TPR outlines plans to shift primary focus to DC saving in 15 year corporate strategy

The Pensions Regulator (TPR) has launched its 15-year corporate strategy, reflecting a shift from defined benefit (DB) to defined contribution (DC) saving, and building on the regulator’s progression to be a “clearer, quicker and tougher” regulator.

It has been published in the form of a discussion paper, with meetings with key stakeholders also planned ahead of the publication of a final strategy in the new year.

The strategy analyses different groups of savers by generation, Baby Boomers, Generation X and Millennials, in order to recognise the different circumstances and risks facing each group in relation to their pensions.

In particular, it emphasised that investment performance, value for money and at-retirement decision-making will play a “much greater role” in the retirement outcomes of younger savers automatically enrolled into DC pensions.

Following the analysis, TPR has outlined five strategic priorities, which will also form a part of the regulator's annual three-year corporate planning in future, including value for money, scrutiny of decision making, and embracing innovation.

Security was also identified as a strategic priority, with TPR emphasising that whilst it would maintain focus on protecting savers and their benefits in DB schemes; there would be a “shift in primary focus” to the security and value that DC schemes provide savers, as assets in these arrangements grow.

Indeed, TPR stated that analysis suggests it will be regulating “fewer but larger schemes” of all types as the market consolidates, estimating that for occupational DC this could be around 50 per cent fewer schemes, and around a third fewer for DB.

In particular, the analysis revealed that if consolidation trends continue, this could see fewer than 15,000 DC schemes and 4,000 DB schemes by 2034.

The strategy has also highlighted "bold and innovative regulation" as a further strategic priority.

In particular, the regulator outlined plans to “transform” the way TPR regulates in order to put the saver “at the heart of its work”, in turn driving participation in pensions saving and protecting member outcomes.

Commenting on the launch of the strategy, TPR chief executive, Charles Counsell, stated: “In a rapidly evolving pensions world, it’s vital that as a regulator we anticipate the change that’s coming.

“That’s why today we’ve outlined our 15-year vision for the future, putting savers at the heart of everything we do as we cement our clearer, quicker and tougher approach.

“We are determined to do all we can to protect pensions savings, drive participation and enhance outcomes now and in the future."

He added: “We will do what is necessary to support the industry through the current crisis and to recover strongly so that savers can enjoy a secure retirement.

“We are standing up for savers of today and building a system that works for them into the future.”

The new strategy has been welcomed by some industry organisations, with The People’s Pension director of strategy, Phil Brown, highlighting the paper as “very much a strategy for the immediate future of pensions”.

He stated: “We very much welcome the regulator’s new 15 year strategy – it’s a good plan and focuses on a new breed of retirement savers, the majority of whom have started saving since the dawn of auto-enrolment eight years ago.

“In focusing on this shift from DB to DC pensions, it correctly identifies the main challenges for each generation and income group. Putting the focus on these savers is key.

“This strategy recognises TPR is now regulating a commercial market as well as employers and trustees, operating single employer schemes.”

However, other industry figures have raised concerns, with Isio partner, Mike Smedley, highlighting potential issues over the assumptions made based on generational break downs, as well as the broader long-term need for TPR.

He stated: “It’s a brave step by TPR to look at the bigger picture and a world where DB pensions are less important to the majority.

"But this raises an existential question – in the long-term do we need a pensions regulator at all? Is it right to maintain the current patchwork of regulators rather than a holistic view of pensions and long-term savings?

"In a world of member-centric DC pensions, why regulate workplace and individual plans so differently?

“It’s also a huge leap of faith to assume that pensions will be the savings vehicle of choice for millennials.

"There are already signs of movement towards other long-term savings which will need a much broader response than TPR’s current statutory remit.”

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