UK regulator sets out three-year plan as budget doubles for auto-enrolment

The Pensions Regulator (TPR) has set out its three-year plan and resource allowance until 2018 as the body plans a rapid jump in expenditure to cope with auto-enrolment.

The UK body, generally funded through a levy on pension schemes, with state support for auto-enrolment, will spend £136.8m (€186m) on regulation in 2017-18 compared with just £62.6m the current year.

However, while the regulator is set to increase expenditure down the line, it has reduced its planned expenditure for the coming 2015-16 year from £84.8m to £76m.

The Brighton-based organisation also under-spent in the 2014-15 year, which ends this month, after making delays in staff recruitment due to “restructuring” last summer and over-estimating on provisions and contingencies for auto-enrolment.

For 2015-16, the organisation will see its headcount increase from 452 to 499.

However, the number currently being employed is significantly lower than its forecasts last year, which said it would employ 583 staff.

Over the next year, the regulator said it would continue its focus on ensuring smaller companies complied with their auto-enrolment duties.

However, it would also have a significant focus on revising its Defined Contribution (DC) Code.

This is due to the regulator’s adapting to the Budget freedoms, which will see a shift in the way people access their pension savings at retirement, with compulsory annuitisation no longer applicable.

It is also expecting to create the regulatory environment for the 75 basis point charge cap that will be in place for auto-enrolment default investment funds in trust-based DC schemes.

TPR said it would also monitor the defined benefit (DB) to DC transfer market, which could see an increase in activity due to the Budget freedoms, and intervene where appropriate.

Chief executive Lesley Titcomb said the organisation’s work would be dominated by the DC at-retirement market transformation, evolving scam models and risks within the DB market.

“During a time of such significant change, it is important the regulator be seen as an authoritative, trusted voice within the pensions sector,” she said.

“The corporate plan sets out how we will provide trustees, employers and advisers with the information they need to see these major changes through.

“Where we take regulatory action, I want that to be transparent and for our actions to be understood.”

TPR chairman Mark Boyle added: “It is vital we reach all our audiences, remain on top of market developments, anticipate future risks and work collaboratively with government departments and industry bodies to ensure the overall retirement system runs smoothly.”

Over the next three years, the regulator will also implement its new DB Code of Funding that it created to implement a new statutory objective.

The code was widely accepted among the UK industry and sees the implementation of a new, holistic, risk-based model of DB funding.

In October last year, Boyle said TPR was working to create guidance for DB and DC trustees, and that it would assert its presence in the European regulatory agenda.