The Pensions Regulator has outlined how it aims to encourage UK economic growth while also protecting member interests.
Details of this new approach were set out in a letter to government, with TPR’s CEO Nausicaa Delfas expanding on these key principles at an industry event this afternoon.
Delfas says TPR will look to reduce the regulatory burden, enabling access to a broader range of diverse assets to help drive growth in the UK agenda.
In addition, the regulator will look at how it can drive growth through data and digital enablement and support market innovation – with a view to helping increase the value of pension funds.
The government has been pushing pension schemes to increase investment into productive finance, to help boost the UK economy. This has raised questions around the fiduciary duty of trustees across the DC sector, and whether they should be supporting this initiative, or focusing solely on where they can get the best returns for members.
Delafas says: “Economic growth and the interest of savers do not have to be in conflict. Indeed they could be mutually reinforcing.” However in her speech she acknowledges investment into productive finance may not be appropriate for all schemes.
Recent discussions, particularly around social investment, climate change and ESG have raised the issue of whether considering the wider economy and environment into which people retire should be part of these fiduciary considerations. In other words, a pension might deliver a decent returns but if it doesn’t support the housing or services people need when they retire, is this the best overall outcome for members?
In her speech, Delfas said a number of initiatives are already underway that will support this growth agenda. This includes changes to how TPR supervises master trusts and driving better governance standards amongst trustees.
She adds: “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.”
Delfas says TPR remains focused on how it can help creating better value, including, where appropriate, how schemes can invest in productive finance assets. It is also looking at how using data more efficiently can reduce regulatory burden.
Broadstone head of policy David Brooks says: “TPR is in a very difficult position now it has this growth overlay on its operations with the key policy aim of the Government to use the ‘latent’ assets in UK pension schemes to invest in UK productive finance.
“This tightrope it will need to walk is summed up in the speech as TPR has to accept for some schemes this sort of investment will not be appropriate for their strategy, but the core principle is to enable good outcomes for savers.
“It is notable that while the upside of productive finance is frequently discussed there is only passing reference to outcomes for savers – mentioned frequently when discussing Value For Money work.
“TPR knows that the evidence of the upside for savers is slim and so while it will help the Government reach its policy goals it must be careful of the reputational risk of influencing investment decisions too strongly.”
