The Pensions Regulator will extend its oversight to professional trustee firms operating across the DC and DB market.
It said the decision to extend its regulatory reach follows evidence gathering with 11 of the biggest trustee firms — and comes as TPR looks to address risks at a systemic and scheme level to help ensure better outcomes for members.
Trustee firms will come under TPR supervision from this summer. Announcing this change TPR said the professional trustee market has experienced substantial growth in recent years, with more than half of UK schemes now using a professional or sole trustee model.
TPR said its recent evidence gathering exercise was designed to better understand these trustee businesses and the risks and potential areas of conflict that could arise. Key issues have been highlighted in its market oversight report. These include:
- relationships with employers
- profit and remuneration model
- sole trusteeship
- in-house advisers
- scheme decision maker
TPR said it found a variety of business models in the market – all of which brought different risks and opportunities to savers. This extension of its powers builds on earlier activity which saw it establish relationships with eight of the largest commercial and non-commercial administrators in the market.
TPR’s market oversight team will start establishing ongoing supervisory relations with trustees firms from the summer — extending its approach to cover the remaining firms by the end of the year.
Speaking to the TUC’s Pension Conference in London TPR’s chief executive Nausicaa Delfas said: “The professional trustee industry has experienced significant growth over the last few years.
“Between them, just 10 firms govern more than a trillion pounds of savers’ retirement income. As part of our new risk-based and outcome-focused approach to regulation, we are extending our engagement with these firms to identify and mitigate any risks to pension savers.”
TPR called for views from the industry, and from industry and urged anyone with relevant information or experience of the professional trustee market and any risks to contact it.
Professional trustee firm Independent Governance Group (IGG) welcomed this announcement that TPR would be formally rolling out a regulatory framework for trustees. IGG’s CEO Andrew Bradshaw says: “As the pensions landscape continues to evolve, and decisions become increasingly complex, professional trustees play a critical role in ensuring the good governance of schemes. As an industry, we govern in excess of £1trn of assets and so it is right that we are held to a high bar and keep striving to raise the standards of trusteeship and governance, which better serves pension savers and ensures their needs are met.”
He adds: “TPR has rightly identified particular areas for the industry that it would like to focus on and we look forward to working with them on the extent to which such risks exist and how they can be both managed and mitigated. We are particularly keen to work with TPR to ensure that the practical application of the framework works alongside its other stated objective of encouraging innovation in the market, which is key to meeting many of the Government’s, and savers’, objectives.”
Rachel Croft chair of the Association of Professional Pension Trustees added: “APPT welcomes TPR’s announcement on the regulation of professional trustee firms and looks forward to continuing to engage with TPR on this important topic, in the interests of enhancing governance standards for members and all stakeholders.”
