UK regulator reprimands itself over missed risk management targets
The UK Pensions Regulator (TPR) has failed to convince more than half of UK pension trustees to pursue an integrated risk approach, requiring them to take account of a scheme’s funding, investment and covenant risk.
As the organisation published its 2013-14 annual report, the regulator’s new chairman, Mark Boyle, said the past year had seen a number of “significant” milestones.
Noting that TPR had aimed to drive up standards among defined contribution (DC) schemes, he also stressed the importance of its work in the defined benefit (DB) sector.
“We have also redefined our approach to DB regulation by consulting on a new code of practice that explicitly balances an employer’s sustainable growth with the regulator’s other statutory objectives.”
However, according to the regulator’s own targets, it was unable to win over a sufficient number of DB trustees and convince them of the need for an integrated approach to monitoring risk.
It said only 42% of trustees surveyed in the fourth quarter of 2013 said they employed a fully integrated approach, well short of its target of 54%.
Under its own traffic-light rating system, this resulted in the regulator classing its efforts as red, whereby a target was “missed by a significant degree”.
The results come after TPR admitted it would reduce the budget available for DB regulation by 10%, as it nearly doubled the funds available to deal with the rollout of auto-enrolment.
Last year, as it launched a consultation on its DB code of practice, it said the idea of an integrated risk approach was key to achieving good funding outcomes.
The regulator also said it failed to respond to funding proposals as quickly as hoped, responding to 80% of the 1,649 received last financial year within about four and a half months, rather than its target of three months.
Both employers and consultants were also unfamiliar with the regulator’s six principles for DC funds, with only 12% of employers and 52% of consultants aware of the guidance – against a target of 60% and 90%, respectively.
However, it was more successful in improving scheme record-keeping, exceeding by 3 percentage points its target of 70% of funds having all required data to qualify.