How TPR's relationship supervision regime is working

Jonathan Stapleton
clock • 5 min read

Key points

At a glance

  • TPR is building a closer relationship with a small number of schemes
  • Under the new regime, each scheme has a named supervisor and is subject to annual evaluations
  • It is hoped schemes will see the approach as a more ‘positive experience’

The Pensions Regulator’s relationship supervision regime was launched a year ago. Jonathan Stapleton hears from Dianne Morgan about how it is working in practice.

The Pensions Regulator's (TPR's) relationship supervision regime was launched in October 2018 in a bid to bring in a new regulatory approach. As part of this new regime, the regulator looks to do more proactive work, meaning that more schemes will experience a higher level of interaction with the watchdog than they have previously.

One-to-one supervision

So far, TPR has brought around 45 so-called "strategically important" schemes - the biggest defined benefit (DB), defined contribution (DC) and public service schemes ­- into this new framework but hopes to be working with 140 funds by the end of March next year. It will look after master trusts once they have been authorised as well as collective DC (CDC) schemes and DB superfunds once they come into being.

The schemes are selected for relationship supervision on a range of criteria, such as size of assets under management, number of members and, for DB schemes, the amount of hedged liabilities. Once selected, schemes will remain in the regime for at least a year but the expectation is that the very largest schemes will remain in relationship supervision indefinitely as they still fit the criteria.

This sort of relationship supervision approach - also known as one-to-one supervision ­- aims to build TPR's understanding of schemes and help identify and resolve issues or potential issues early.

Speaking at the PP Trustee Senate, held in Hertfordshire at the beginning of the month, TPR head of relationship supervision Dianne Morgan said that, while schemes may have previously only heard from the regulator following, for instance, the submission of a valuation or after it had reviewed a fund's chair's statement or received a whistleblower report, it would now take a much more proactive approach with some.

Morgan explained: "The regulator isn't stopping any of the reactive events-type interventions but we have reorganised ourselves to be able to do so much more - realigning our teams in order to be more proactive, both through regulatory initiatives on the events side, and through relationship supervision."

How it works

But what will happen when a scheme is selected for the relationship supervision approach?

Morgan says the first thing schemes will receive is a letter. This will be followed by a phone call from a TPR supervisor who will be the scheme's single point of contact going forward - explaining why the scheme has been selected and arranging a face-to-face meeting with the scheme to set out the watchdog's expectations, plan how supervision will work in practice over the coming year, and take the scheme through the evidence the regulator will need to see in order to complete its assessment.

TPR bases its annual evaluation of schemes in regulatory supervision over six separate areas - management and governance; systems and processes; IT/infrastructure; control functions; member outcomes; and DB risk ­- but notes not all areas may be in focus for all schemes and there may be overlap and interaction across different areas.

As part of its assessment process, the regulator will ask for written documentation from the scheme but may also look to meet with the trustee board as a whole, sub-committees, scheme managers and administrators, sponsors and others able to provide it with the information and evidence it needs as appropriate - and may also attend trustee meetings and hold meetings with the sponsor.

Morgan noted the information and evidence it requires to assess a scheme, however, shouldn't be onerous. She said: "Our experience so far is that trustees and the scheme managers can produce this evidence in reasonable timescales and reasonably easily."

Recommendations

Once TPR has completed its evaluation, the regulator will inform schemes of its findings and any recommendations it has made within a two or three months, both through a written report and a face-to-face meeting.

Morgan says some recommendations can be minor things that can be resolved very quickly, others more complex issues where schemes will be asked to draw up an action plan to address the findings and agree it with the regulator.

She explained: There isn't a specific format for this but we want schemes to be really clear about what the actions are, when they'll be done and who will do it and also have some idea about what compliance looks like."

The regulator will then have meetings or calls with schemes to track progress against the agreed action plan before undergoing the next annual evaluation.

A positive experience

Morgan said that, so far, the feedback from relationship supervision process is good - explaining the regulator is both being alerted to significant events it may not have been told about previously and is also seeing evidence of great practice it can share with others. And she said she hopes schemes will notice the difference too.

She concluded: "I really hope it will feel different and be a positive experience for schemes."

One-to-one supervision: How it works

  1. Initial contact: The regulator will speak to schemes to set expectations and plan how supervision will work in practice over the coming year.
  2. The annual evaluation: TPR will request documents to help it evaluate the scheme. It will then hold follow up visits and calls with schemes to further investigate areas of assessment and clarify points raised.
  3. Feedback: The regulator will complete its annual evaluation and inform schemes of its findings and any recommendations.
  4. Building an action plan: Schemes will then define an action plan and agree it with the regulator.
  5. On-going engagement: TPR will then have meetings or calls with schemes to track progress against the agreed action plan before undergoing the next annual evaluation.

Key points

At a glance

  • TPR is building a closer relationship with a small number of schemes
  • Under the new regime, each scheme has a named supervisor and is subject to annual evaluations
  • It is hoped schemes will see the approach as a more ‘positive experience’

More on Law and Regulation

Aon says reforms will lead to more gradual change

Solvency II reforms will not lead to substantial step change in insurer pricing

Reform will support higher bulk annuity volumes without price rises

Jonathan Stapleton
clock 25 November 2022 • 1 min read
Griffith: "We are of the view that the existing provisions in the bill are currently sufficient"

Ministerial backdown over intervention powers positive for pensions

Change in policy will ensure that regulators retain their independence from government

Jonathan Stapleton
clock 24 November 2022 • 1 min read
The trial will take place at Preston Crown Court on 20 November 2023

Former trustee pleads not guilty in TPR prosecution

David Broadman pleaded not guilty to six counts of making illegal pension investments

Holly Roach
clock 24 November 2022 • 1 min read
Trustpilot