TPR could reduce master trust capital reserves amid drive to cut regulatory burden

In a letter to the prime minister and the chancellor, published this week, TPR’s chief executive Nausicaa Delfas said reducing the burden of unnecessary rules “should be a fundamental part of our role”. 

“Some burden in the system has been created by regulations that were devised in a different context, and could now be reviewed,” Delfas said. 

On the capital reserve rule, Delfas said the current regime was “pertinent to the initial authorisation of master trusts” but the sector had since evolved to become profitable and “less likely to fail”. 

“This calls into question the prudence of maintaining £350m to £400m in capital reserves for a failure event, while also considering that the revenues of these master trusts are sufficient to meet ongoing running costs,” Delfas said. 

“It is within TPR’s gift to allow schemes to place greater reliance on revenue offsetting, thereby releasing unproductive capital. Any capital freed up in this way could be reinvested by schemes into services for members, product and investment innovations, technology, and ultimately jobs.” 

Such a change would also lower the barrier to entry for potential new master trust providers, she continued. 

“In considering this reform, TPR would have to be comfortable that any proposed changes to the regime would not create unintended consequences, for example unfair treatment between schemes or cohorts of schemes,” Delfas added. 

TPR also plans to make better and more efficient use of data, including eliminating duplication in data requests and co-operating with other regulators to share information. 

The government has asked industry regulators to explore ways in which they can nurture economic growth through reducing regulatory burdens. The Financial Conduct Authority setout its plans earlier this week. 

TPR’s letter set out five ways in which the regulator plans to support the government’s growth agenda, including increasing the value of pension funds, enabling productive investment, cutting unnecessary regulations, boosting its data and digital capabilities, and supporting innovation. 

Speaking at an industry conference earlier today (28 March), TPR’s Delfas called for the industry to innovate, improve transparency and boost value for money. 

“Economic growth and the interests of savers do not have to be in conflict,” she said. “Indeed, they could be mutually reinforcing.” 

She added: “Well-designed regulatory policies with transparency at their core can correct market failures, promote equitable growth and enhance economic stability.  

“And in the forthcoming Pension Schemes Bill and our value for money framework, we have the potential to do all three. 

“Pensions are uniquely placed to consider long-term returns, and I would urge you all to consider what more you can do, particularly around transparency in performance and associated charging structures.”