The Pensions Regulator (TPR) has published its new compliance and enforcement policy for collective defined contribution (CDC) pension schemes, which sets out its risk-based regulatory approach and how providers can expect it to supervise them.
Under new powers, TPR can issue risk notices when it is concerned a CDC pension scheme is not being effectively run, governed or funded.
TPR will use risk notices where it wants to see trustees planning corrective action, which they must then deliver. A risk notice can be issued when it has concerns that a scheme is likely to breach its authorisation criteria. It can be used instead of – or in advance of – more serious powers, including de-authorisation.
TPR’s Executive Director of Market Oversight, Neil Bull said: “We support innovation in the market that benefits savers and believe CDCs offer trustees and employers a further option to provide members with a pension. But we expect savers to be protected. We are excited about the Government’s commitment to widening CDCs to multi-employer schemes.”
A CDC scheme must be authorised by TPR to operate. Once up and running it will be supervised by TPR, under five key operating principles, as outlined in this published guidance under ‘our expectations’.
TPR will supervise CDC schemes in a collaborative and proportionate way. Its goal through supervision is to be clear on the outcomes the regulator seeks for savers and to prevent compliance breaches or harms to savers before they occur.
As part of supervision, TPR will send CDC scheme trustees an annual evaluation regulatory report summarising:
- its evaluation of the scheme
- its intended supervisory intensity
- the key risks observed
- actions it expects the scheme to take
- its planned engagement timetable
TPR will keep the intensity (frequency and detail) of its supervision of CDC schemes under review. This will be determined primarily by its assessment of the scheme’s level of risk.
If those operating a scheme do not actively co-operate and engage with TPR, it may de-authorise the scheme.
