Charles Counsell:
The Pensions Regulator (TPR) has called for increased regulation for superfunds and defined benefit (DB) master trusts and says there is a “strong case” for an authorisation regime to be introduced for professional trustees.
In the first session of the third formal meeting of the WPC's inquiry into DB pensions with LDI - held this morning (14 December) - the committee heard evidence from people including TPR chief executive Charles Counsell.
As part of his testimony to the committee, Counsell said that, following the crisis, there were lessons to be learned about the governance of schemes - particularly with regards to smaller schemes.
Counsell noted a third of DB schemes have fewer than 100 members - adding that smaller schemes tend to be "less well managed and less well governed than larger schemes" something that was demonstrated in a "whole new way" during the LDI crisis.
He said: "We've got to have a focus on how we move to the point where we've got larger schemes - I'm not saying that all small schemes are badly managed or badly governed but it is true that, across the board, they are more typically badly managed."
Counsell said the key question was how to consolidate the smaller schemes - and for that, he said, the industry needed consolidation vehicles such as DB master trusts and superfunds.
He said both sorts of vehicles needed more oversight - saying TPR believed regulation of superfunds "should be put on a statutory footing to make them safe" and that the regulation around DB master trusts should be toughened, adding that TPR did not have the same "regulatory grip" over these vehicles as it did over DC master trusts, the later of which needed to be authorised by the regulator.
Professional trustees
Counsell also said there was a "strong case" for the authorisation of professional trustees to increase levels of governance across schemes.
He said TPR believes that all schemes should have professional trustees sitting on their board - but noted the regulation around these professionals probably needed to increase.
Counsell explained: "There is no authorisation regime, no regulation around professional trustees so there is a question about whether or not that should also happen and whether there should be an authorisation process around professional trustees."
He noted that, while there was currently an accreditation process, this was something the regulator could not force trustees to undertake - telling the committee a new regime for professional trustees should probably go further than simply making the existing accreditation process compulsory.
Counsell said: "These are big financial vehicles. And if I was sitting here in the Financial Conduct Authority's shoes, and I was looking at people that run big financial vehicles, there would be an authorisation process… There's a lot to do to get there but I think there is a strong case for it."
