Charles Counsell: Over 1,000 schemes to feel 'gentle hand' of enhanced TPR supervision

The watchdog will strengthen its scrutiny across the board, with particular attention being paid to deficit repair contributions (DRCs), recovery plan lengths, record-keeping standards, and the timely payment of auto-enrolment (AE) contributions.

In its corporate plan for the next three years, published yesterday (16 May), TPR said it wanted to increase participation in workplace pensions, while boosting savers' confidence in both the security and quality of their retirement products.

The regulator has set itself 18 key performance indicators to measure its progress over the three years, each aligned with six corporate priorities, and four overarching outcomes.

Enhanced supervision

Speaking to PP, chief executive Charles Counsell said the watchdog was working to become involved ahead of major scheme events, where possible.

"We have over the last two years or so striven to become proactive and targeted, and you can really see that through our corporate plan this year," he said. "For instance, our supervision approach which means that more than 1,000 schemes will feel our gentle hand."

This is in addition to around 60 schemes which will face one-to-one supervision, as the watchdog announced last year, with around 20 already subject to this.

"Some of the things that we will be focused on are, for instance, record keeping, and specifically driving those who haven't undertaken a review of their records for the last three years to do so.

"We're also going to be looking at investment governance and driving reviews of the default investment funds."

Counsell reiterated the regulator's focus on driving up the value of DRCs where "those seem to be low relative to dividend payments" as reducing recovery plan lengths "where it's affordable" and "greater than the average for any specific tranche" of schemes.

In its latest quarterly compliance and enforcement bulletin, also published yesterday, TPR outlined a case study of where an employer agreed to suspend dividend payments for six years, reduce its scheme's recovery plan length, and increase annual DRC payments.

Improving standards of record keeping will, in particular, be a priority for TPR over the next few years, especially as the pensions dashboard is rolled out.

Record keeping

"Record keeping is one of those things that is really important and, for me, is all about ensuring that schemes are well-governed and well-administered by their trustees," Counsell continued.

"It is a fact that not all schemes have good record keeping and good data in practice, to be honest, particularly where they may be smaller schemes. We do encourage them to think about whether or not they should be moving that scheme into something that is bigger and has more scale, but we're very conscious of the associated costs of all these things.

"Record keeping is particularly important as we move towards having in place the pensions dashboard, which is such an important thing for individuals. Therefore, there's a lot of work to be done over the next two years with trustees."

Linked to this, there is an enhanced focus on administration standards. While the regulator does believe the administration market "is dominated by a small number of providers", there is still a "reasonable market".

Counsell said it was important that "good levels of quality" were being provided for a "value for money price". The regulator has plans to publish more guidance in this area, alongside a "closer supervisory regime" in the "absence of a formal regulatory regime".

Boosted resources

All of this will come with a boosted workforce and budget, with the regulator setting out plans to increase its number of staff members by 17% by 2021/22, rising from 660 to 774, while the budget will rise by 24% in the same period compared to last year's actual spend.

Counsell said the increased costs were necessary as the regulator's net widens to include a wider range of provision and regulatory activities, including defined benefit (DB) superfunds and defined contribution (DC) master trust supervision.

In addition, the watchdog has the ongoing monitoring of re-enrolment under AE, which causes peaks and troughs in the overall budget needed.

The distribution of the regulator's resources among its various teams will remain largely the same over 2019/20 compared to 2018/19, with around 33% allocated to frontline regulation and 17% to regulatory policy. There will be a marginal two percentage point reduction in direct AE, recognising that staging has now concluded.

The corporate plan comes after the Department for Work and Pensions yesterday also published a regular review of the watchdog, outlining 16 recommendations to improve its effectiveness.

The report noted the "significant impact on the development and performance of the organisation" during the tenure of Lesley Titcomb, who stepped down as chief executive in March.

Counsell said he would continue Titcomb's "transformation of TPR over the last couple of years".

"As you'll see from the plan, I'm absolutely committed to completing that transformation," he said. "So that we are not only seen as, but we really truly are, clearer, quicker and tougher in the way we do things."