TPR finally finds its feet on DC pensions

I reported yesterday on the excellent PPI report on how countries around the world are getting on turning DC pots to pensions. (summary, not very well – especially the USA). I’ve also written this week on the widening gap between expectation and delivery in CDC (summary a lot more talk than action). What I haven’t written about is “direction” and in particular regulatory direction (aka guidance) on this matter.

But that is to ignore a speech by TPR CEO, Nausicaa Delfas which I think is one of the most important made by any Government official this year. A transcript of Nausicaa’s PPI speech is now available on the Pension Regulator’s website

For those hard of finger, here it is.

Assessing DC pensions savings: What does good look like?

Key messages

  • All modern workplace pension schemes should offer products and services that help savers access pensions at or in retirement in the future.
  • The success of automatic enrolment has led to a sharp increase in saving with little direct engagement from the saver. But accessing pensions will require positive action.
  • We all need to work together to guide savers toward the right solutions for them. If not, we risk a lost generation of people suffering in retirement.
  • Without a consensus on what good looks like, positive outcomes sought for savers will not be realised. I want to start building that consensus by proposing five principles to help shape the conversation.


Good afternoon, everyone. Thank you for inviting me to speak at the launch of this important report on “What can the UK learn about other countries’ approaches to accessing DC savings?”, of which TPR has been the lead sponsor…

I know from my previous regulatory experience at the FCA how important it is to look at international comparators and lessons learned – and that is clearly the case here. I would like to thank our international partners[1] in working with the PPI to bring these lessons to life.

In the UK, the pensions market is evolving rapidly towards fewer, larger, well-run pension schemes, which are more likely to deliver good retirement outcomes for savers.

And since joining the regulator earlier this year I have made clear that my three priorities are: to protect savers’ money, enhance the pension system, and support innovation in savers’ interests.

Solving the problem of ‘at-retirement’ is fundamental to all three.

People saving into defined contribution schemes are faced with incredibly complex choices about how to support themselves in retirement. We must do all we can to ensure they receive good retirement outcomes.

It’s clear that the market needs to provide a suite of value for money products and services that work for different savers and different retirements. And that we all need to work together to guide savers toward the right solutions for them.

If not, we risk a lost generation of people suffering in retirement.

Of course, some schemes will not have the skill, capability, or appetite to meet savers’ needs ‘at-retirement’. Those schemes will likely need to consolidate in future.

But for those who have the scale and expertise to deliver for savers, I will today set out some principles to test with you, the industry, to encourage innovation in savers’ interests.

Focus on retirement options

The switch in focus from DB to DC pensions, the increase in the numbers enrolled in workforce pensions, and the fact we are living much longer mean we need to focus more on ‘at retirement solutions’ and on post-retirement support.

We have the second biggest pensions market in the world. But less than a fifth of our pension assets are in DC pensions. In the United States and Australia that figure is much higher, at 65% and 87% respectively.

Their experience provides us with an opportunity. To draw from their learning and look to the future.

The needs of future generations will be different to today’s retirees: here are three for consideration:

  • We have declining levels of home ownership. And later starts on the housing ladder. Meaning higher housing costs in retirement.
  • Lower levels of pension income and savings to draw upon. Financial resources that will have to stretch further to cover for increased longevity.
  • Higher dependency on DC pensions where savers hold the risk for their investments.

These pose challenging choices for savers, who will have to consider how best to convert their pension pots into an income, for a retirement that is both adequate and sustainable.

At the moment, most transfer out of the trust-based world. This might be right for some. However, a recent report suggested that almost a year’s worth of income could be lost through transfer and higher management fees. That can’t be right[2].

Over the next decade the assets held in DC workplace schemes by over-55s in work, will increase by nearly threefold to £527 billion[3], with the average pot sizes reaching £50,000[4]. At that point DC workplace schemes will become the largest proportion of the retirement market[5].

But, the welcome growth in workplace pensions provided by Automatic Enrolment (AE) comes with a challenge as pensions mature.

Accumulation has come about by inertia. Decumulation will require activity.

Many beneficiaries of the AE system have not had to engage much to save. But turning that pot into something that supports their individual retirement needs will require them to be much more engaged. It’s here they need our help. This insight informed DWP’s consultation on reforming decumulation policy. Notably, to place schemes under a legal obligation to provide decumulation products and services.

In the near future, DWP will respond to that consultation and set out the next steps. We support the direction of travel and have been working with them to help shape these reforms.

I would like to outline the approach we will be taking to help bring those reforms into reality.

What does ‘good’ look like?

The experience in Australia and New Zealand is that reform should be guided by a consensus on what good looks like, and how it is assessed. If that consensus does not exist, the positive outcomes sought for savers will not be realised.

I would like to start building consensus on what good looks like for the UK by proposing five principles to help shape the conversation.

To be clear, this is not set in stone. We are at the beginning of a conversation and I’m sure these ideas will change as more voices are added to the discussion.

Principle one – All savers deserve value for money – Schemes should help savers to maximise the value of their pension savings into and throughout retirement

That is because all savers deserve value for their money, right the way across their pension saving journey. In accumulation, value for money means the investment returns, and services received, for the price paid. In decumulation, it’s not quite as simple. But what is clear is that the focus has to be on a holistic assessment of value, not just cost alone.

Decumulation will form part of the value for money framework in the future enabling trustees, employers, and eventually pension savers, to better understand the value of different services and products on offer in the decumulation market.

And we do need to see more innovation to help the DC generation. A generation facing smaller pension wealth.

I am pleased to see that progress is being made on the 2017 AE review measures which will boost overall savings levels, but it is not realistic to rely upon these changes alone to solve the problem. There should also be a real onus on the pensions industry to promote solutions which help members extract more value from their savings.

That is why we are supporting the Government’s efforts in getting Collective Defined Contribution solutions off the ground and why we will welcome other moves to extract greater value from DC pensions.

Principle two – All savers should be helped with decision-making – Savers should be encouraged and supported to make key decisions whilst saving for their pension, and in preparation for decumulation

We need to break down the barriers which are perceived to exist between accumulation, decumulation and retirement.

A guided pathway should run through all three phases: the changing nature of work and retirement demands this.

But let’s be more specific in those years leading to decumulation. We feel savers should be supported to act:

  • To find lost pension pots and consolidate those pots.
  • To ensure they are on track to qualify for the maximum state pension.
  • To understand what pension income, they are likely to accrue and what that might mean for their living standards in retirement. And helped to act if that is insufficient.

The first priority should be to empower informed long-term decision-making from savers, but in my view, there should also be a strong safety net default solution for those that fail to make a decision.

Principle three – Schemes should put the saver at the heart of decumulation – Trustees should consider the best interests of savers and proactively help DC savers to mitigate the risks they face at and in retirement

Whether that’s investment, sequencing, inflation or longevity risk.

Schemes can help to mitigate those risks not only through the guidance provided to savers, but also in the design of the decumulation products they offer.

Trustees should only offer decumulation products – including any default ‘safety net’ solutions – that are in the best interests of their members offering real value for money.

Principle four – The market must innovate to provide genuine choice for savers – The saver should be given a choice in how to decumulate their pension savings considering their personal circumstances

Savers should be offered several pathways offering products which provide flexibility and more certain income streams and a combination of the two. Pathways which serve people throughout their retirement journey, the early and the later years. And consider people’s financial and family circumstances in the round.

And that choice extends to everyone. We know there is a big gender pension gap. Decumulation solutions must help close that gap.

Finally, Principle five – Schemes should provide wrap around and personalised support in the lead up to and during decumulation and in post-retirement

Support that is targeted at those that need it most and who are at greater risk of experiencing poorer later life outcomes, for example: women, people from some ethnic minority groups, people with disabilities and carers.

Support which is purposeful and leads to something. Giving people agency to navigate their options and to take decisions.

Here there are some lessons from this report, from the US, Australia, and New Zealand suggesting that we need to be both mindful of giving people the confidence to draw down their pension sufficiently to give themselves a good standard of living they deserve, but at the same time, warn them if they are drawing down too fast and too deeply.

That might point to pathways which look at people’s financial circumstances in the round.

Moving forward – the role of TPR

I have set out five simple principles for how we want the ‘at retirement’ market to develop. We will now engage with the sector on the development of these principles through a series of virtual roundtables early in the new year.

As a regulator we will work with you to support innovation at and post-retirement. Learning from the insight of this report we need to work collectively to promote what innovation in this space looks like, rather than passively waiting until issues arise.

Our job will be to champion and protect the interests of the saver, bringing their voice to the table by working with charities and other groups who advocate for them.

We will work to guide and shape the market to enhance the pension system so that over time schemes become full-service providers – accumulation, decumulation and post-retirement support – collaborating with the sector as we do so.

And allow room for and encourage innovation. And as we begin to appreciate what works, we will provide constructive challenge to the sector to adopt best practices – and ensure that our processes and approach enable innovation in the interests of savers.

Next steps

We expect innovation to come from you, the industry – but we are here to support and enable, where innovation is in the interests of savers.

We will be publishing interim guidance next year, providing clarity on the key issues, giving confidence and encouraging the sector to develop their offer early. Providers who bring forward their decumulation offers early will get ahead and gain a foothold in the market.

That interim guidance will provide a pathway to decumulation becoming part of the value for money framework by encouraging schemes to set their own metrics.

Fuller guidance will be developed over a longer timescale, as we innovate, test and learn together.

We are already working with the Treasury, FCA and DWP to address the barriers faced by schemes in straying into regulated financial advice, or unsolicited marketing activity regulated by the Information Commissioner’s Office, when trying to provide more personalised communications and guidance.

And we will work with the sector to help minimise situations where savers are faced with messy decumulation because they have several pension pots.

We also recognise that decumulation will be a real capacity and capability challenge for some parts of the sector, including single employer trusts.

But let’s be clear, the long-term expectation is that all schemes should offer decumulation products either directly or through partnerships. Modern workforce pensions that offer accumulation and decumulation. If schemes won’t or cannot make that offer, they will come under pressure to consolidate.

You should assume that this will become part of the Master Trust supervision conversation.

And finally, we will look to work with partners on further thought leadership and activities which encourages innovation. We are already supporting the exploration of decumulation-only CDC model. And we look forward to the separate PPI report on decumulation CDCs that we are co-sponsoring later this year.


So, to conclude, TPR stands ready to support innovation in the interests of savers – for schemes to find those ‘at retirement’ solutions that savers need.

With you, employers, trustees and wider industry we should build on the positive outcome of AE and influence the sector to be ready to access their DC savings pots.

This report from PPI demonstrates the size of the task ahead.

I believe that by beginning a conversation now will be able to provide savers a better, more assured and safe experience.

All savers deserve good retirement outcomes.

With your help, and innovation, let’s work together to deliver this for everyone.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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7 Responses to TPR finally finds its feet on DC pensions

  1. John Mather says:

    The numeracy problem in the U.K. is a significant issue, with statistics highlighting the extent of the challenge. According to the National Numeracy organization, around 17 million adults in the U.K. have low numeracy skills, representing nearly half of the working-age population.

    Additionally, a survey conducted by the Organisation for Economic Co-operation and Development (OECD) found that the U.K. ranks 22nd out of 24 countries for numeracy skills among 16- to 24-year-olds. This lack of numeracy skills has economic implications, as it is estimated to cost the U.K. economy around £20 billion per year. These statistics emphasize the urgent need for targeted efforts to improve numeracy levels and ensure individuals have the necessary skills to thrive in the modern world.

    Fix fundamentals and you might have a chance with pensions but wishing that you can get everyone above the average can’t work can it

    • jnamdoc says:

      Teachers should teach, nurses should care, builders should build, artist should create and inspire, farmers should provide us with affordable high quality produce, lorry drivers should deliver the goods we need, etc etc.

      And those of use involved in the pension business should design and support (and defend) a ‘pension system’ that delivers a dignified living wage for all working people.

      I’m at screaming stage now when I hear numerate people say if only the people weren’t so dumb with numbers. What? We’d stop ripping them off?
      Its an excuse, a guilt ridden reflex for not collectively as an industry working together to prevent the decimation, actually the deliberate destruction of our once admirable collective defined benefit pension system, and at the same time stripping the Schemes and our economy of virtually all productive capital. Too many saw their roles as being agents of the Regulator operating under a myopic and fatally skewed mandate, or they stood on the sidelines figuring out how to maximise the position for their own gain.

      This is really simple. The intellectual and moral argument have been made. We need policy makers to turn our system away from making pots (all the more prone to agency plunder), and back to systems of collective provision, not dependent on single sponsor covenant, and which invests, creating a virtual loop within an integral part of a funded economy. The Regulator can have a role in this. That should not be to degrade collective systems. The remit must be changed! That is a policy decision. And here is where the industry, if it has any moral compass remaining should be banging on the door of Ministers, every day, advocating the merits and affordability of collective systems. And not looking for more sticking plasters to fix a broken-vase of a pension-pot system.

      We need free markets and entrepreneurialism to fund our services and provide for us in our old age. But paternalism too has a place in society. People need pensions, not pots.

  2. John Mather says:

    I think you will find that DB success is much exaggerated which is why so many are in the PPF or in buy outs.

    The assumptions were wrong and uplifted benefits for senior staff made it worse. LDI may well be the last nail in the coffin.

    Pots and pensions need cash there is no such thing as a pension without cash to buy it unless the lemming gambit is applied. This relies on excess death rates. to subsidise the survivors.

    This summary might give some reality to the rather academic debate, Look at the figures on the inability to save £10 a month or to eat today.

  3. John Mather says:

    Or this one the leaders seem to have given up

  4. Peter CB says:

    While this argument will rumble on and on, I think we should not ignore some form of DB as a pension framework in a Value for Money context..
    For employers with an existing DB scheme in surplus and the prospect of minimum auto-enrolment contributions rising to 12% as the PLSA and others are campaigning for, opening a new DB section in the current scheme is surely a viable option.
    The minimum DB benefits to be provided under auto-enrolment are funding for 1/120th of salary on a CARE basis. Discretionary revaluations as per the USS Conditional Indexation model are available to mitigate any past service deficits that might develop in the future. Provided the real value of the revalued benefits have been fully protected pre and post retirement the employer might also be able to benefit from a Surplus Distribution Plan under my suggestions.

    From the Members’ point of view, on a whole life basis with the increased state retirement age, an inflation protected pension, of more than a third of the revalued salary is a reasonable expectation. Even a short service benefit would provide a useful inflated protected addition to the state pension. The wealthy who can forgo income in retirement can always take a transfer payment to their desired retirement pot.

    If the employer is unwilling or too small to support a DB pension scheme, a collective and/or possibly (I don’t enough about these) a capital backed DB pension scheme would appear to be viable alternatives. A whole life CDC scheme should also be able to provide equivalent benefit levels with a reasonable degree of certainty and the possibility of enhancement.

  5. Byron McKeeby says:

    1/120th on a CARE basis seems a long way from the 1/60th on a Final Salary basis most trustees worked towards in the 1990s before OPRA and TPR. And of course the senior executives had 1/30th or 1/40th ….

    • Peter CB says:

      Agreed – but would 1/120th with inflation protection provide a more secure pension than a 12% auto-enrolment DC arrangement?

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