The pensions market is at a moment of significant change, moving to a system of fewer, larger, ‘mega’ schemes. This brings new risks and opportunities for savers.
We want all defined contribution (DC) savers to get value for their money. We supervise schemes in the market to make sure they are acting in the best interests of savers.
DC schemes and master trusts should now expect us to engage differently with them. We will expect greater transparency and flexibility so that all our interactions are fruitful, targeted and responsive to risk.
Our new way of engaging means that master trusts will have greater clarity on what we expect, so that savers are protected and get good value for money.
Published: 20 February 2025
Our master trust supervision pilot
Over the last 12 months, we have undertaken a thorough review of our approach to the oversight of the DC and master trust market.
This included:
- evaluating the style and nature of our engagement
- auditing all tasks involved in master trust supervision
- collecting detailed feedback from industry participants
- considering our internal management and organisation
- assessing our internal decision-making processes
- examining the roles of all staff involved in industry oversight
- reviewing the data we request and analyse
This review culminated in a 14-week pilot study where we worked with three large master trusts.
The pilot enabled us to explore our review findings in more depth, and test and develop a new expert-to-expert risk-focused approach to master trust supervision.
Working with specialist teams from each master trust meant that we could test in real time, and in greater detail, how our new approach would work in practice.
How we are transforming
The public expects The Pensions Regulator (TPR) to help deliver good outcomes from pension saving. This is why we are changing the way we work as a regulator, addressing key risks wherever they arise, using a different regulatory toolkit.
We are now moving towards a prudential-style regulation model that places greater emphasis on managing regulatory risks, anticipating potential threats to savers, and addressing risks to the UK economy.
We will better understand industry risks and opportunities by learning more about the business models and products of those we regulate. This will help us assess risks and challenges and set clear expectations for the future.
While compliance with the rules remains the foundation to our regulatory approach, we also recognise that ensuring good outcomes from pension saving means we must enable effective competition and foster innovation across the sector.
More effective interactions
Our goal is to work more closely with the industry so that we can target our regulation more effectively. We want to improve how we interact with those we regulate, whether in person, by phone, or in writing.
Through our expert-to-expert, risk-focused supervision approach, we will ensure we are asking the right questions at the right time to identify risks and challenges and support effective decision-making. The industry will be clear on the outcomes we want to help deliver for savers and why we ask for certain information. We will also listen to feedback and learn from each interaction.
Using real-time data to spot risks
Using digital tools and data, we will be proactive in spotting risks instead of reacting to problems later. We will review data quickly and consistently to understand challenges and opportunities presented by schemes and the wider master trust market at any moment in time.
A scheme-specific approach
We will foster greater collaboration with the industry, with more face-to-face interaction between our respective technical experts, and more scheme-specific conversations to support strategic decision-making.
Each regulated entity is different in terms of its profile, and this means a more nuanced approach to the oversight of regulated entities is called for. Our future engagement and approach to supervision will recognise this.
Insight from our pilot
The pilot confirmed our new way of working will provide us with richer insight into risks and challenges for specific schemes, as well as across the master trust sector.
In particular, the pilot showed that taking a more strategic approach will lead to fewer and more targeted data requests and meetings. This means both our resources and scheme resources are deployed where they are most needed.
The pilot also demonstrated that our new improved interactions present excellent opportunities to influence key decision-making in real time to improve regulatory compliance and saver outcomes.
Participants were extremely positive about our new targeted, expert-to-expert approach commenting:
“We have nothing but positive feedback for it.”
“The supervisors have always been pragmatic.”
“Our expert-to-expert conversations have huge value.”
“Could not agree more with the direction of the pilot.”
The pilot showed:
- targeted, expert-to-expert meetings were more efficient and valuable for better regulatory outcomes
- our new approach facilitated more open and constructive conversations
- problems were solved more quickly
- we were able to be clearer with schemes about our expectations
- we gained better insights into the risks and challenges faced by specific schemes and the master trust sector as a whole
- a potential reduction in the frequency and number of data requests - because data requests will be more specific rather than process-driven
- our new approach led to more robust strategic decision-making
What DC schemes and master trusts can now expect from supervision
Based on findings from our review and pilot, we are now launching a direct expert-to-expert engagement model.
Staffed by our colleagues with expertise across investments, governance, financial analysis and other key commercial skills, our teams will engage with master trusts on an expert-to-expert basis. This approach will help us understand how they operate and uncover regulatory risks and opportunities in the market at large.
DC schemes will be grouped into four segments, each led by a segment lead.
These are:
- monoline master trusts (larger schemes that carry a higher risk to the market)
- commercial master trusts, including those that form part of an insurance offering
- non-commercial (or industry-wide) master trusts and collective DC (CDC) schemes
- single and connected employer DC schemes
Each pension scheme in the monoline and commercial segments will have a dedicated team with experts in:
- financial analysis
- business strategy
- investment
- legal compliance and regulation
The same expertise will be available for the non-commercial master trusts, CDC and single-employer DC segments.
Broadly, schemes with similar risk profiles and challenges will be grouped together in a segment, and each segment will have different levels of engagement.
In line with our risk-focused and flexible approach, we will move schemes to different segments and levels of engagement where appropriate.
We will keep our new approach under review to ensure our interactions and interventions are timely and appropriate and continue to promote collaboration and innovation across the industry, in the interests of savers.