TPR delays investment data collection from DB schemes

Since December 2019, trustees have been legally required to run a competitive tender process when appointing fiduciary managers for a fifth or more of their scheme’s assets, and set strategic objectives for their investment consultants. 

The watchdog took over compliance reporting and policing responsibilities for these requirements from the Competition and Markets Authority in October 2022, after the initial rules were introduced in 2019.

Legislation introduced by the Department for Work and Pensions in July on this matter dictated that compliance statements – which were previously submitted to the CMA – will now form part of the regulator’s scheme return process for DB and hybrid schemes.

We would hope that TPR might issue an addendum to the scheme return or introduce some transition arrangements, as there is still a lot of uncertainty around this issue at the moment

Laura McLaren, Hymans Robertson

However, this information is not being required from schemes in the 2023 scheme return cycle.

A TPR spokesperson said: “Information regarding our plans for collecting this information will be shared in due course.”

The watchdog plans to publish future guidance on this matter “alongside a communication programme”. 

“As schemes have already had to record this data and provide it to the CMA for compliance with the CMA order up until September 30 2022, schemes should continue to do so and be ready to provide data to TPR when data collection is announced,” it said.

‘Gap in compliance’

Hymans Robertson partner Laura McLaren told Pensions Expert the main issue is that “there will be a gap in compliance reporting and monitoring for most pension schemes” in relation to the obligations set in the regulations.

Local Government Pension Scheme funds will remain covered by the CMA order.

“We would hope that TPR might issue an addendum to the scheme return (which will act as the vehicle for compliance reporting/monitoring going forward) or introduce some transition arrangements, as there is still a lot of uncertainty around this issue at the moment,” McLaren noted.

Broadstone head of policy David Brooks said “it is somewhat surprising” that the information is not being collected. However, he pointed out that “this is a relatively minor inconvenience”.

“Three years on from the CMA initial ruling, this is a well-established and productive process for trustees to proactively consider their investment advice services,” he added.

IC Select director Donny Hay also believes the delay “makes little difference really”.

He said: “Our concern is less about this ‘minimum compliance’ with the rules and more about ‘driving continuous improvements’ through good investment governance, which ensures risk and return objectives are more likely to be met and investment advisers are held to account for their overall performance, service levels and offer value for money.”

Scheme return double reporting method continues

Pensions Expert reported in March 2022 that TPR introduced new questions for DB and hybrid schemes in its scheme return, in a web-based form, which prompted criticisms from pensions specialists due to an increased risk of providing wrong information.

The remainder of the scheme return is filed through Exchange, a platform used for several years by trustees and their advisers that allows different people to add information to the form, review, print and share with colleagues before sending to TPR.

Several pensions noted at the time that the new web-based form, similar to an online survey, was causing mayhem for schemes as there is no way of double-checking the information being submitted.

Despite the backlash, TPR is maintaining the double method for collecting information for the 2023 return. However, it has included guidance on what to do if respondents want to share responses to the new questions for approval before submitting. 

“The simplest way to do this is to take screenshots of your responses in the form using the ‘print screen’ button on your keyboard. You can then copy and paste the screenshots into a Word document, which can then be shared,” the regulator stated.

Brooks noted that “following the last-minute nature of the online form and some logistical issues last year, we’re not expecting the same issues this year, although this method of collecting is still far from ideal when working with trustees”.

Changes in asset breakdown reporting

For 2023, TPR has also introduced new questions on schemes’ asset breakdown, to reflect the outcome of its joint consultation with the Pension Protection Fund, launched in April 2021.

The two bodies will now collect asset class information separated into two categories: bonds, and equities and other assets.

It also divides schemes into three tiers, with smaller schemes (in tier one) retaining a simple reporting approach, larger schemes (in tier two) providing more “granular information” on asset allocations, and the largest schemes (in tier three) “providing information on the sensitivity of portfolios to investment stresses”.

Brooks said: “The additional data requirements regarding the asset allocation splits have been well trailed to schemes and will not present any major issues.

“However, whether it is detailed enough is an open question and one that will be on TPR’s agenda for future years. Not least the use of liability-driven investments is under greater scrutiny and we are sure TPR will want to capture more information on this when it can.”