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Pensions Alert - The Pensions Regulator’s new approach: more scrutiny of pension schemes, employers and corporate activity

Workplace defined benefit and defined contribution pension schemes will be subject to greater scrutiny as the Pensions Regulator continues to implement its “clearer, quicker, tougher” approach to regulating pension schemes.

A new report issued by the Pensions Regulator, “Making workplace pensions work – TPR Future – our new approach”, sets out details of how it will be taking a more proactive approach to regulating pension schemes to reflect major changes in the political, economic and pensions landscape, particularly as a result of recent high profile insolvencies.

The Pensions Regulator will use a new range of interventions to address risks sooner and take action where necessary, including, from October:

  • one to one supervision by the Pensions Regulator of 25 of the largest defined benefit, defined contribution and public sector pension schemes. This supervision will be extended to 60 schemes over the next year. The Pensions Regulator will maintain ongoing contact with these schemes and in some cases their sponsoring employers; and
  • assessing valuations and deficit reduction plans of around 50 defined benefit pension schemes to ensure that they have complied with the Pensions Regulator’s 2018 annual funding statement, in particular, whether trustees are assessing the impact of dividends on the employer’s covenant and whether the scheme is being treated fairly in light of any such distributions to shareholders.

The Pensions Regulator has already made changes to the way it operates following extensive criticism by the Work and Pensions Select Committee which described it as “feeble and timid”, “failing in all its objectives” and “reactive and slow-moving”. For example, we have already seen the Pensions Regulator take a much tougher approach when considering what needs to be done to address the impact of corporate activity on pension schemes. The Pensions Regulator is also likely to have greater powers in relation to corporate transactions, if proposals to strengthen its powers in the Government’s White Paper and the related consultation paper are implemented (see our alerts “Pensions White Paper: Increased scrutiny for corporate transactions” and “Pensions Regulator to have stronger powers in corporate transactions”).

There are also other changes on the horizon for pension schemes and scheme employers. During the autumn, the Pensions Regulator will be working on designing clearer funding standards for defined benefit pension schemes with a formal consultation on a revised Defined Benefits Funding Code to begin next year.