Sarah Smart endorsed as TPR chair despite conflict of interest concerns

Pensions Expert reported on Friday the worries of some committee members, including chair Stephen Timms and committee member Nigel Mills, that Smart’s interests in the private sector could conflict with her duties as TPR chair.

Additionally, the committee asked whether the fact Smart was married to the chief executive of one of the biggest defined benefit schemes in the country, the British Airways Pension Scheme, might compromise her ability to fulfil all the requirements of the role.

Smart reassured the committee that she would be able to pre-empt any conflicts that might emerge, assuring Timms in a letter dated April 15 that she would “terminate the majority of my other professional commitments if I am appointed to the role of chair of TPR”.

My performance as chair should be inextricably linked with TPR’s performance as a regulator

Sarah Smart, TPR

She would, however, remain as a co-founder of SmartCats, which is producing an investment-monitoring tool.

Additionally, her husband, Fraser Smart, has entered into negotiations with his employer with a view to stepping down from his role at the BA scheme, and has pledged not to take any similarly high-profile roles during his wife’s tenure as TPR chair.

Smart will recuse herself from anything to do with the BA scheme for as long as her husband remains employed there.

TPR’s ‘constrained future resources’

In her letter to Timms, Smart outlined what she saw as the regulator’s priorities over the next five years, which she says includes expanding its present remit to cover new areas, not least the introduction of superfunds and the pensions dashboards.

“As well as the normal business of regulating DB and [defined contribution] schemes, overseeing auto-enrolment and working across the industry to stamp out the scourge of pension scammers, it must also throw its arms around superfunds, the dashboard, collective DC schemes and climate change regulation,” she wrote.

“It is also likely that we will see an increasing number of failing employers as the impact of Covid becomes fully apparent, and an increasing number of applications for clearance following the extension of TPR’s powers in the Pension Schemes Act 2021.”

Smart added that this remit “is set against a backdrop of constrained future resources — the 2021-22 financial year will be the first time since its establishment that TPR’s budget has not increased”.

The regulator “must balance the competing demands of addressing immediate issues that threaten the financial security of pension savers and of helping to build a long-term, robust system that enables pension scheme members to save for their future with confidence”, she continued.

“It is undoubtable that these requirements present many, equally important, priority areas for TPR’s resources and, in my view, TPR’s key focus must be to ensure that it makes the best decisions it can about where to focus its regulatory resources and that it makes the best decisions it can in those areas where it is focusing its regulatory resource.”

Success to be judged on outcomes

Smart set out the criteria against which she would like to be measured, arguing that “the success of TPR is judged on the outcomes that it achieves for savers rather than simply on the work that it undertakes”. 

“My performance as chair should be inextricably linked with TPR’s performance as a regulator,” she said.

She argued that the regulator can best prove it is efficient and effective by demonstrating that it applies its regulatory resources to the right areas, and that its decision-making is “effective and appropriate”.

It should also be “clear on how it offers value for money to government and industry”, and be able to show “a clear link between its regulatory activity and improved outcomes for savers”.

“Above all, [it is important] that in my time chairing TPR it is clear to savers that the system is working to protect them,” Smart said.

Regulator to review public register

The concerns raised about the potential for conflicts of interest also highlighted that, at present, TPR does not include potential conflicts arising from “connected parties”, like spouses, in the public register.

A letter from Anthony Raymond, general counsel at TPR, to the clerk of the Work and Pensions Committee, Anne-Marie Griffiths, sought to reassure the committee that TPR takes “the need for transparency very seriously in all the work we do”. 

“TPR’s board actively manages conflicts of interest and a robust process is in place to ensure board members are aware of and declare any conflicts likely to arise at board meetings. In all cases, appropriate action is taken and recorded in relation to declared conflicts,” Raymond wrote.

“TPR... produces a summary register, which does not include information about interests relating to connected parties. Our approach has been that declared relevant interests relating to connected persons, such as partners or spouses, wouldn’t be appropriate for publication due to the personal nature of the information,” he explained. 

“However, the information is held and used within the organisation to manage any such potential conflicts.”

Though the regulator has no concerns about its internal processes for managing conflicts, Raymond acknowledged that “it is vital that we are as transparent as possible about potential conflicts and how they are managed. We agree with the committee that the wording is not sufficiently clear”.

Smart herself requested that Fraser Smart’s role as chief executive of the BA scheme be added to the published summary register on the regulator’s website.

In addition, Raymond said Smart asked the regulator to review its code of conduct, its internal guidance and its standing orders.

Smart requested that TPR then “make recommendations to the board to ensure there is more clarity about the declaration and handling of connected persons information, and that as much information is included in the published summary register as possible”.