A rapid acceleration in the scale of workplace pension schemes means savers must be protected from systemic risk by a more prudential-style of regulation, the watchdog of trust-based pensions said today.
Nausicaa Delfas, CEO of The Pensions Regulator (TPR), told an industry conference that TPR’s modelling shows that in 10 years’ time the master trust market will contain schemes of systemically important size.
There will be seven schemes with more than £50 billion assets under management on a consolidated basis, four of which will be responsible for well over £100 billion each.
In response, Ms Delfas set out how the organisation is evolving its approach in line with Mansion House reforms announced by Chancellor Rachel Reeves to drive growth and scale in the market.
“We are shifting to a more prudential-style of regulation, addressing risks not just at an individual scheme level, but also those risks which impact the wider financial ecosystem,” Delfas told the DG Publishing Private and Public Pensions Summit.
“We are entering a different era of regulation which protects, enhances and innovates in savers’ interests, so that all savers – from every walk of life – can get good retirement outcomes from pensions.”
Change for the market and the regulator
Ms Delfas highlighted that the broader pensions market is changing and increasingly concentrated with 47 administrators covering 90% of memberships and 10 professional trustee firms accounting for well over £1 trillion of assets.
The public expects TPR to evolve its approach to a changing market and to help to deliver good outcomes from pension saving. To achieve this, TPR will focus its attention on three areas: scheme investments, data quality, and, crucially, trusteeship.
It will also deploy a new regulatory toolkit including:
- a new approach to master trust supervision with tiers of engagement depending on the risks schemes present to the market and saver outcomes
- investing in digital, data and technology and embracing new ways of working across the organisation to get a rich evidence base for regulatory action as well as driving efficiency and automation
- growing a team of innovation professionals and putting in place a ‘pensions market innovation hub’ to review ideas at an early stage and to provide guidance to enable safe new product development
