Our latest insight reports on TPR’s introduction of an oversight framework for professional trustees, an increase in the use of its enforcement powers for breach of the value for members requirements and the latest on possible legislative change for the PPF.
The Pensions Regulator (TPR) round-up
TPR to introduce oversight framework for professional trustees
On 2 April 2025, the Pensions Regulator (TPR) confirmed that, as part of its shift towards a more prudential form of regulation, it will be introducing an ‘oversight framework’ for professional trustee (PT) firms. This follows its late 2024 initiative in which it liaised with the eleven largest trustee firms to help it identify good practice, risk areas, ways to improve outcomes and ensure compliance.
The PT sector has significantly expanded in recent years with over half of UK schemes having a professional or sole trustee and TPR has identified a need to engage more closely with the market in the interests of savers and effective governance.
“Between them, just 10 firms govern more than a trillion pounds of savers’ retirement income.
As part of our new risk-based and outcome-focused approach to regulation, we are extending our engagement with these firms to identify and mitigate any risks to pension savers.”
Market oversight report
TPR’s Market oversight: Professional trusteeship report outlines three key insights from the 2024 engagement exercise together with five areas which will come under the oversight framework.
| Insight | Detail |
|---|---|
| Different structures | There are varying business models and service offerings including several firms that also provide add-on services such as administration and professional advice. This brings both efficiencies but also the possibility of conflict risk. |
| Back office support | Certain PTs employ ‘back office’ support such as governance – this provides expertise but also possible accountability and quality assurance issues. |
| Expansion | Some firms are expanding rapidly increasing the availability of services but also raising possible issues around standards and entry criteria. |
| Future engagement area | Detail |
|---|---|
| Employer relationship | and how this is managed by PTs. |
| Profit and remuneration model | and whether it impacts decision-making, for example, are services diminished to save costs? |
| Sole trustee | why this model, is it influenced by cost and what are the internal controls? |
| In-house advisers | and whether this adversely affects decision-making or advice. |
| Scheme decision-maker | how are decisions made and whether they are made by those with appropriate knowledge and understanding with suitable delegation. |
Next steps
TPR’s Market Oversight team will set up supervisory relationships with PTs this summer with a view to all firms being overseen by the end of 2025. Data collection will form part of the engagement process.
Once it has assessed risk, TPR will set out its expectations and what mitigations are needed to deal with risks. It may also use its powers should a firm not meet TPR’s expectations on a significant risk. Good practice will also be shared.
PT firms will find TPR’s current thinking on its engagement to date useful to help prepare themselves for the upcoming initiative and any areas TPR may identify as requiring further consideration in the interests of members and effective delivery of professional trustee services.
Increased use of enforcement powers for poor governance of DC schemes – consider if DC savers need to be in bigger scheme
We reported back in September that TPR had used its compliance and enforcement powers ten times between January and June 2024 for breaches of the more detailed annual value for members (VfM) assessment that specified (smaller) defined contribution (DC) schemes have to complete. TPR’s July to December 2024 compliance & enforcement bulletin details an upswing in the use of its VfM enforcement powers during this period with nineteen schemes receiving penalties meaning total fines have now reached £97,750.
TPR said: “All savers deserve to be in schemes with good governance. Where trustees cannot compete with the best in the market, either in terms of value or governance, they should consider whether a transfer to a better-value scheme and winding up is what is best for their savers.”
Pension Protection Fund (PPF): possible legislative change and strategic plan
The Pensions Minister’s 20 March 2025 written parliamentary answer on what measures the forthcoming Pension Schemes Bill may contain on the PPF notes that the Government “will continue to consider whether there are further opportunities for change in the pensions compensation system”.
This most likely refers to the possibility that the PPF’s surplus could, with legislative changes, be used to increase compensation levels – the most likely candidate should this be the case being indexation of pre-1997 pension rights (which is “firmly on the Government’s radar”) and possibly a change to the 90% compensation level for those members below normal pension age as at the assessment date. See our insight for details of current parliamentary work on indexation of pre-1997 pension – the Government’s response is expected in the coming weeks.
The PPF’s press release and strategic plan for 2025-28 refers to the time being right for legislation review, referencing current liaison with the Government on both potential compensation changes and the levy flexibility changes that it is anticipated the Pension Schemes Bill will include, allowing the levy to be reduced further than it presently can, possibly down to zero. The PPF notes that it has now been protecting defined benefit (DB) members for 20 years and “continues to act as the ultimate ‘backstop’ for around £1tr in liabilities”. Its goals for the next three years include to “act in the interests of those it protects; adapt and evolve; build on its strong foundations; and help shape positive change in the pensions industry”.