The Pensions Regulator (TPR) has confirmed that it will be changing its approach to supervision and its regulation of the defined contribution (DC) market to make master trusts the "gold standard" in pension provision.

TPR announced that DC master trusts will be supervised differently going forward, in order to help identify market and saver risks sooner and enhance the pensions system.

The shift in approach will see schemes split into four segments of supervision: monoline master trusts, commercial master trusts, non-commercial master trusts and collective DC schemes, and single and connected employer DC schemes.

Each segment will have tiers of engagement based on the specific risks they present to market and saver outcomes.

As part of the new regime, every scheme in the monoline and commercial segments will be allocated a dedicated multi-disciplinary team of named individuals with expertise in financial analysis, business strategy, investment and governance.

While driving high levels of compliance will still be a priority, TPR said that it is also seeking open and transparent dialogue to help schemes capitalise on new opportunities which benefit savers.

The new approach was confirmed following a successful 14-week pilot by the regulator, as part of which it worked with three large master trusts to gauge the best approach for the DC and master trust market.

According to TPR, the pilot showed that targeted, expert-to-expert meetings led to better regulatory outcomes, facilitated more open and constructive conversations and saw problems solved sooner.

TPR said that the new approach also allowed it to be clearer with schemes about its expectations, leading to more robust strategic decision-making, and its interactions gave better insights into scheme-specific and sector-wide risks and challenges.

In addition to this, it suggested that the more strategic approach could see fewer and less frequent, but more targeted data requests to schemes cutting regulatory burden.

TPR director of DC and master trust supervision, Sam Grutchfield, said: “The challenge of the last decade was getting people saving. The challenge of the next is to make sure pensions deliver real value for money.

“With a more strategic approach to supervision, we can make effective, scheme-specific interactions using real-time data to spot scheme-level and wider risks sooner.

“There will be fewer, but more targeted data requests, and more focused, expert-to-expert meetings, allowing us to influence key decision-making in real time improving regulatory compliance and saver outcomes.”

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