On 21 April 2023, the Pensions Regulator (TPR) published its Corporate Plan for 2023 to 2024 (the Plan), setting its direction for the next year and providing an overview of its priorities from 2024 onwards. This follows on from the publishing of its Corporate Plan 2022 to 2024 (the 2022 Plan), about which you can read more in our previous briefing. The Plan sends a clear message that those trustees and employers who cannot comply should "improve or leave the market".

Value for money is at the heart of TPR's Plan and it follows the same five strategic priorities set out in the 2022 Plan. We consider the updated detail contained within the Plan in this article.  

1. Security: savers' money is secure

Enhanced protection of defined benefit (DB) pensions

Trustees are managing DB schemes in the context of economic turbulence with high inflation, rising interest rates and slower economic growth. Although some schemes are in surplus on the technical provisions basis, which reportedly collectively total £295 billion (read more on this here), there are high levels of unsupported investment risks and many schemes are substantially underfunded. 

With this in mind, TPR confirms in the Plan that the new DB funding code, the release of which has been delayed until April 2024, will establish a stronger set of standards for DB schemes. The code will make clear that schemes must reduce reliance on sponsoring employers as they mature, but there will be provisions allowing trustees to be flexible around funding to fit the circumstances of the scheme. TPR has previously stressed in its announcement of the funding DB code that this is not a reason for employers to panic and that it will "provide schemes with the continued flexibility around funding to suit their circumstances". 

Market stability

Since the 2022 Plan, TPR has issued guidance on liability-driven investments (LDI) and managing investment risk, calling upon trustees investing in leveraged LDI to improve their scheme's operational governance. In its most recent Plan, TPR commits to continuing to work with stakeholders (including the Bank of England, Financial Conduct Authority (FCA), government and the pensions industry) to ensure savers are protected. 

Pension scams

There is an increased risk of pension scams due to the rising cost of living pressures and scammers constantly evolving their methods. TPR is continuing to focus on pension scams in the Plan, which is evidenced through the publication of its "strategy to combat pension scams" and efforts to increase participation in its "pledge to combat pension scams", the latter of which now has more than 600 organisations participating. 

Auto-enrolment (AE)

AE has brought millions of new savers into workplace pensions, with many more expected to be enrolled with the announcement of the Private Member's Bill aiming to expand AE. In the Plan, TPR shares that it will begin to deliver its new AE operational strategy this year, which aims to secure long-term, sustainable operations that maintain high levels of compliance. It will do this through a more targeted, risk-based approach to AE (for example, by harnessing and embedding the lessons learnt from the previous year to test new regulatory approaches). From July to December 2022, TPR issued 28,027 compliance notices and conducted 87 investigations in relation to non-compliance with AE obligations. Employers should therefore keep a close eye on developments in this space and seek advice on their potentially increased responsibilities in relation to AE, as well as any concerns around current non-compliance.

2. Value for money for savers 

Value for money framework

TPR will be working with the Department for Work and Pensions (DWP) and FCA to create a new value for money framework, with the goal of enabling schemes to focus on a "holistic assessment" of value for money rather than purely on cost. As part of the framework, schemes will be required to disclose metrics on their investment performance, costs and charges, and quality of services. Those schemes that are underperforming will be obliged to take positive action in their savers' best interests. The framework will likely require legislative change. Although TPR does not give any hard deadlines in which the value for money framework is to be implemented, it has committed to begin work on the details of the framework in summer 2023. 

Regulating value for member assessments – smaller schemes

Trustees of defined contribution (DC) pension schemes have been required to state the return on investment from their default and self-select funds since 1 October 2021. TPR has highlighted that small schemes are often unaware of their regulatory duties and so a key priority for TPR going forward is to identify these smaller schemes offering poor value and improve their standards.  

3. Scrutiny of decision-making: decisions made on behalf of savers are in their best interests

General code of practice

The Plan explains that a new general code of practice will be launched this year. It will combine existing codes into one content source on TPR's website, which should make it easier for trustees and their boards to access and follow. TPR notes in the Plan that this is only a starting point for regulatory engagement.

Retaining value when savers access their money

It is estimated that more than 1.5 million DC savers will be entering retirement in the next five years, so it is imperative that, when savers come to access their money, they are supported to make the right decisions. The Plan commits TPR to working with the DWP and FCA to explore how the value for money framework can include metrics for decumulation to lay the foundations for savers. TPR will also support DWP in helping savers better understand their pension choices. 

Equality, diversity and inclusion (EDI)

The Plan notes that diverse and inclusive trust boards result in better, more representative decision-making. TPR recently published guidance on EDI in pension schemes and it will now work with schemes in a supervisory capacity to re-affirm its expectations in the EDI space.

4. Embracing innovation: the market innovates to meet savers' needs

Superfunds and other alternative DB models

TPR published guidance on superfunds in June 2020 which was met with some resistance from the Bank of England. This guidance will be reviewed and there will be a separate piece of guidance published on other DB models later on this year.

Collective defined contribution (CDC) schemes

CDC schemes could drastically change the UK pensions landscape by offering a practical alternative to traditional DB and DC schemes. In January 2023, DWP launched a public consultation on extending opportunities for CDC schemes. The Plan explains that TPR will produce a revised code and guidance on this matter following the publication of the consultation response.

Pensions dashboard

DWP predicts that there could be as many as 50 million dormant and lost pension pots by 2050. This has been caused, in part, by deferring to small pots. The pensions dashboard offers individuals access to data on their state, workplace and personal pensions in one place, as the average person will build up 11 different pension pots in their lifetime. Plans were first set out for the pensions dashboard in 2016, but the Pensions Minister Laura Trott recently announced that the government is undertaking a "reset" of the pensions dashboard programme. In the Plan, TPR states that it will continue to help the pensions industry to prepare for the pensions dashboard, particularly by ensuring that its data is robust. 

5. Progressive and effective regulation

Digital, data and technology

A priority for TPR in the upcoming year is to establish and integrate its data, digital and technology directorate (DDaT) to capture, manage and analyse data effectively and provide improved digital services. In embedding and developing the DDaT, the Plan aims to enhance TPR's regulation.

Net zero

TPR has set a target to achieve net zero carbon emissions by 2030 and it plans to demonstrate progress towards this goal by outlining its plans to achieve the target by 2024. As part of the effort to achieve net zero emissions, TPR has conducted an environmental assessment of its new office in Brighton where sustainability considerations underpin all stages of the design. The Plan also commits to provide carbon literacy training to its team to ensure they are confident in discussing climate change.

Please reach out to Eleanor Hart (eleanor.hart@dentons.com) for any pensions queries.