There are a number of initiatives going on at The Pensions Regulator. Yesterday I contributed to one of them – the “Vision” that is being lead by Elizabeth Renshaw-Ames
You can read the project that the “Vision” is on this link. It is part of a move within TPR to turn itself into a prudential regulator like the FCA. I support that move,
I am not a trustee and though my partner is , we are not going to the events TPR are organising next week which are exclusive to pension trustees.
I suggested that TPR listened to what Baroness Altmann proposed as an amendment to the Pension Schemes Bill. Her amendment would make trustees pay attention to all sides of the argument by looking at the numbers laid out by their actuaries in TAS300 (V2). I have sent TPR’s Vision people this account of the debate in the House of Lords
The past is where the money is , the past is our DB heritage and though DC master trusts and a few occupational schemes with substantial DC exist, they are little more than savings schemes. If TPR want the future to be about pensions they are going to keep our pension savings buying pensions, the old phrase was “money purchase” as savings bought annuities, this can still be the way forward if we revert to flex and fix with “fix” being annuity.
The alternative is CDC and this is a second project in the hands of TPR that I’d like to be a part of.
A third element of TPR’s development is “value for money”, a concept that needs development itself. For many people, the big question is whether they are getting value for money from their pension saving- which is currently into DC savings plans and increasingly master trust based plans (the heritage being increasingly GPPs).
If there is anything going on in DC pension saving, it is going on in this work which is joint with the FCA. It will need to answer the “comparison” questions that people as employers (paying) or employees (saving) will have about funding retirement. Just what will we get as “pensions” and what’s best value. The Government has made this statement which throws a spanner in the VFM framework consultation in my opinion.
An uplift that sounds like improved value for money to me!
What next?
Finally, I’d pick out of TPR’s initiatives their innovation support
On August 3rd, TPR will open its doors to organisations that want to get a CDC scheme authorised. This will not be a retirement CDC scheme but a whole of life scheme. So CDC will move to its next stage by throwing its doors open to all employers who want a go at improving pensions by up to 60% (on a VFM comparison.
TPR’s “innovation” is important to me, as it is helping CDC schemes happen this year. This will bring real VFM to our pensions.
Trustees of a certain vintage like me, Robin Ellison (if he’ll forgive me naming him) and others, may scoff at TPR’s efforts to raise the bar and innovate at the same time.
TPR’s EK Renshaw-Ames and I both started out as auditors, then career paths diverged – she into governance consultancy and governance roles, me into trusteeship roles alongside 50% member-nominated trustees. We are now in quite different places, and being much older I am now fully retired anyway.
Maybe I should abandon the field to the current and future generations of regulators and trustees. Just as you and Stella seem to be staying away from any of the events TPR have arranged for next week, Henry?
My own experiences of engaging with TPR over innovation in investment mandates and having a financial management plan (eg the 2014-2040 iteration for one scheme ran to 17 pages plus 14 appendices) did not go well.
I sensed that TPR at that time were ill-prepared to take on such variant detail unless it conformed with their own blinkered preferences, which in several respects it clearly didn’t. The increased staff numbers at TPR may suggest they are better prepared nowadays. I sincerely hope so.
While pensions regulation and innovation are sometimes viewed as contradictory—another oxymoron where strict rules stifle creativity—more recent approaches by TPR suggest they see them becoming increasingly interdependent.
Rather than being a barrier, regulation is argued as a necessary framework to ensure innovations (such as AI or new investment models) are safe, trustworthy, and actually improve outcomes for pensioners. (TPR prefer “savers” to “pensioners”. Meanwhile I believe some “old” investment models should not be abandoned just yet.)
The word “governance” appears 50 times in that 9-page TPR Vision document. The word “innovation” does not appear at all. Nor does “diversity”. My past experiences of TPR would suggest a little more cognitive diversity on their side of the table might not go amiss. Robin Ellison and I both liked to have at least some of our MNTs in the room and fewer professionals.
It’s another oxymoron (governance AND innovation) to put alongside PensionsOldie’s more optimistic, hoped for “pension entrepreneurs”.
Risk Aversion vs. Risk-Taking?Pension governance relies on “prudence”, stewardship, and fiduciary duty, which prioritises security and predictability. Innovation requires testing new, often, but not necessarily, untested approaches, which may introduce or increase volatility.
Regulatory Rigidity? Stringent regulations from TPR can create a “compliance-first” culture that discourages deviation from traditional, adviser-led investment or often outsourced administration methods.
Long-Term Horizons: Pension funds may be able to look decades ahead, whereas “innovation” often, but not always, implies more rapid, shorter-term disruption.
Why it may not necessarily be an oxymoron?
Surviving Modern Challenges: The “longevity revolution”, lower-carbon targets, and geoeconomic volatility may demand innovation to keep funds solvent. Without innovation, traditional, slow-moving governance risks falling behind, failing to deliver adequate retirement outcomes.
“Safety First” Innovation: Regulatory bodies say they are actively supporting “innovation hubs” and new models, such as megafunds or superfunds or CDC schemes, all largely untested, showing that innovation can be structured, monitored, and safe.
Tech-Driven Efficiency: Technology (AI, big data) may enable better governance by automating compliance, enhancing data integrity, and improving member engagement.
Governance OF Innovation, by the trustees, for the members (and the employers, as contingent members in some schemes)
Rather than being mutually exclusive, the goal is to develop even better governance that enables, facilitates innovation.
Data and AI: Using advanced analytics to enhance investment strategies and administration.
Active Ownership: Using technology-driven, “active” management to influence ESG factors.
Digital Engagement: Modernising how members interact with their pensions and with their trustees.
In conclusion, while they are often in tension, pensions governance and innovation could become co-dependent. Good governance is said to be necessary to ensure innovations are safe, while innovation is said to be necessary to maintain governance effectiveness in the 21st century.
Good luck with that.
Thanks Derek