The regulator makes clear in the report that it will continue to take a risk-based approach to the regulation of pension plans and that this will continue to affect all of its activities.
The pensions regulator’s medium term strategy includes:
- strengthening the funding of defined benefit plans
- improving the governance of work-based pension plans
- reducing the risks to members of defined contribution pension plans
“In its first year, the Pensions Regulator’s achievements have included the establishment of a new clearance process for corporate transactions involving employers with defined benefit schemes, issuing statutory codes of practice giving practical guidelines, developing a regulatory framework for the funding of DB schemes and developing an organizational and regulatory approach which is proactive, risk-based and flexible,” said Tony Hobman, the regulator’s chief executive said in a press release.
In regard to plan funding, the regulator plans for DB programs to complete plan-specific funding valuations. Those with deficits will have to agree on recovery plans, which will be based on prudent assumptions for valuing the assets needed to cover the liabilities as they fall due; and an appropriate recognition of what is reasonably affordable for employers.
As far as its goals that rule governance, the regulator is currently focusing on helping trustees to improve their knowledge and understanding, with the emphasis being on education and support through codes of practice and guidance, e-learning and the trustee knowledge and understanding scope guidance.
According to the regulator, during the next three years the main thrust will be on helping the regulated community understand what is expected of it. In the longer term it vows to work to improve the transparency of trustees’ accountability to members.
The risks in relation to defined contribution plans are more diverse than for defined benefit plans and require a different regulatory response, the regulator said in the press release. The regulator also said that the early focus will be on identifying and prioritizing the key risks and helping the pensions community understand what is expected of it.