TPR eyes pivot to ‘Generation DC’

Where defined benefit security has been a cornerstone of regulatory policy in recent years, the high costs of providing income for life mean DC provision to newly enrolled employees now vastly outweighs DB.

The regulator today announced that protecting the future financial wellbeing of savers will sit at the heart of its work for the next 15 years as it delivers on its statutory objectives.

Launching a consultation on its corporate plan, TPR chief executive Charles Counsell said that supporting the financial health of younger generations must be a priority for the regulator, while not neglecting short-term issues such as the struggles of DB employers during the current financial crisis.

The watchdog’s discussion paper highlights value for money, security and scrutiny as key determinants of outcomes for young savers, but also commits the regulator to supporting innovation in the industry.

Mr Counsell said: “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.

“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 pivot in focus was welcomed by some industry commentators.

Zoe Alexander, Nest’s director of strategy and corporate affairs, said: “For most millennials, being automatically enrolled into a DC pension scheme is likely to be their first, and increasingly only, way of saving for retirement. 

“It is vital the regulator can reassure millions of young people that the schemes they’re putting their hard-earned money into are well-governed and have investment strategies that stand a high probability of delivering the returns they need.”

However, others have doubted whether a pensions-specific focus is appropriate for a generation that cannot expect to receive a pension in its traditional sense of an income for life.

Mike Smedley, partner at Isio, said: “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?”

He continued: “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 the regulator’s current statutory remit.”