UK Regulator

A] Prelude

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B] The Issue

The UK Pensions Regulator (TPR) has urged pension trustees to determine the long-term future of guaranteed Defined Benefit (DB) schemes and prepare for new requirements on value for money and retirement income in investment based Defined Contribution (DC) schemes.

C] The Details

TPR chief executive officer Nausicaa Delfas said the regulator wanted to see fewer, larger, well-run pension funds delivering security and value in a pensions system geared towards providing a sustainable income in retirement. To achieve this, she urged trustees to make decisions that will “deliver that sustainable income in retirement for millions.” (As EPH we do not often see such clear and focused communication by a regulatory body and we applaud it as it is in the interest of the participants and is directed at optimization and improvement.)

For DB schemes, this means taking decisions now on their long-term endgame. Delfas pointed out that 80% of schemes were in surplus on a low-dependency basis, with an estimated £170bn of surplus assets. She said trustees should, at a minimum, set a long-term objective, consider all available options and assess whether their current governance structure remained fit for purpose!

For DC schemes, Delfas said trustees needed to determine whether their pension funds could meet the “complex but necessary” new requirements under the Pension Schemes Act 2026. She said pension schemes had fiduciary obligations and that delivering value for members was important to fulfilling those obligations!

D] VFM Framework

The Value for Money (VfM) framework would encourage schemes to focus on holistic value rather than costs alone, she added. “If the VfM framework leads to a 1% improvement in investment returns for the average member who started saving at 22, it could lead to a 30% bigger pot by retirement,” Delfas said.

She urged trustees to start preparing by getting their data in order ahead of the March 2028 deadline for submitting data from 2027. Trustees should also review their investment strategies to ensure they were forward-looking and delivered appropriate returns for members.

Delfas also called on trustees to prepare for new requirements on default pensions and guided retirement. “Guided retirement requires trustees to design default pensions based on the needs of their members. This means that you are responsible for designing the default pensions, your cohorts of members, and allocating the members to default pensions appropriately,” she explained.

E] Options

She noted that the number of options was “relatively limited”, highlighting annuities, drawdown and retirement collective defined contribution (CDC) as potential options. “What is important is that you choose what is right for your members,” she said.

TPR will consult with the Department for Work and Pensions (DWP) and the Financial Conduct Authority (FCA) on developing a framework to “help” trustees with secondary legislation and regulatory guidance. Delfas said the regulator was committed to “being open” and welcomed early engagement on new ideas or emerging issues.

“Where you spot burden which doesn’t prevent harm – tell us, we’re listening. We also encourage those with new ideas to engage with us early via our innovation service.”

F] Finally

As EPH we are impressed by the recent excellent UK pension legislation and how it focusses on tangible results for the participants and how to improve if lacking. An example and inspiration for many or most other countries and other regulatory institutions like for example EU’s EIOPA!

(Source: @ipe/EPH)