Pensions regulator to boost staff by 12% to take more forceful action

James Phillips reports

The Pensions Regulator (TPR) will boost its headcount over the next three years as it shifts its resources into more forceful and direct action against flagging schemes.

The watchdog is restructuring its workforce to boost its frontline regulation team and introduce a data team, while the proportion of staff dedicated to automatic enrolment (AE), regulatory policy, and communications will fall.

The overall headcount is expected to increase from 591 full-time equivalent (FTE) staff in the 2017/18 year, to 660 this year, a 12% increase. TPR expects the staff to increase further to 720 FTE by 2020/2021.

The movement of resources comes as the regulator promised to act more broadly and visibly in a bid to improve outcomes for savers, with a pledge to employer a wider range of regulatory tools, and more often adopt standards-based regulation and tailored approaches to different sectors of the market.

In its corporate plan for the 2018 to 2021 period, published today (10 May), TPR promised to bear its teeth where it believes schemes are being unfairly side-lined compared to other creditors, noting “if we see a situation where we believe a scheme is not being treated fairly relative to other creditors, we are likely to intervene and, if necessary, use our formal powers”.

Smaller schemes and those which present the biggest risks will see a greater focus, while larger schemes will be engaged with more proactively, the regulator promised.

Chairman Mark Boyle said trustees and sponsors should expect to see a more “vocal” regulator.

“The pensions landscape has been changing significantly,” he said. “We are meeting this challenge by embedding a new regulatory culture and reinforcing our regulatory teams on the frontline.

“In the coming year, you can expect to see us being more vocal about our expectations of those we regulate and intervening quickly and decisively through our wide-ranging regulatory activity and enforcement powers so that workplace pension schemes are run properly and people can save safely for retirement.”

This will be backed up by an improved use and collection of data, including with dedicated staff, to “better target and prioritise our work based on the risks we want to reduce”. It will also work with regulatory partners to improve outcomes for retirement savers, such as the Financial Conduct Authority (FCA), which it is currently in the process of designing a joint strategy for.

AJ Bell senior analyst Tom Selby said the plan showed a war-torn watchdog fighting back against criticism.

“TPR has come out fighting after something of an annus horribilis which has seen it face stinging criticism for its role in the BHS scandal and the recent failure of building firm Carillion,” he said. “While some of this may have been justified, TPR’s budget remains tiny when you consider the vast landscape it is required to monitor.”

Financially, the watchdog’s budget has grown by £4.3m to £88.6m compared to the 2017/18 actual year spend, with levy costs set to increase by £8.3m while AE costs will decrease by £3.9m. Much of the increased costs will go towards salary costs, which grow by £5.9m, but this is largely offset by a £4.3m reduction in contractual costs.

“This undoubtedly limits its ability to ensure all savers in the schemes it regulates are protected all the time,” Selby continued.

“In this context, chairman Mark Boyle’s pledge to be ‘more vocal’ in communicating its expectations of those it regulates makes sense. The regulator has to compensate for its lack of resources somehow and by roaring like a lion it will hope to convince those it polices it is more than just a kitten.”

The report includes eight priorities for the next three years, as well as four macro trends, and seeks to respond to the potential impact of Brexit on particular sectors, as well as a potential concentration risk caused by the growth and expected consolidation of master trusts.

On Brexit, the watchdog said it was working with the government and wider industry to build its understanding and response to the potential effects. In particular, it said it was assessing the implications for cross-border schemes – a potential problem acute to Northern Ireland and the Republic of Ireland – and would provide further guidance for schemes when more details of the final deal and its impact on pension schemes is available.

The watchdog added further detail on any change in its regulatory approach would be clarified over the summer, and then implemented throughout the timespan of the corporate plan.