Consultation on TPR’s DC compliance and enforcement policy

Introduction

TPR has issued a consultation on its compliance and enforcement policy for occupational DC trust-based schemes, together with its overall strategy for regulating all DC schemes.

In this Alert:

• Key points 
• TPR’s DC strategy
  
• Occupational DC schemes
  
• Master trusts
  
• Auto-enrolment schemes
  
• Enforcement – occupational DC schemes
  
• Work-based personal pensions (WBPPs)
• Next steps
  

Key points

• TPR’s core aim is to ensure that all DC members are placed in schemes that are “effectively governed, durable and offer value for money”;
• Trustees of occupational DC schemes will be asked to assess the extent to which their scheme delivers good member outcomes and produce a “governance statement”, following a “comply or explain” approach.
• Governance statements will not be mandatory, but TPR will monitor their take-up, effectiveness and quality.
• A master trust assurance framework will be introduced in 2014.

TPR’s DC strategy

TPR believes that good quality DC schemes should meet its six principles.  These principles are underpinned by 31 DC quality features that “encapsulate those activities, behaviours and control processes that are more likely to deliver good member outcomes”.

The Code of Practice for occupational DC trust-based schemes (which is due into force in November 2013) aims to set out practical guidance to help trustees to meet the legislative requirements for running an occupational trust-based DC scheme.  It will be supplemented by regulatory guidance, also due for publication in November.  (Please see our Alert: dated 25 July 2013.)

Occupational DC schemes

In order to demonstrate to their members and sponsoring employers that they have a good scheme, TPR will ask trustees to produce, and make available, a “governance statement”.  This will explain the extent to which the scheme has “embedded” the DC quality features.

TPR will provide a draft template of a governance statement for trustees to adapt to their specific circumstances, together with an assessment template.

Master trusts

TPR considers that the market entry level for master trusts should be set sufficiently high that only providers with durable business models are able to participate in automatic enrolment.  To achieve this, in addition to producing a governance statement, master trusts will be expected to obtain independent assurance of their quality.

TPR is working with the Institute of Chartered Accountants in England and Wales, the audit profession and master trust providers to develop an independent assurance framework.

Auto-enrolment schemes

To take a more active role and to ensure the scheme is better run, TPR encourages “large, well resourced employers that use a large scale multi-employer scheme, such as a GPP or master trust” to set up an employer management committee.

Enforcement – occupational DC schemes

Details of TPR’s enforcement options and approach are set out in the consultation.  Broadly, the draft policy explains:

• how TPR identifies and assesses risk in DC schemes;
• TPR’s approach to monitoring DC schemes through its reactive (whistleblowing reports) and proactive (thematic reviews) work;
• how a DC scheme may be investigated; and
• the enforcement options available (with illustrative examples).

Work-based personal pensions (WBPPs)

TPR shares the regulation of work-based personal pensions with the FCA.

Scheme providers will be encouraged to use product and investment governance committees to ensure their WBPP products are designed for, and continue to be suitable for, the target market, particularly for automatic enrolment.

Next steps

The consultation, to which Sackers will be responding, closes on 31 October 2013.