The Pensions Regulator has suffered what some critics call an 'annus horribilis'. James Phillips looks at how the watchdog has responded in its latest corporate plan.
The Pensions Regulator (TPR) will boost its headcount over the next three years as it shifts its resources into more forceful and direct action against flagging schemes.
The watchdog is restructuring its workforce to boost its frontline regulation team and introduce a data team, while the proportion of staff dedicated to auto-enrolment (AE), regulatory policy, and communications will fall.
The overall headcount is expected to increase from 591 full-time equivalent (FTE) staff in the 2017/18 year, to 660 this year, a 12% increase. TPR expects the staff to grow further to 720 FTE by 2020/2021.
The movement of resources comes as the regulator promised to act more broadly and visibly in a bid to improve outcomes for savers, with a pledge to employ a wider range of regulatory tools, and more often adopt standards-based regulation and tailored approaches to different sectors of the market.
In its corporate plan for the 2018 to 2021 period, published on 10 May, TPR promised to bear its teeth where it believes schemes are being unfairly side-lined compared to other creditors, noting "if we see a situation where we believe a scheme is not being treated fairly relative to other creditors, we are likely to intervene and, if necessary, use our formal powers".
Smaller schemes and those which present the biggest risks will see a greater focus, while larger schemes will be engaged with more proactively, the regulator promised.
Chairman Mark Boyle said trustees and sponsors should expect to see a more "vocal" regulator.
"The pensions landscape has been changing significantly," he said. "We are meeting this challenge by embedding a new regulatory culture and reinforcing our regulatory teams on the frontline.
"In the coming year you can expect to see us being more vocal about our expectations of those we regulate and intervening quickly and decisively through our wide-ranging regulatory activity and enforcement powers so that workplace pension schemes are run properly and people can save safely for retirement."
This will be backed up by an improved use and collection of data, with dedicated staff, to "better target and prioritise our work based on the risks we want to reduce". It will also work more with regulatory partners such as the Financial Conduct Authority (FCA), with which it is currently in the process of designing a joint strategy.
AJ Bell senior analyst Tom Selby said the plan showed a war-torn watchdog fighting back.
"TPR has come out fighting after something of an annus horribilis that has seen it face stinging criticism for its role in the BHS scandal and the recent failure of building firm Carillion," he said. "While some of this may have been justified, TPR's budget remains tiny when you consider the vast landscape it is required to monitor."
Financially, the watchdog's budget has grown by £4.3m to £88.6m from the 2017/18 actual year spend, with levy costs set to increase by £8.3m while AE costs will decrease by £3.9m. Much of the increased costs will go towards salaries, which grow by £5.9m, but this is largely offset by a £4.3m reduction in contractual costs.
Selby continued: "In this context, chairman Mark Boyle's pledge to be ‘more vocal' in communicating its expectations of those it regulates makes sense. The regulator has to compensate for its lack of resources somehow and by roaring like a lion it will hope to convince those it polices that it is more than just a kitten."
The regulator's year has not necessarily been entirely difficult, however, with it making greater use of its various powers, some for the first time. For example, it has secured its first criminal convictions for AE- and section 72-related failures, including for former BHS owner Dominic Chappell, and a regulated apportionment arrangement for British Steel pensioners, and extracted more than £320m for three Coats Group schemes.
The report highlights eight priorities for the next three years, as well as four macro trends, including the impact of Brexit on particular sectors and potential concentration risk within master trusts.
On Brexit, the watchdog said it was working with the government and wider industry to build its understanding and response, and, in particular, assessing the implications for cross-border schemes - a potential problem acute to Northern Ireland and the Republic of Ireland - and would provide further guidance for schemes when more details of the final deal are available.
In a foreword to the report, Boyle and chief executive Lesley Titcomb recognised that the following year may provide some difficulties, and a more "agile, skilled and diverse workforce" was necessary to support TPR's activities.
"One thing is certain," they wrote. "It will be another challenging year, but we are in an excellent position to take on those challenges."
JLT Employee Benefits head of technical John Wilson said it was not unexpected given the deluge of criticisms the regulator has faced from parliament and the industry.
"Following accusations of ‘being asleep on the job', it is unsurprising to see TPR's plan to become a more agile supervisor," he said. "Trustees and scheme sponsors should expect to see increased intervention - the regulator acting more as a ‘player' than ‘referee'."
TPR's newest corporate plan is an iteration of its ‘clear, quicker, tougher' agenda, but questions continue to crop up as to whether the pendulum has swung too far.
Lincoln Pensions chief executive Darren Redmayne welcomed the approach but believed it was prioritising members over and above other parties.
"The regulator is tasked with protecting member benefits while at the same time minimising any adverse impact on sustainable growth of sponsoring business," he said. "This necessitates a delicate balancing act - this corporate plan appears to be prioritising the protection of benefits, which is good for members and potentially more challenging for sponsors."
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