The publication in question is actually about Dutch relaxation of guarantees on benefits allowing pension schemes to invest more adventurously.
Mary McDougall may not yet be ready to follow her predecessor, Jo Cumbo, who has no time for replacing safeguards from regulators. Investing in defence stocks is ephemeral, Jo Cumbo sees the downside immediately.
This ‘new approach’ statement from the UK pensions regulator should be a wake-up call for any private pension saver.
Your best interests are no longer centred by a regulator and government seeking to tap your retirement savings to fuel domestic growth.https://t.co/CZKtfb7Njp
— Josephine Cumbo (@JosephineCumbo) March 28, 2025
I am in trouble for criticising the Pensions Regulator so I am pleased to read the article that worries Jo, a statement made last week which I have enjoyed reading (end of).
Here is what the Pensions Regulator has in mind. Have they been talking with the Dutch? This is the appendix of their recent letter to Government.
Summary of TPR commitments and asks of government
1. Increasing the value of pension funds
- We will design the process and system for active analysis of investment performance data when available through the Value for Money Framework. This means that when the legislation is enacted we can use this analysis to set public principles which make clear our market expectations and supervisory approach towards driving growth in UK pension funds and savers pots.
- We will continue to use our platform and position as a regulator to support the consolidation of poorly performing schemes into a market of fewer, larger and better run schemes focused on value through our messaging and communications, as well as through the use of our regulatory powers as we expand our interaction with the smaller schemes.
- We will conduct a review and provide a report to government which provides sector insights, data and analysis to help DWP and HMT make a policy decision on the use of defined benefit surplus.
2. Enabling productive investment
- We will use our sector insights to help government understand the kinds of growth opportunities that UK pension schemes will find attractive to invest in, producing a report and sharing data and insight as appropriate.
- We will develop a strategy and workplan to make sure all schemes have trustees capable of considering a diversified range of investments.
3. Reducing unnecessary regulatory burden and releasing funds for investment
- We will review our regulatory capital reserving requirements for master trusts with a view to ensuring it is proportionate, which could unlock hundreds of millions of pounds for investment.
- We will review all our regulatory interventions and legislation to assess their value to make sure we are targeting interventions in a way that deliver the greatest benefit to savers and the economy, and to propose removal of unnecessary legislation.
4. Driving growth through digital and data enablement
- We will review and streamline our data requirements, where possible, so that schemes are asked once for information, in a clear format in the right way.
- We will provide government with our view on where wider data legislation could be harmonised and streamlined to benefit growth for pensions.
- We will set up an industry data and digital working group to develop the maturity of the pensions industry in digital, data and technology unlocking its transformative potential.
5. Supporting market innovation
- We will build an innovation hub to support industry in bringing new products to market with potential for growth.
- We will test emerging ideas with industry, where these have potential to benefit savers and the economy.
Our asks of government
- Your commitment to support us to remove unnecessary legislation once we have completed our review.
- Consideration of delegated rule-making powers.
- Convening a wider cross-government investment growth group as part of its industrial strategy.
Stepping together towards growth
Let us not lose track of where the Dutch are coming from and where they are going, this from the FT and the article quoted above.
In 2023, Dutch senators passed a law to transition the country’s occupational pension system into a model in which pension funds no longer guarantee a fixed retirement income to members.
The transition is expected to take place between 2025 and 2028. The old defined benefit system pushed the schemes into liquid, low-risk assets such as government bonds by requiring pension funds to closely match assets with long-term pensions owed.
The funds will now be able to set target returns that can fluctuate with market movements, removing some liability driven constraints and increasing their risk appetite.
Jo Cumbo will not be the only influential critic of this. We are likely to see a lot more as Britain faces problems.
On behalf of the Apostrophe Protection Society, I note that TPR refers to “savers pots”.
I wouldn’t hold my breath while TPR considers “active analysis of investment performance data”, although it tends to confirm – as we knew during the LDI crash – that TPR don’t have any data yet, despite years and years of trustees (no apostrophe necessary) filing annual
returns.
While TPR saying “We will develop a strategy and workplan to make sure all schemes have trustees capable of considering a diversified range of investments” sounds like yet more future additions to the Trustee Toolkit and their bias in favour of professional trustees, rather than lay, member-nominated/representative trustees, is showing once more.
Me liking your contribution, I have to be careful not to criticise the Pensions Regulator on my blog.
We must fully applaud the TPR for getting onto the growth agenda.
After 20 years of a mis-guided anti-growth strategy, hopefully there is time to rescue our economy by turning our pension scheme assets towards the new national economic strategy of GROWTH.
Our second pillar pensions (ie the private bit of pensions intended to actually reduce the stress on the State finances) is now 50% “funded” by UK Govt Gilts as a result of a disastrously myopic cult of de-risking (ie so it is funded in the same way as NHS Pensions are funded – its not!).
Official OBR forecast show Debt to GDP moving to 300% over the next two/three parliaments (and that’s a central case, ie no prolonged war in Europe, no tariffs, and a modest uptick in GDP – LOL, but not really )). So the notion that those pensions loaded with gilts are going to come through this unscathed is as they say “for the birds”.
And packaging them off en masse at £50bn per annum to a specifically designed low risk (ie low investment, low growth) constructed insurer environment, is not going to cut the mustard. Surely everyone understands the folly of transitioning c£500bn of economic firepower in that way? Good for bonuses and statist mindset, but its currently designed not for growth – certainly not at the levels we need it.
The TPR has hit all the right straplines – so let’s continue the discussion and get behind that; there will be many teething problems – their tendency for only-big-state solutions will inhibit innovation and growth, but hopefully they will learn (or be allowed) to trust well structured schemes and employers to lead on investment – its what they do.
DB surpluses need to be re-cycled to growth, and, we also need to revisit and break away from the TPR comfort blanket of low-dependency (ie the super cautious G+0.5% investment approach). There is no actual science to that as the ‘right’ number, other than it feels like a really high number. Indeed, for each of those £50bn p.a. transfers to the Insurers, the TRP low dependency approach needs some £5 – £10bn more than the insurers think they will need to pay the same pensions under even their cautious insurer regulatory regime. That’s £5 – £10bn that can be used to invest in our economy and services, driving the growth needed to pay for our public services, and if there is anything left, our pensions.
Growth!