TPR Future: How the regulator is evolving

The Pensions Regulator (TPR) has been through its most testing times in the past few years. From BHS to Tata Steel UK, and more recently Carillion, its role in these high-profile defined benefit (DB) cases has come under scrutiny.

Meanwhile, it has been busy with the continued rollout of auto-enrolment (AE), the pensions freedoms and the increasingly sophisticated nature of scams. Its workload is set to increase further this year as the master trust authorisation regime comes into force, while the government has promised it new powers in the DB white paper. The sheer increase and broadening of its workload over a short period is quite staggering.

Taking stock

For Mark Boyle, who is coming to the end of his first term as non-executive chairman, now is a good time to take stock of what has been achieved over the past four years.

Speaking to PP at the end of February, Boyle said: "TPR is in a very different place from when I joined, both in terms of the environment we're working in, and in the way we as a regulator behave and perform. That job isn't yet fully completed - we are in the process of changing, and have been for a number of years, but we have further to go. We really do want to be ‘clearer, quicker and tougher'."

This mantra, which has replaced its ‘educate, enable and enforce' line, means it is focusing on being tougher on non-compliance, intervening more quickly, and using some of its powers for the first time.

This came around the same time as the BHS saga, which led many to suggest the change was in reaction to that case. However, Boyle said he and chief executive Lesley Titcomb put this in train two or three years ago, before the collapse of the retail giant.

"We have not been changing as a response to those cases such as BHS. It's fair to say those cases have raised our profile very significantly externally, and have probably heightened the need to change - but that change was already happening [and is now accelerating]. Like any good organisation, we have to reach out to our stakeholders and get them to tell us what they think about us."

The watchdog conducted a major exercise, which was the genesis of TPR Future (which is about how the regulator is changing as an institution), to find out what a much broader range of stakeholders felt about it.

"Out of that we were told in no uncertain terms they wanted the regulator to be visible, to understand what the regulator's expectations are, and for us to be more ready and faster to use our powers."

This was almost entirely mirrored by what staff were saying internally, he explained - and also reflected the change in the wider political environment compared to four or five years ago.

DWP relationship

Boyle said it has been interesting to observe its relationship and interaction with the Department for Work and Pensions (DWP) during that time.

"We have a very strong relationship now with DWP and other parts of government, and that has helped give us this opportunity to try to influence and explain," explained Boyle. "While it's for government to make policy, our voice is heard now more effectively."

The watchdog had been waiting with bated breath for the government's long-awaited white paper on protecting DB pensions, which was published as this article went to press.

The regulator had specifically asked for improved information-gathering and interview powers, which Boyle said would make a "significant difference in the way we're able to act and react."

The white paper has now confirmed TPR will get extra powers around scheme funding, information-gathering and anti-avoidance, and there will be a new criminal offence for employers that neglect their pension responsibilities, to give TPR ‘the ability to respond more quickly and decisively'.

Resources

But of course, extra powers mean yet more work for an already stretched regulator. It successfully had its budget boosted by £3.5m last year for its compliance and enforcement work, enabling it to increase its headcount by around 15%. This was mainly in response to extra money needed for AE, and the new master trust regime that comes into force in October.

In the context of a £80m annual budget, roughly half of which is for AE, this is a "meaningful improvement", Boyle said.

But is it sufficient for TPR to do its job effectively? While he said it is sufficient to the job it currently has (excluding the white paper powers), he noted there was a very broad range of activity that it needs to resource up for.

"Have we the resource to do everything? - No, we don't, but then no organisation does. It's about getting better as you scan the horizon, work out what you want to do and place your priorities, and then where you want to place your resources. I would argue it's about placing those resources where you can be most effective.

"The TPR Future exercise is making us much better at doing that, at focusing our resources."

Sometimes it is clear to see what is coming down the pipe - such as the master trust regime, which the watchdog heavily lobbied for and used it to argue for more resources.

As it has not been easy to plan for the white paper, the regulator has not been resourcing up in anticipation; instead, it has taken a wait and see attitude to see where it lands and act accordingly. It is seeking at least to ensure DWP has "some understanding" of what the potential resourcing repercussions could be, he added.

What's next?

Looking forward, the regulator's soon-to-be-published 2019 corporate plan, which explains where it is heading and will include eight priorities, will bear "close resemblance" to the 2018 plan. This is because where we are placing our focus and attention has not changed, Boyle said, calling it an "evolution".

"It would be wrong to think there will be radical change from us - because we have been trying to change as we go along. So our greater visibility from the past couple of years, willingness to express views and seek to influence policy direction where appropriate from behind the scenes, and willingness to take action faster."

However, he did note that from next year "you will start to see significant changes in the way we regulate as a result of TPR Future".

Having completed the diagnostic phase of the initiative last summer, the regulator will reach the end of the second phase, design, by the end of March, after which it will then move into the implementation phase.

"The way we regulate - scanning the landscape, looking for risks, focusing on where the limited resource we have is best implemented - that is really going to come to life during the next 12 months. We will look to continue what has happened over the last 12 months - successful interventions that have led to significant results, both in cases and more broadly."

As a result of the broader horizon scanning, TPR will give its views on a wide range of topics through for example thematic reviews, where it will scrutinise particular areas, and share findings.

It will also demonstrate over the next few years what its evolution towards ‘clearer, quicker, tougher' means in practice. It already seems to have divided opinion, however, with critics arguing it is coming down too hard in certain places. However, Boyle said feedback suggests "very strong endorsement" from its stakeholders and added: "It's inevitable we will get critics over some of what we do - some people will say we're too tough, others will say not tough enough. It is the nature of being a regulator that you get a polarity of views."

How the TPR Future initiative pans out over the next few years is going to be an interesting one to watch, especially at a time when it faces more challenges than ever. Clearly, this is just the beginning of the journey.