The Pensions Regulator (TPR) has announced plans to extend its regulatory approach with professional trustee firms, with plans to form new relationships with the 10 largest professional trustee firms before Christmas.

Speaking exclusively to Pensions Age, TPR executive director of market oversight, Neil Bull, pointed out that the professional trustee market has seen significant growth in recent years, with industry research revealing that professional trustees now make up over half (51 per cent) of the market.

“That has made quite a big change,” he said, noting that, at the same time, the number of professional trustee firms has fallen, with around 10 professional trustee firms now “dominating” the market.

Indeed, LCP’s research revealed that five professional trustee firms now hold 90 per cent of the DB assets covered by the survey.

“That does lend itself new opportunities for sort of expertise and additional skills,” Bull added, “but it also poses a whole range of risks as well.”

Bull continued: “So I’m pleased to announce that we're going to extend our regulatory approach to create new relationships with the 10 largest professional trustee firms.

“That’s going to focus on understanding much more about how their businesses work, the risks and opportunities that go with that, as well as any conflicts, perceived or real.

“That might cover things like the ownership structure of those professional trustee firms, the skills and experience they have, how they're able to cover that important diversity angle within equality, diversity and inclusion (EDI), as well as fees.

"I think we'd be failing as a regulator if we didn't have a a really good look at that emerging area."

The timeline for this work is “quite short”, Bull acknowledged, as TPR is looking to reach out to those 10 professional trustee firms by Christmas this year.

But Bull said he expects professional trustee firms to be receptive to the regulator's new engagement efforts and to engage with TPR with “candour and honesty”.

“Because at the end of the day, we're trying to protect savers and they are as well, so we do share a common purpose in that. We're not expecting any difficulties,” he said.

The growing role of sole trustees will also be considered as part of this work, as Bull noted that this is another area of the market that has seen “huge growth” in recent years.

"This started from a lower base than the traditional professional trustees, but it's the same 10 firms that will be most actively involved in sole trusteeship - so if we can engage directly with them, then we'll be able to get a really good handle on the sole trustee side and that poses different risks and opportunities."

Once this initial “discovery phase” is completed, TPR will look to feed any insights from its work back into the market, to highlight any areas of concern.

"And I think if we do that, then we'll be doing a good service to the savers that we're trying to represent," he said.

“All of that really is part of how we're rebranding our supervisory approach, so rather than just targeting the trustees when we see areas of risk or opportunity that come up, this professional trustee piece will allow us to engage directly with those firms, rather than through the individual trustees, as we did before.”

Indeed, Bull said that this work is part of a broader shift from the regulator, as TPR is looking to become more focused on outcomes, as opposed to focusing only on compliance.

"That's not to say that compliance isn't important, " he clarified, "but we don't want to be a regulator that says 'if everybody just complies with their duties, then we're done', we want to look at the outcome.

"That also kind of ties in with our strategy of looking at fewer, larger systemically risky schemes, and that allows us to focus in much more carefully, using data to identify the patterns and pockets of risk are. The professional trustee piece is a good example of that."

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