TPR writes to govt to outline actions for growth
The Pensions Regulator has written to the prime minister, chancellor and secretary of state outlining its new approach for ensuring regulations support growth.
In the letter, published on Friday (March 28), TPR said it believes investment in diverse assets cannot only improve outcomes for savers but could also generate growth for the UK economy.
“The two do not have to be in conflict,” it said.
“For this to happen, as an industry and a country we must come to a collective understanding of where the barriers and opportunities are for growth in pension savers’ interests and come to some consensus on a way forward.”
Over the past decade, the pensions landscape has changed radically with the introduction of automatic enrolment.
However, government figures show that 12.5mn people are under-saving for retirement.
At the same time, TPR said the market itself is transforming into fewer, larger pension schemes through rapid consolidation.
“Larger schemes can offer the benefits of economies of scale, with the power to invest in a much bigger range of assets,” it said.
“This has potential to not only boost the outcomes of millions of savers but benefit the UK economy too.”
The government asked TPR for five measurable commitments or changes that it could implement in the next year within a tolerable level of risk.
The five actions it noted are:
Increasing the value of pension funds
Enabling productive investment
Reducing unnecessary regulatory burden and releasing funds for investment
Driving growth through data and digital enablement
Supporting market innovation
Value of pension funds
TPR regulates two kinds of pension schemes: defined contribution pension schemes and defined benefit pension schemes.
There are 15 times as many accumulating savers in defined contribution schemes , but the majority of assets (some £1.2trn) remain in defined benefit schemes.
“We believe that all defined contribution pension savers deserve value for money,” TPR said.
“That is why we are working with the government on the outcome of its consultation on unlocking the UK pensions market for growth and working in partnership with the FCA and government on work to develop a Value for Money Framework.”
TPR said it will use its platform to support the consolidation of current poorly performing schemes into a market of fewer, larger and better run schemes focused on value.
“As the Value for Money Framework becomes operational it will bring consistent, comparable investment data into the market, shine a light on performance through transparency, and set the wheels in motion for effective competition accelerating the consolidation of the market,” it said.
Unnecessary regulatory burden
As part of its attempt to release funds for investment and reduce burden, it will review regulatory capital reserving requirements for master trusts to ensure it is proportionate.
TPR said it will review all regulatory interventions and legislation to assess their value to make ensure it is targeting interventions in a way that deliver the greatest benefit to savers and the economy, and to propose removal of unnecessary legislation.
TPR will review and streamline data requirements, where possible, so that schemes are asked once for information, in a clear format in the right way.
The regulator will also set up an industry data and digital working group.
The regulator also said it will build an innovation hub to support industry in bringing new products to market with potential for growth.
In return, TPR asked the government for support in removing unnecessary legislation once it has completed the review and asked for consideration of delegated rulemaking powers.
TPR said these five commitments aim to significantly boost business confidence, improve the investment climate, and foster sustainable economic growth consistent with its remit.
“We have also set out unnecessary obstacles preventing us from undertaking reforms, and how these might be addressed through legislation or other means,” it said.
HM Treasury has been approached for comment.
sonia.rach@ft.com
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