PLSA IC 18: TPR urges schemes to do more about risk management

Written by Theo Andrew

The Pensions Regulator has urged pension scheme trustees to do more about their risk management strategies, warning that some schemes “haven’t even dipped a toe in the water”.

Speaking at the Pensions and Lifetime Savings Association’s Investment Conference, Thursday 8 March, TPR lead investment consultant, Fred Berry said that they are seeing a “mixed picture” in regard to schemes implementing a risk management approach.

The regulator published its guidance on IRM in 2015 in order to provide practical help on what a “proportionate and integrated approach” to risk management may look like.

Berry said: “There are schemes doing it very well and there are some that frankly haven’t really got round to thinking about it at all.

“There are those that aren’t doing anything at all, there are those that are doing some but aren’t joining it up and there are those that are doing it but not actually doing anything with the results.”

An audience poll showed that half of the attendees said they were embracing the TPR guidelines, while 11 per cent said they were merely paying it lip service.

In addition, Berry said that those schemes that are not doing anything should consider a simple risk scenario exercise to see how their scheme will fair.

“Our concern is that there are schemes out there that haven’t even dipped a toe in the water when it comes to thinking through those scenarios," added Berry.

“It is important to us as the regulator to see that when schemes have done their work, that they actually do something in consequence of it … in our view, just to have a conversation about it at the time isn’t good enough,"

On whether trustees had read the guidelines, Berry said: “Pension fund trustees have no excuse to not have read at least some of it.”

PwC co-head of pensions investment consulting practice, Sinead Leahy, suggested that convents need to stop working in silos, “creating a common framework that will bring people together".

Furthermore, the conflicting briefs of the TPR have been brought into question in recent months and Berry argued that the guidelines have helped TPR to reflect on its own objectives.

“We are required to look after the security members benefits, the security of the Pension Protection Fund, but we also have to balance those regulatory interventions with the sustainable growth of sponsoring employers.

“It’s about balancing complementary, perhaps competing objectives, and that happens with us at the regulator when we are intervening on scheme funding and it comes in when scheme trustees are.”

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