The Pensions Regulator (TPR) has shared its new corporate plan, highlighting the introduction of the new regulatory funding regime for defined benefit (DB) schemes as a key challenge for the upcoming year.

Noting that the industry is in a "period of change", TPR's corporate plan emphasised that the industry is moving towards a landscape with fewer, larger pension schemes that deliver good outcomes for savers.

It also acknowledged that global instability has continued to fuel UK inflation and a monetary policy response in the shape of increased interest rates over the past year, with the associated cost pressures impacting customers and businesses alike.

This is also true in the pensions industry, as TPR noted that sponsoring employers have had to manage these commitments against increased production costs, while rises in the cost of living have created a challenging environment in which to save.

Given this backdrop, TPR welcomed the shift towards consolidation, arguing that these larger schemes offer the ability to invest across a range of assets in their members' interest and have the scale to offer administrative efficiency and good governance.

TPR noted that there has also been growing concentration of the trustee industry, as mergers and acquisitions across professional pensions companies have made these companies more systemically important for the delivery of good outcomes.

However, the regulator acknowledged that this "rapid" shift will also bring new risks for savers and the economy, with its latest corporate plan therefore outlining its plans to protect savers’ money, enhance the pension system and innovate in savers’ interests.

In particular, it said that the key challenge in 2024-25 will be embedding the new regulatory funding regime for DB schemes while also increasing attention on defined contribution (DC) value for money, good governance and administration.

TPR's long-awaited DB funding code is set to be published this summer, although concerns over the impact of the new regime have persisted, with MPs recently warning that changes are needed to avoid "finishing off" the remaining open DB schemes.

In total, TPR identified 22 priority outcomes in its corporate plan, including work to improve DC value by evolving its supervisory approach in master trusts with a greater investment focus, as well as developing guidance on decumulation; encouraging new models that combine flexible and predictable retirement income streams and supported pathways for savers.

It will also look to raise the standards of data quality, and ensure schemes meet their obligations to prepare for dashboards, as well as pensions administration, by expanding one-to-one relationships with key administrators.

In the DB space, meanwhile, TPR will aim to provide guidance on capital backed journey plans and expedite assessment of emerging market propositions, supporting innovation in DB, as well as embedding the DB funding code and new regulatory approach to DB funding.

Looking further ahead, however, TPR confirmed that it will be increasingly shifting its focus from the DB funding regime, instead focusing on the delivery of the DC value for money framework, as well as tackling deferred small pots and working with industry to develop solutions to support savers into retirement.

TPR said that it also plans to work with DWP and stakeholders to prepare for the changes to auto-enrolment duties set out in the Pensions (Extension of AE) Act 2023, which looked to extend auto-enrolment to lower earners and younger workers.

TPR chair, Sarah Smart, commented: “The pensions market is changing to one of fewer, larger, schemes.

"This presents new risks and opportunities for savers and the economy. This year’s plan demonstrates how we will address these challenges to protect savers, enhance the pension system and support innovation.

“We will encourage innovation by helping trustees support DC savers into retirement and supporting DB models and options for consolidation that protect savers.”

TPR chief executive, Nausicaa Delfas, added: “This plan signals that the market should expect us to engage differently with it in the future.

"Our focus is not just on the fundamentals of driving high levels of compliance, but also working together to enhance the system and support innovation in savers’ interests.

"Internally this will involve investing in our people, developing our digital, data and technology capabilities and embedding our new structure, which aligns with our strategic priorities.”

In addition to the updated priorities, TPR has announced two appointments to its board, naming Andrew Baigent as its new chief operating officer (COO) and Paul Neville as its permanent executive director of digital, data and technology, having been interim executive director of DDaT since October 2023.

Baigent, a chartered accountant and former finance director with experience in leading major digital change programmes, will be a member of TPR’s Board and its executive committee from 4 June.

Commenting on the appointments, Delfas added: “Pensions are at a moment of great change, and we are changing too, becoming more market-facing and outcome-focused.

"Andrew brings a wealth of experience managing complex organisations. This will be critical in making sure we continue to evolve and align our resources and talent behind initiatives that really deliver for savers.

“Paul has already made a positive impact at TPR helping us transform towards a data-led and digitally enabled regulator. His permanent appointment will help us deliver in the interest of pension savers now and in the future.”

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