TPR to supervise new DB consolidator entrants

Defined benefit consolidators looking to enter the market must approach The Pensions Regulator before doing so, new guidance issued today, 7 December, has said.

TPR will be responsible for assessing the consolidators’ business model, its financial stability, governance and ability to pay members benefits, while employers will have to seek clearance before any proposed transfer to a superfund.

Alongside the regulatory requirements, the regulator has published guidance for employers, superfunds and trustees ahead of authorisation.

TPR executive director of regulatory policy, David Fairs, said: “We believe DB superfunds are potentially a force for good and can provide a secure and safe place for pension saving and help drive up standards.

“However, as these schemes come to market, we need to give savers confidence now that these schemes are well-governed, run by fit and proper people and are backed by adequate capital. That’s why we have issued guidance making it clear we will supervise superfunds. They will need to seek our authorisation in due course once legislation has come into effect.

“By coming to us now, superfunds can show us how they plan to meet the standards we and government expect, and prevent possible regulatory action further down the line.”

The consultation, Consolidation of Defined Benefit Pension Schemes, made clear that a new regulatory and legislative framework would have to be put in place before superfunds can operate.

The DWP added that it plans to beef up the powers of TPR, subjecting superfund trustees to a rigorous fit and proper person test and ensuring they are “proactively regulated”.

Commenting on the launch, Pensions Minister, Guy Opperman, said: “Well-run superfunds have great potential to deliver more secure retirement incomes for workers while allowing employers to concentrate on what they do best – running their businesses.

“We’re clear there needs to be proper regulation, and we’re consulting to ensure we get that right. We’re transforming pensions saving in this country through our radical reforms, and this is yet another innovation which will improve retirement prospects.”

The DWP said that in developing the consultation proposals it looked into the authorisation regimes such as the DC master trusts and the Prudential Regulation Authority authorised firms.

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