The Pensions Regulator is encouraging trustees to start preparing for the requirements included in the pension schemes bill, such as default pension benefit solutions and value for money comparisons.  

The pension schemes bill, introduced to parliament on 5 June, will fundamentally reshape the defined contribution market, TPR said.   

   

    

“We’d urge schemes and trustees to look now at how they are outcome-focused, building scale, are data-led and supporting savers into retirement,” TPR stated. 

 

On the DC side, the wide-ranging bill is expected to legislate for the introduction of: 
 

  

The regulator promised to engage widely as the bill moves through parliament and develops. In turn, it said industry should proactively come forward with practical ideas. 

 

 

Together with the Financial Conduct Authority, TPR will launch a voluntary asset allocation survey later this year, to be repeated annually, interim director of policy and public affairs Patrick Coyne told an audience at a Professional Pensions conference this week. 

The survey will be shared with the market “to allow trustees to gain better insights on any connection between value and asset allocation and make more informed investment decisions for their kinds of savers”.  

It comes as new value for money rules are expected to require schemes to publish and compare their net investment performance and service quality. 

Offering scheme members a default retirement solution will be another new requirement trustees will need to prepare for. Coyne said those that have not yet discussed it should start having these conversations at trustee board level. 

While the outlines are there, some have called for clarification on several of the requirements included in the bill. Sackers partner Helen Ball recently suggested there needs to be discussion about how to describe a ‘main default arrangement’ so it is flexible enough to evolve with future practice. She also called for a debate on whether it should be the trustee or the provider to choose which main default arrangement is right for which groups of members, and how trustees and providers can ‘proactively consider’ consolidation for DC schemes with DB underpins, or with restrictive scheme rules.   

As those questions and others will be debate in parliament and consultations yet to come, for those looking to create their own decumulation solutions, the regulator’s new innovation support service offers a discussion session. 

“Whilst we won’t be able to provide specific advice, approve or endorse the idea, we will be able to confidentially discuss your proposition and highlight any concerns that we may have from a regulatory perspective, if any,” Coyne explained. 

In addition, he invited trustees to consider what their schemes offer that larger providers do not, and what steps would be needed to consolidate. Larger schemes, he suggested, should explore “different investment opportunities”, citing Long-Term Asset Funds. LTAFs provide DC schemes access to illiquid assets, such as the private market investments the government has been pushing, while seeking to satisfy liquidity needs.  

 

With data is a key focus for TPR as it is trying to get a better picture of the scheme universe, Coyne also told trustees they should go beyond data auditing. 

 

“I’d urge to you to consider investing in digital infrastructure to support automation and reporting, and engage with your administrators to understand just what services they can provide given suitable investment,” he said. 

 

The government reforms will require schemes to take a more active role to help their savers navigate retirement, he said: “So, start to think what that might look like now and consider user testing different communications with your savers to make sure you’re ready.”