Pensions - Articles - TPR acts to address issues in small DB pension schemes


New research from The Pensions Regulator (TPR) shows the majority of defined benefit (DB) savers are in well-run larger schemes which are showing year on year improvements, but small DB schemes are lagging behind.

 Smaller schemes tend to display poorer governance standards, with trustees placing less emphasis on assessing the fitness and propriety of new trustee board members. They also perform worse than larger schemes on meeting the principles of TPR’s funding code, particularly around taking and managing risk.

 To address the issues highlighted in its latest DB research and response, TPR is continuing its action to drive good governance and administration in all schemes, regardless of size.

 As part of its new regulatory approach, TPR is stepping up its proactive involvement with smaller schemes to assess their performance in key risk areas, including governance, covenant, investment and funding. It will provide clear, directive feedback to the trustees of a number of small schemes. Schemes which do not act on the feedback may face further action.

 There are further examples of TPR’s new approach to regulation regarding small schemes, including using its powers to address risks and improve outcomes.

 For example, TPR initiated an investigation to explore whether support for a DB scheme with 130 members and a buy-out deficit of £33 million should be provided by the parent company. The intervention contributed towards much stronger support for the scheme being put in place by the parent company.

 David Fairs, Executive Director of Regulatory Policy, Analysis and Advice, said: “Under our clearer, quicker and tougher approach, schemes in all segments of the pensions landscape can expect to receive greater scrutiny from us. In particular, we are taking a far more directional approach to small schemes to drive up standards and ensure all members are in well-run schemes.

 “It is challenging to be a scheme trustee and we continue to help trustees, of all size schemes, meet the standards we expect and make a positive difference for their members.

 “We are reviewing and streamlining our existing guidance to make sure our expectations are clear. This includes outlining how we will be quicker to take enforcement action where standards are not being met by using our existing powers more often, and any new powers that may be provided by Government.”

 To set clear expectations for DB trustees, TPR has started work on a new DB funding code, as outlined earlier this year in the Government’s DB pensions White Paper. The code will aim to introduce clearer funding standards to help trustees and employers to agree good funding outcomes for their schemes and which should, alongside any expansion of TPR’s powers, better equip it to take enforcement action.

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