The UK Pension Regulator has published its latest Corporate Plan which describes the Regulator’s main areas of focus over the next two years. The Plan provides important updates on the timing of the new DB funding Code and the extension of the notifiable events regime, as it sets out the key actions we can expect the Regulator to take in relation to each of its five strategic priorities:

  1. Security – ensuring pension savers’ money is secure
  2. Value for Money – ensuring pension savers get good value for money
  3. Scrutiny of decision-making – ensuring decisions made on behalf of pension savers are in their best interests
  4. Embracing innovation– responding as the market innovates to meet pension savers’ needs, and
  5. Bold and effective regulation– being a bold and effective regulator.

The key actions we can expect in each of these areas are summarised below.

Security

New powers: The Regulator will continue to implement and embed its new powers introduced by the Pension Schemes Act 2021. It has also confirmed that the changes to the notifiable events regime (which have been delayed without explanation) “will become operational in due course”. Although it is non-committal on the timing for this.

Scams: The Regulator is concerned that savers are at heightened risk of scams due to the pressures people are facing with personal finances. Its work will therefore continue to deliver communications that flag clear earnings for savers, encouraging them to seek readily available guidance and report their concerns to Action Fraud. It is also continuing to encourage schemes to sign up to the Scams Pledge, which demonstrates commitment by those running schemes to put processes in place that actively mitigate scams risks for savers, as per the Pension Scams Industry Group (PSIG) Code.

The Regulator plans to publish its revised Pension Scams Strategy during 2022. Moving into 2023, it plans to roll out activity identified in its Scams Strategy alongside testing alternative disruption techniques and continuing with the ongoing work of Project Bloom. The focus on trustee, administrator and provider due diligence in the actions they take to mitigate the risks associated with pension scams within their schemes will ramp up.

Supervision: The Regulator will continue its proactive supervision of DB, DC and public service schemes through one-to-one supervision. It will also extend its pilot working with third-party administrators, including a further three administrators into the programme during 2022 and 2023. The Regulator will continue to assess superfunds that wish to enter the market against the expectations set out in its interim guidance (June 2020) and it will also be ready to accept any potential CDC schemes into authorisation assessment from 1 August.

Cyber security: The Regulator will continue to engage with key areas of the market in relation to cyber risk and discuss steps that can be taken to assess risk and develop resilience. Further development will be needed if the Regulator and schemes are to keep pace with developments in this area as different threats emerge and technological developments provide threats and opportunities.

Value for Money

Disclosure and assessment: The Regulator wants to drive a long-term focus on value for money across the pensions market. This includes trustees disclosing information on key components such as investment performance and scheme oversight – which in turn includes areas such as data quality, communications and costs and charges. Trustees and independent governance committees will then be able to compare these things with schemes offered by other providers.

The Regulator published a statement in June 2022 based on the feedback received from the joint discussion paper which it issued with the FCA. The Regulator and the FCA will use this feedback to help shape the assessment framework, continuing to work closely with the DWP on a future consultation which should be published by the end of the year.

The Regulator will start a regulatory initiative this year to identify and address instances of non-compliance and to engage with schemes that need to make improvements, schemes that have confirmed they offer good value for money, and schemes that will consolidate.

Scrutiny of decision-making

Single Code of Practice: The Regulator confirmed that it will publish its new single code of practice during the second half of this year. This will combine the content of the existing 15 codes into one online document and is designed to be easier to understand and navigate.

New DB funding code: On the basis that the DWP consults on its draft funding and investment regulations in Spring 2022, the Regulator is planning to launch its second consultation in Autumn 2022, with the new code becoming operational from September 2023 – but these timings remain subject to change. Changes resulting from the new code will be forward-looking, which means that schemes with valuation effective dates on or after the code’s commencement date will be affected.

The Regulator may undertake a regulatory initiative ahead of the new code becoming operational, with the potential for “a focus on scheme management of risk and resulting covenant strength”.

Joint regulatory strategy: Recognising that savers are unlikely to know or care whose regulatory remit they fall under, but will want to know that their savings will be protected, the Regulator plans to publish an update to the FCA-TPR joint regulatory strategy (issued in 2018) in the second half of 2022. This will outline the shared strategic outcomes that will continue to draw their focus in the years ahead. Working with other regulators, it will come to a common understanding of shared issues and co-ordinate joint responses through the Wider Implications Framework.

Improving trustee board equality, diversity, and inclusion (EDI): The Regulator recognises the need to improve EDI within their regulated community and along with its industry working group the Regulator is creating an action plan which will be implemented during the remaining period of its corporate plan.

Tackling climate change: In 2022, the Regulator will continue to implement the PSA 2021 requirements on climate change, including assessing TCFD reports for the largest schemes and master trusts, which they expect to receive between the spring and autumn. The Regulator will also be supporting the second tranche of schemes (£1 billion or more in assets) for TCFD reporting and supporting any new requirements that the DWP may introduce.

During the remaining two years of this plan, the Regulator will develop a regulatory initiative focused on the ESG / investment regulations and the publication by schemes of compliant statements of investment principles and implementation statements. It will design its enforcement approach around breaches and provide information and examples of best practice to trustees.

Embracing innovation

Developing pensions dashboards: The Regulator will continue to work with the Pension Dashboard Programme, DWP and FCA as the legislative and technological frameworks are set. It will also launch a programme of education, highlighting the steps that schemes need to take to meet their dashboard duties, including what data to prepare to be ‘dashboard ready’.

Superfunds and other innovative DB models: The Regulator expects the de-risking market for DB schemes to continue to develop, a wider set of options and opportunities for trustees and employers to have emerged, and a number of schemes to have transacted with these. The Regulator will continue to engage with prospective providers, undertake research and analysis and assess the risks so that it can ensure that any new DB scheme models meet savers’ needs. As part of this, it will complete the review of certain elements of its superfund guidance and produce any further guidance on the broader landscape of options as necessary.

CDC schemes: The Regulator will support the development of a new set of amended regulations, which will enable a broader market for CDC schemes to be established. The DWP has indicated it will consult towards the end of this year and the full scope of work will not be confirmed until this consultation has taken place. The extended authorisation framework could include multi-employer, industry-wide, commercial vehicles and decumulation arrangements.

The Regulator is also preparing to provide ongoing supervision for the first CDC schemes that are established, including the first CDC scheme return and supervisory return.

Bold and effective regulation

Operational effectiveness: The Regulator continues to assess its operational effectiveness and find ways to improve it. In the coming year, its work in this area will include responding to both an independent review and a board effectiveness review. The Regulator also continues to prepare for a potential move to new office space from July 2023. This includes testing a hybrid way of working over the course of 2022 which will inform its future working model.

The world around us: The Regulator recognises the need to reduce its environmental impact and improve its resilience to the impacts of climate change. To achieve this it:

  • has committed to achieve net-zero carbon emissions by 2030 and over the next three years it will set out its plans to achieve this
  • will report in line with the TCFD recommendations where it can and in doing so, it is aligning itself with the approach used across the financial sector, and
  • will report annually on its performance against the Greening Government Commitments 2021 to 2025.