Charles Counsell, Chief Executive of The Pensions Regulator (TPR), talks about where we are with the work that we’ve been doing over the course of the year.
A very good afternoon to you all and a very warm welcome to everyone. Thank you so much for coming to join us this afternoon. It’s a great pleasure to see you all. We used to run these events in the Spring, to coincide with the launch of our corporate plan. But this year as last year, we have chosen to do it now in the early Autumn.
Frankly, I think I prefer this timing because it allows us to talk a little about where we are with the work that we’ve been doing over the course of the year.
But importantly, as Mark has just mentioned, holding this event now means we can involve you much more in shaping our long-term strategy. The development of this strategy is new for us, it builds on our clearer, quicker and tougher strategy. But I do want us to take a truly long-term view and consider the pensions landscape for the next 15 years or so; and to identify what our role should be in that and to get your engagement in that as we develop it.
You played a part in developing our clearer, quicker, tougher strategy, and we really would like you to help us to build on that by engaging now with our long-term strategy.
Today of course also coincides with the long-awaited Queen’s speech, I’m not quite sure whether to congratulate ourselves for the timing or bash our heads together, but hey ho. I did think, perhaps I should have come in wearing a crown and robes, but maybe not.
New Pensions Bill
Anyway, delighted to hear that the Queen has this morning, announced there will be a new Pensions Bill. It will include: clearer scheme funding standards in defined benefit (DB), and powers for The Pensions Regulator (TPR) to enable us to be tougher for those recklessly putting pensions savings at risk. It also introduces the concept of Collective Defined Contribution (CDC) and the framework for the pensions dashboard, amongst other things.
I do want, if I may, to thank publicly the TPR policy team, who have been working very hard with the Department for Work and Pensions (DWP) in the build up to this. Thank you hugely for the work that has happened to date, more obviously to come.
I’ve mentioned TPR’s programme of change - the large-scale evolution we’re going through to be as effective as we can be. The changes are well under way, and you may have heard about some of the significant new developments we’ve had over the last few months. But let me call a few of those out:
Introduction of supervision
We’ve now been running our relationship supervision for a year or so. We’ve had broadly good feedback from those being supervised, and in particular those in one to one supervision. I think there were some initial nervousness from some schemes, and some who wondered, well "why the change?"
But many have now said they actively welcome and appreciate the benefits of a closer relationship. Indeed, I met this morning, a Chair of trustees of one of those schemes who was very pleased with the way we have approached it and the fact we are engaging proactively and cooperatively with that scheme. For me, I believe that this is another example of us being clearer.
There are various types of supervision, depending on the type of scheme, the level of risk, or the events taking place, so please do go and visit our supervision team who are manning one of those stands that Mark referred to earlier.
Master Trust Authorisation
In master trust authorisation, we now have 34 master trust schemes that have been granted authorisation, and I see many familiar faces from those master trusts in the room today.
Before authorisation began we had a market of about 90 or so master trusts, we had applications from 38 of them, as well as one new master trust coming into the market. So that means more than half decided to exit the market before authorisation.
The feedback we’ve received from those who have gone through it, is that the authorisation process has been tough. We do make no apology for that. Collectively master trusts are responsible for 14 million savers - so it’s vital they are run properly.
“A complex and rigorous process” is how one master trust put it. The PLSA have said the feedback they received from those who have been authorised has been positive. The CEOs that they have talked to and that I have talked to, have spoken about how the process improved operations.
And all of this is very good news for those currently saving into a master trust, who can feel secure that their savings are being well looked after.
Collaboration with FCA and MaPS
We will talk about, if I may, about collaboration. We are collaborating much more closely now with other regulators and organisations, than perhaps we have ever historically. In particular, with the Financial Conduct Authority (FCA), and also with the Money and Pensions Service (MaPS). We published a joint pensions strategy with the FCA last year, which is a good starting point. Two of the key areas of joint work are in the areas of Value for Money and improving customer journeys.
We had a joint conference with the FCA a couple of weeks ago in Edinburgh and the themes emerging on Value for Money are that higher levels of proscription are likely to be needed. Also, that any framework would need to be flexible enough that emerging definitions of value could be incorporated as the market develops.
On the customer journeys the feedback was that the younger cohorts, especially those in the higher income brackets, were likely to benefit most from further nudges designed to increase their contribution levels.
Younger cohorts were also the most likely to benefit from the development of new technology as well as allowing them to manage pensions alongside other long-term savings vehicles such as ISAs.
For older cohorts it was felt that the key opportunity to improve outcomes was improving the quality of their interactions with the industry as they approached retirement. This is particularly with regards to the wide range of decisions they are faced with in making the transition from full time employment, potentially to part-time employment, through to full retirement.
And we’ve been working with MaPS particularly following the Rookes review, specifically to help savers who are facing potentially difficult decisions following an employer event, for example a company restructure.
We are of course also working with MaPS on the pensions dashboard, now a part of the upcoming Pensions Bill, which I believe is hugely important for savers.
I really believe that collaborative working will be vital in the future if we want an effective regulatory framework and you’ll hear me talking a little bit more about it in a few minutes when I talk about the long-term strategy.
In enforcement, there are many instances in which we are being tougher. We have been enforcing more often and more vigorously. You may have seen in the press we prosecuted and secured custodial sentences against criminal trustees, and secured large fines against advisers and employers, for example one which illegally opted their staff out of NEST.
I’m pleased that we’ve had successful prosecutions in relation to scams, having secured our first custodial sentence; we have launched criminal investigations and have banned trustees where we had concerns over the way they were managing funds.
We are currently carrying out seven criminal investigations into scams. These cases cover 52 schemes, have 38 suspects who we are treating as targets, with indicative losses to these pension schemes of around £55million. They cover a range of complexities and possible outcomes from fraud and money laundering to Employer Related Investments.
I hope you have also seen over the course of the summer, the joint campaign that we have been running with FCA to make consumers aware of scams. That has led to over 170,00 people visiting the ScamSmart website.
We also know that it is working, anecdotally. A member of The Pensions Regulator team was on holiday during the summer, on a beach in Portugal. She was sitting on the beach and she heard from nearby someone saying, as a jet ski went past in the sea, “there goes the pensions scammer.”
So, we certainly have changed, and we continue to change as an organisation, both internally and also how we interact with others. You were part of that change and I hope you’ll have a noticed the significant changes in our tone and actions.
The press and other commentators have noticed too - and generally the feedback is that people are pleased to see these changes:
i) For instance, Sir David Metcalf, the Government’s Director of Labour Market Enforcement, praises the guidance and tools we produced for employers to help them comply with their automatic enrolment duties.
ii) A recent PwC survey suggests that 8 out of 10 lawyers, I can’t help saying that without thinking about that little advert, but I mustn’t go there. A recent PwC survey suggests that 8 out of 10 lawyers, think our new approach and powers are having a positive impact on their clients. This is a significant change, the last time that survey was run, which I think was in 2017, 3 out 10 said the same.
iii) A recent article in Pensions Age talked about us “baring our teeth”. The President of the PMI said we’d pulled no punches in asking the hard-hitting and provocative questions that trustees needed to answer.
For me, coming back to The Pensions Regulator after nearly a two-year period as Chief Executive of the Money Advice Service, I have seen a marked difference in the culture of the organisation. I spent a little time, very soon after I arrived, going literally desk by desk to meet as many members of the team as I could. I was really struck at how much had changed in that time, both in what the team are doing, but also in how they are going about the work.
Look, please do take time today to go and visit the stands that we have out there and speak to some of our teams and find out for yourself, the things that are changing. I hope you form the same impression; I hope you have the same impression. Very briefly, here’s a quick summary of what we’ve got on those stands today.
- Scams: We have a stand on scams, to find out what we are doing and how we can tackle the appalling effect of scams and prevent scams in the first place.
- Supervision: I spoke about our new supervision model, and we have a team here that are happy to talk to you about what they’re doing and how it might affect you.
- Environmental, social and governance (ESG): We have a stand on ESG. Guy Opperman is rightly being very vocal about trustees’ new responsibilities. A few days ago, he “demanded that pension schemes and the fund managers they appoint, which haven’t acted on ESG, should stop shuffling their feet”. We would like to hear your views on what is happening in the market and how the new requirements are being implemented.
- Trustee education: On trustee education, we believe our toolkit has been a useful resource over the years. But following on from our ‘Future of Trusteeship’ consultation, we’re also taking a look at ways we can modernise it. What information would be useful to trustees? Do please visit the stand to share your views and test out our new modules.
- We also have a stand called: Ask the policy experts. There are so many changes on the pensions horizon; who better to ask than one of our policy experts? They can speak with you about our preparations for change, and how you can be involved in future policy development.
- And now finally, we have a stand looking at our New Singular Modular Code. We are working to streamline our codes of practice from 15 to just one modular code. This is an ongoing piece of work which aims to give you the information you need at the click of button. So, do please go to that stand and see how this is developing and what changes you can expect.
So that is what we are currently working on, but there are more changes still to come.
I’ve mentioned our policy team are here to talk about some of these changes on the stand. Here are three, just to highlight.
DB funding code
First of all, our new DB funding code.
The team have been working hard on the new funding code. The new code should be seen as a package alongside the Pensions Bill announced earlier today, because they are not stand alone, but a collection of measures designed to protect the saver.
I won’t go into the details of the code here - you can do that with our Policy people on the stand. But we’ll be launching our first consultation on the code very soon. We’d really like your input and feedback on our proposals. Our intention is to be much clearer on our expectations of what ‘good’ looks like. This will include a simpler approach for trustees to use to determine and demonstrate compliance.
The code does work as a package alongside the Pensions Bill, but I do recognise the fact that we live in a world of political uncertainty at the moment. So should there be for any reason, a delay to the Pensions Bill, we will consider whether to proceed with the code in any case.
In automatic enrolment, automatic enrolment is no longer a new duty for employers, of course.
Employers know what they’re doing now - it’s part and parcel of being an employer, consistent with paying, for example, national minimum wage and national insurance contributions. Awareness is high amongst not just employers but those involved as third parties such as payroll professionals or advisers. The next step for us is to ask - how can we make this model more efficient?
Our twin aims are to streamline our communications to make better use of data that we’ve got. That way we can quickly identify who is compliant, and then concentrate on targeting our regulatory activity at those who we believe may not be compliant.
We are working closely with DWP to help shape and design future changes, and we will look to work closely with you - our stakeholders, in 2020, to help inform our thinking on that approach.
Driving up standards of trusteeship is an ongoing priority for us. What do we do when trustees won’t engage with us? What do we do with the schemes who consistently demonstrate poor standards of trusteeship? Our consultation on the future of trusteeship closed last month, and we’ve been encouraged by the level of debate and strong views that we’ve received. We’ve had more than 110 responses, which is more than any other consultation that we have ever put out before, so thank you very much for your responses. We will of course, publish our response to it in due course. A few themes have emerged, which I thought I would just touch on now.
There is broad support for:
Encouraging consolidation and the wind up of underperforming defined contribution (DC) schemes.
There is support for greater diversity and a stronger role for the industry to help schemes achieve that.
There is support for greater clarity of expectations around trustee knowledge and understanding and the need to ensure any changes don’t simply become or aren’t simply a tick box exercise.
Perhaps not surprisingly, the question of whether there should be a professional trustee on every board has elicited more mixed views. Most of the feedback has been that this shouldn’t be a blanket approach, but it should be introduced on a case by case basis.
Thank you for your views, we fully appreciate them, we welcome the hearty debate on all aspects of governance and trusteeship. We do believe it will ultimately help to level the playing field and give savers access to fewer, but better governed schemes in the future.
I’m going to move on to the longer-term strategy.
The pensions landscape does continue to evolve: automatic enrolment (AE) is now a norm, DB is mature, DC is growing. The two ground breaking policies of the past decade, automatic enrolment and freedom of choice have changed the pensions landscape forever.
- You only need to look at the demographics of who is now saving into a pension scheme, to see that. Typically, they are younger, typically they are lower paid.
- Each month in this country, tens of thousands of people reach their 22nd birthday. For them, assuming they are working, they will be automatically enrolled into a workplace pension, probably for the first time.
- Obviously they are younger, typically they are lower paid, and of course typically, they will be enrolled into a DC scheme - by in effect the risk sits with them. Our job at The Pensions Regulator, must be to be there to protect their interests.
I mentioned earlier some of the collaborative work we are doing with FCA and the Money and Pensions Service. This is a good start, but we can go further. It is certainly my intention is to collaborate more closely with our partners.
Someone said to me a month or so ago that the industry wants to see regulators - specifically the FCA and TPR in this case, but also MaPS, to deliver consistent messages and approaches. Yes, they do reflect, and they must reflect the different bases of the law, but they should aim in the same direction and be focused on achieving the same outcomes. I agree.
It is my fundamental belief that we as organisations, collectively, and with others, to work in a co-ordinated way across the pensions landscape. We have our different objectives and different perspectives perhaps, but in the end a saver doesn’t care who regulates their pension, they simply want their savings to be safe and they expect them to lead to them having a reasonable standard of living, ultimately in their retirement. That’s why we’re here.
All of this means it’s vital that we recognise the need for TPR to take a longer-term view of the ever-evolving landscape and the provision and protection of long term savings.
So that’s why we are developing a long-term strategy, which looks at the world both now and in the future.
We are at an early stage with that work at the moment. We plan to consult formally in the New Year, but we wanted to give you the opportunity today to give your input to that work.
So all of the breakout sessions today will help support and inform the development of that strategy, and we’re keen to her your views. Each session looks at the future challenges from a slightly different perspective - from the saver, to the employer, to the product provider, to the regulators.
So in conclusion, before we move on to our panel session, it’s clear that change and uncertainty will continue to be a given in the pensions industry. In this environment particularly, we must keep the saver at the forefront of our mind. It’s easy when we’re surrounded by all this change to get caught up in our own challenges, but we need to remember why we’re all here. We’re here to look after the interests of the saver.
Regulation must be fit for purpose given the challenges ahead, so we must look to the future and work together.
So, please do raise questions this afternoon, share your thoughts, debate with us and with each other. We won’t obviously, solve every pensions problem in this room today, but we can share good practice, we can spark ideas, and we help to create a landscape in which savers can save with confidence.
Thank you very much.