TPR turns up the heat on pension schemes

Law firm Eversheds Sutherland obtained data from the regulator showing that it had issued six requests last year under section 72A of the Pensions Act 2004, which requires individuals connected to pension schemes to attend a formal interview.

This compared to just one such request between the start of 2018 and the first quarter of last year.

Section 72A states that TPR can give written notice to require relevant people to “attend before the regulator… to answer questions and provide explanations on one or more matters specified in the notice”.

Claire Carroll, partner at Eversheds Sutherland, said this sharp increase was “a clear indication of TPR’s intensified focus on compliance and governance within pension schemes”.

She added: “Section 72 requests require significant work, and for large schemes with extensive data, this could be an enormous task.

“The added pressure of attending interviews to answer whatever questions TPR might have will cause concern for those that are unused to the process and who might not be on top of the day-to-day detail.”

Increasing pressure on professional trustees

Carroll also highlighted that the regulator’s demands could put pressure on professional trustees. TPR stated last year that it planned to increase its work in the professional trustee space as providers of such services had become “systemically important” to the pensions sector.

She said the complex demands of broader section 72 requests – which can include demands for extensive scheme data – could cause “heightened risk and concern among both individual professional trustees and their respective firms”.

“The prospect of facing more rigorous oversight and higher expectations from the regulator emphasises the vital importance of having robust governance and compliance processes,” Carroll added.

Last year, a similar data request from Eversheds Sutherland found that the amount of data requests made by TPR was decreasing, but individual requests were becoming more demanding. Data requests are also covered by section 72 of the Pensions Act 2004.

TPR’s evolving approach

In November, TPR chief executive Nausicaa Delfas outlined the regulator’s planned move to a more prudential form of oversight, reflecting an expected shift towards fewer, larger pension schemes.

Speaking at DG Publishing’s Private and Public Pensions Summit, Delfas said: “We are shifting to a more prudential style of regulation, addressing risks not just at an individual scheme level, but also those risks that impact the wider financial ecosystem.

“We are entering a different era of regulation which protects, enhances and innovates in savers’ interests, so that all savers – from every walk of life – can get good retirement outcomes from pensions.”

The move reflects the growth of defined contribution master trusts, several of which are expected to have more than £50bn in assets in the next decade. The regulator is also working more closely with the largest administration providers and professional trustee firms, both of which are increasingly important to the successful functioning of the pensions system.