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The growing role of The Pensions Regulator

Tuesday 12 March 2024

Nausicaa Delfas, Chief Executive of The Pensions Regulator (TPR) gave a speech at the JP Morgan Pensions and Savings Symposium entitled: “The growing role of The Pensions Regulator”.

Key messages

  • Pensions are changing and the era of consolidation is here.
  • The ask of trusteeship is changing – with disclosure an opportunity not just a burden.
  • TPR is changing in response, to continue to protect, enhance and innovate in savers’ interests.

Good afternoon.

I have been asked to talk to you today about the growing role of The Pensions Regulator.

But what I do want to talk to you about is the growing role of pensions.

To talk about how we are in a moment of change – heading towards fewer, larger pension schemes.

To talk about how those responsible for the retirement outcomes of – in some cases, millions of savers – are grappling with increasingly complex stewardship decisions.

How you as an industry will need to respond if we are to truly protect, enhance, and innovate in savers’ interests.

And how we as the Regulator will be enabling you to deliver better outcomes for savers.

The changing pensions industry

The UK pension system is a product of its environment.

An iterative system which emerged over time. Reflective of the paternalistic role some employers played in workers’ lives and the economic realities of the day.

Over the last 100 years it produced a complex web. Thousands of pension schemes, some with very few members, tied to an individual employer.

Those employers valued the hard work of their staff and they saw them right into retirement, with a promise of a benefit for the rest of their lives.

A trustee was often a finance director of that company – past or present – and they made what they thought were prudent decisions for people like them, guided by the principles of trust law and fiduciary duty.

We still have 5,000 private sector defined benefit pensions schemes holding £1.4 trillion worth of assets.

And added to that are about 1,200 defined contribution pensions schemes – where the benefit is less certain.

But that model of pension provision – a system of small schemes independent of one another – is becoming a relic.

The pensions industry is undergoing radical change and is now on a journey towards, fewer, but larger, pension schemes.


We as a regulator and the industry have been the catalyst for change.

Together we ensured that both DB and DC systems developed securely and with savers at their heart.

One where defined contribution schemes are not just seen as a bolt on for the wealthy few, but as the key pillar of financial support in most people’s older life.

Automatic enrolment has changed the face of saving. 11 million savers have been newly enrolled by their employer and are now saving for older life. Many for the first time.

This has not only helped address the huge challenges of under-saving for later life – but created an environment where the vast majority of savers are within a few master trusts.

Over a million small employers, new to pensions, sought to comply with their duties and took the path of least resistance, enrolling their workers en masse into large schemes with high governance standards.

Now 90% of trust-based members are within master trusts, with 82% of members concentrated in the largest 5 schemes by assets under management.

Other DC schemes have looked at the scale and expertise that master trusts offer and decided they can’t compete. Over the last decade we have seen a 67% reduction as schemes consolidate.

At the same time, we have also seen radical shifts in the defined benefit pensions system.

For so long our role was in helping schemes put their best foot forward with funding to make up deficits.

But we are now in a position where defined benefit pension schemes are funded to their best levels in living memory – with around 80% fully funded on a technical provisions’ basis.

With the first superfund in the market, capital backed journey plan offerings under consideration, and even the prospect of a public-sector consolidator…. a whole new range of options for trustees and schemes are available in securing members’ benefits.

The era of consolidation is here – across both sides of the market

We believe that this consolidation has the potential to deliver better outcomes for savers.

Higher standards. Scale efficiencies. Tighter regulatory grip.

Our DC and DB surveys have consistently shown that there is a strong correlation between the size of schemes and how well they are run.

In DC schemes for example 87% of master trusts have data management plans in place – essential for protecting scheme information – but fewer than a third of small schemes do.

And in DB, 79% of large schemes have a journey plan towards their long-term objective but just 53% of small and micros have the same.

Schemes at the smaller end of the market (particularly in DC) tend to be less aware of TPR and our expectations, and less able to adapt to new legislative requirements.

Standards of governance, administration and value for money are typically lower in these schemes.

Our newly laid General Code provides a set of clear, consistent expectations on scheme governance. There are no excuses for not knowing what is expected.

That is why we are clear that we will help to drive consolidation in savers’ interests so that only schemes that deliver good outcomes remain.

Second best isn’t good enough for savers. Our proactive engagement and market oversight will make sure that those schemes that remain in a reshaped market always deliver good outcomes for savers.

Our approach to poorly performing schemes will be to make sure they improve or move their savers to a better scheme.

The changing role of trustees, disclosure and consolidation

A consolidated, concentrated market brings different risks for savers and the economy as a whole.

The first line of defence for savers and for us as a regulator against these new threats, are trustees. They have always been the backbone of our pensions system.

For generations they have pursued the interests of their scheme members.

We rely on them to take decisions in the best interests of others.

But as we move towards fewer, larger schemes, the ask of trusteeship is changing.

Increasingly we will need boards to be able to synthesise a broad range of data inputs and translate these into strategic decision-making.

To understand commercial considerations offered to schemes with scale to move the market.

And crucially, still represent faithfully the saver voice and savers’ interests in all that they do.

Making good investment decisions and employing sophisticated investment governance practices remain essential.

We need all trustee boards to be suitably skilled to invest in diversified assets that deliver good outcomes for savers.

Not because we favour one asset class over another.

But because all schemes should have the knowledge and experience to be able to consider investments in asset classes that might deliver better outcomes for savers.

The Government’s Mansion House reforms are designed to enable the financial services sector to unlock capital for UK industries and increase returns for savers while supporting growth across the wider economy.

A key focus of the reforms is in supporting investment in “productive assets”.

We believe that if trustees have the right expertise, the right advice, and the right governance, these kinds of investments can play a role in a diversified portfolio.

But it is not a simple task to invest, for example, in private markets.

There is less readily available public information to assess investment prospects.

There are higher costs from increased due diligence and complex ongoing management. And challenges in valuations, with varying approaches from different fund managers; the actual value being unknown until an asset is sold.

But the rewards by making sound diverse investments are obvious.

A potential for higher risk-adjusted returns.

New investment opportunities with the diversification benefits that provides.

And even sources of inflation protection with access to inflation-linked cashflows.

As a regulator, we want to prompt trustees to ask tough questions of themselves, and in our Private Markets Guidance published earlier in the year, we challenged them to do more for savers.

It's not our job to tell trustees how to invest people's pensions. But it is our job to make sure they focus squarely on delivering value and have the right skills and expertise to consider all asset classes including the ability to challenge the advice and offerings put in front of them.

We remain in an era of high interest rates and high inflation. Trustees must grapple with assets at risk, weaker growth prospects and pensions in some cases, failing to keep pace.

There are no easy answers. And in a complex world, trustees must understand complex data and use it to inform strategic decisions in the interests of their members.

Using disclosure as a tool to really look across the whole pensions’ universe, to learn from the best and improve how they operate.

One area where we are seeing disclosure requirements start to genuinely change behaviour are the climate reports. Those introduced by the 2021 Pensions Act and brought into being by the Task Force on Climate-Related Financial Disclosures.

Already there is increased awareness, debate and a better understanding of climate-related risks and opportunities in the pensions market.

That’s because there is the right framework, guidance and regulation. This means schemes can plot potential transition pathways to more sustainable investment.

Not everyone would agree that disclosure is changing behaviour. I have heard some say that reporting may in fact get in the way of decision making and action.

But the disclosures that are required should be the output of the strategic decisions that trustees are making.

As a regulator we will increasingly use that disclosure and constructively challenge trustee decision-making so that savers’ interests are really being met.

The goal is not disclosure for disclosure’s sake but to encourage genuine change in how schemes operate. To encourage trustees, working with skilled advisers to embrace best practice, focus on maximising opportunities and mitigate risks that climate change presents.

Disclosure is here to stay and should be seen not as a burden but as an opportunity.

From 22 September this year, defined benefit pension schemes will be required to provide much more detailed information and complete a statement of strategy alongside their actuarial valuation.

This will support trustees in their long-term planning and risk management, and facilitate engagement between trustees, employers and TPR.

And regarding defined contribution schemes, we have been working with the FCA to further develop our joint Value for Money framework.

This seeks to enable schemes to compete on metrics that matter and move the focus from cost alone to genuine value for money.

The framework is backed with potential new powers to tackle poor performers if market dynamics aren’t fast enough to ensure only good schemes remain.

But while disclosure is likely to be a constant for all schemes, the ask of trusteeship is not one-size-fits all.

Different kinds of schemes will need different balances of experience, challenge and inclusion of the member voice.

For instance - DB schemes approaching end game will need a strong commercial understanding of the options available to them.

In the past, most if not all trustees and employers of well-funded schemes would have sought out insurers to buy their pension scheme.

But that is not the only option available now

With risk transfer deals in the region of £40-50bn per annum in the last few years, in the context of £1.4trillion in DB assets, there is a significant potential gap.

Emerging to meet this demand are Superfunds and – in time – Capital Backed Journey Plans.

We also expect to see other new and innovative saver-focused offerings as the market develops.

Understanding the balance of benefits and risk between all of these options is a key part of that decision making process for trustees – they have to make the right decision for their members.

In DC schemes, the challenges are just as complex – but different.

With long time horizons, and a generation of 18-year-olds soon to be saving, they will not only have to drive long-term value, but also support savers in turning their pension pot into a retirement income.

That will require a sophisticated understanding of how to support savers to make the right decisions for themselves, but also, potentially to work with providers on developing at-retirement solutions that work for their members.

Across DB and DC, the models of trusteeship are also changing – with the rise of professional trustees, sole trustees and fiduciary management – each bringing benefits and presenting challenges.

A few professional trustee firms have become firmly part of the fabric of pensions. More than half of schemes with more than £5m in assets use a professional trustee from one of just 13 different firms.

And whilst these firms bring expertise, the number of independently-minded people making decisions for savers has decreased massively.

It is now a very different environment from one where a pension was provided by the employer and overseen by the finance director.

It is instead, a concentrated, commercialised marketplace of complex financial institutions.

The changing role of The Pensions Regulator

We will soon be in an environment of supersized schemes across both DB and DC.

And if a few schemes, in a competitive dynamic pensions market, have a large say on the retirement outcomes of millions of savers we as the regulator need to be able to positively influence how they operate.

Not only that, but because of the size of those schemes, the investments that these schemes make could not only affect retirement pots. They could also impact the wider UK economy.

So, we need to perform our role in the broader financial landscape, stress-testing different economic events and anticipating how to respond.

We already recognise the role that pension schemes play in the complex financial services ecosystem.

That is why we are making sure that our capable people are deployed in the right way, with appropriate focus on financial stability issues, and that our systems and processes support this.

We have doubled the number of investment consultants we have and are improving our capacity to respond, in part driven by better collaboration between regulators, improving relationships with market participants, and enriched data capture.

This is all part of work in train to reshape TPR to be a regulator fit for the future.

We need to meet the dynamic needs of the emerging pensions market and savers.

That means being more proactive and assertive in our work.

Focused on protecting savers' money by making schemes and employers comply with their duties. Driving consolidation where it is in savers’ interests.

It means enhancing the pensions system through effective market oversight. Raising standards of trusteeship and using disclosure to facilitate nuanced interactions which lead to better strategic decisions.

It means supporting innovation in savers’ interests – being flexible with our regulatory approach and co-designing with industry so that new products and services always deliver good outcomes.

To make this happen we are aligning our structure to our strategic priorities and essential functions, directing our resources and talent to these areas to meet our key objectives.

This will involve creating three new regulatory functions, namely:

  • Regulatory Compliance – protecting savers’ money through the effective and efficient delivery of regulatory compliance services, targeting schemes and employers.
  • Market Oversight – enhancing the market through strategic engagement with schemes and others who influence delivery of pension savers’ outcomes.
  • Strategy, Policy and Analysis – using insights from our regulatory approach and elsewhere to evolve the regulatory framework and support innovation in the interests of savers.

We will become more market-focused, making sure we are even closer and better connected to developments in the pensions market and able to positively influence change as it unfolds.

Though they are internal structural changes, I expect the industry to also see a gear-change in how we interact with you, and in our effectiveness over time.

We will increase our use of data, digital and technology to identify where we need to focus our efforts. We will develop multi-disciplinary teams that can focus on the themes and the risks we are addressing.

We will learn from every interaction we have and use that learning to update our risk analysis and our regulatory approaches.

And we will develop quicker routes to enforcement to ensure that bad actors can’t threaten peoples’ pots or the UK market.


Millions of people from all walks of life are saving for a pension. They rely on that money to support them in older life.

But we are in a moment of change – heading towards fewer, larger pensions schemes with new risks and opportunities for savers and the economy as a whole.

It is incumbent on us all to change with the market if we are truly to protect, enhance and innovate in savers’ interests.

Thank you. 

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