensions, investment performance, value for money and at-retirement decision-making will play a much greater role in retirement outcomes,” TPR said.

The regulator identified five strategic priorities: security, value for money, scrutiny of decision-making, embracing innovation, and “bold and innovative regulation”.

TPR generation matrix 

Screen Shot 2020-10-16 at 14.03.41

Source: TPR

The graphic depicts TPR’s estimation of the relative reliance that different saver groups are likely to place on DB, DC and other long-term savings (LTS).

Initial reactions from within the pensions industry included welcoming TPR’s strategic plan but also saying it raised big questions.

Zoe Alexander, director of strategy and corporate affairs at NEST, the UK’s largest DC master trust, said: “A shift in focus by the regulator in this direction seems absolutely the right one and reflects the future of pension saving.”

Phil Brown, director of strategy at The People’s Pension, said that in focussing on the shift from DB to DC, TPR had correctly identified the main challenges for each generation and income group.

“This strategy recognises TPR is now regulating a commercial market as well as employers and trustees, operating single employer schemes,” he said. “This is very much a strategy for the immediate future of pensions.”

‘Existential question’ 

Mike Smedley, partner at consultancy Isio, said it was a “brave” step by the pensions regulator to look at ”the bigger picture and a world where DB pensions are less important to the majority”, but that this raised “existential question – in the long-term do we need a pensions regulator at all?”.

“Is it right to maintain the current patchwork of regulators rather than a holistic view of pensions and long-term savings? In a world of member-centric DC pensions, why regulate workplace and individual plans so differently?

“It’s also a huge leap of faith to assume that pensions will be the savings vehicle of choice for millennials. There are already signs of movement towards other long-term savings which will need a much broader response than the pension regulator’s current statutory remit.”

In the UK, TPR is responsible for occupational pension schemes and auto-enrolment, while the Financial Conduct Authority (FCA) regulates personal pension schemes although it also the regulator for advice for savers transferring out of DB schemes.

TPR’s corporate strategy document states that the regulator “will remain a key part of a coherent regulatory system” and that it is committed to “working with our partners in regulation at the FCA, the Prudential Regulation Authority and the Money and Pensions Service”.

And noting that consolidation would likely mean it would be regulating fewer but larger schemes, TPR said “our regulatory approach will need to be highly integrated with other financial and system-wide regulators”.

TPR’s strategy document can be found here.

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