More than 100 pension schemes, including those run by FTSE 100 companies, will face greater regulatory scrutiny under sweeping plans unveiled by the industry watchdog.
The Pensions Regulator, which supervises workplace pensions covering around 40m people, said dedicated one-to-one supervision would be introduced for 25 of the biggest schemes from October.
The crackdown follows a review by the Brighton-based regulator, whose previous approach — which saw it using its powers as a last resort — was heavily criticised by a parliamentary committee following high-profile corporate failures including BHS and Carillion.
The new approach, which will cover defined contribution, defined benefit and public service pension schemes, will be rolled out to around 70 schemes over the next year.
In addition, the regulator is also piloting a “higher supervisory” approach from next month which will see 50 additional defined benefit schemes assessed on areas such as whether the schemes are being treated fairly compared to shareholders’ dividend payments.
“Following a complete review of our entire approach to regulation, we are now implementing a radical shake-up of the way we regulate to embed our pledge to be clearer, quicker and tougher,” said Lesley Titcomb, the regulator’s chief executive.
“Schemes across all sectors, whatever their size, can expect the volume and frequency of their interactions with us to increase so that potential risks to pension savers are identified early and put right before it becomes necessary for us to use the full force of our enforcement powers.”
Defined benefit schemes involve workers receiving a retirement income that rises with inflation and is underpinned by their employer. In defined contribution plans, employees bear the investment risk for building their pension with no certainty of what they will receive when they retire.
The one-to-one supervision will involve regular and continuing contact with trustees or managers and sponsoring employers of pension schemes, the regulator said, with those chosen for closer attention selected on size, risk and previous dealings with the regulator.
Of the 25 chosen for one-to-one supervision next month, there are 1.1m members of defined benefit schemes and 355,000 members of defined contribution schemes. No number was given for the public sector schemes.
“This is clearly just the start of a changed approach from the regulator to the way it does regulation,” said Malcolm McLean, senior consultant with Barnett Waddingham, an actuarial firm.
“Being more proactive presumably means it wants to ensure that problems are spotted before they develop.”
However, Mr McLean said there “has to be a question about the resource implications for the regulator of such an ambitious and far-reaching programme of work and how it will be able to cope with the time commitment it will entail”.
The regulator has about 700 staff to cover 31,000 defined contribution schemes, 6,000 defined benefit schemes and 400 public sector retirement plans which fall under its supervision.
The regulator’s unveiling of its new approach came a week after its role in the three-yearly valuation of the £63bn Universities Superannuation Scheme was questioned by an independent expert panel.
The panel, set up following an industrial dispute over the 2017 valuation, said it had found “no evidence” to support the regulator’s view that the university sector was not in the highest category in terms of its ability to support the scheme.
Last week, the regulator said it would “review the report further and will discuss it with the scheme trustee”.
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