Corporate Plan 2014-2017

Corporate Plan 2014-2017 May 2014

Contents Foreword 3 page Executive summary 5 Introduction 10 The Pensions Regulator The Corporate Plan Other public bodies concerned with pensions Regulatory approach 12 Statutory objectives Risk Educate, enable, enforce Key audiences Making complaints Performance evaluation The pensions landscape: issues and risks 18 Landscape Issues and risks Strategic plan 2014-2017 26 Corporate priorities: To promote good governance and administration of work-based pension schemes To promote security and good outcomes for members of work-based pension schemes To promote employer compliance with their pension responsibilities To improve our organisational efficiency and effectiveness Business plan 2014-2015 41 Workload assumptions Key performance indicators Resource summary Appendix 1: Risk appetite statement 56 Appendix 2: Governance 59 2

Foreword As the government makes firm progress implementing the pension reforms around automatic enrolment, and through new proposals on quality standards, automatic transfers and decumulation, the work-based pensions landscape continues to evolve. Many of these new initiatives will have implications for our role and the way in which we carry out our duties. Since The Pensions Regulator (the regulator) was established almost a decade ago, our core remit to protect the benefits of members of work-based pension schemes and to reduce risks to the Pension Protection Fund (PPF) has been steadily augmented. In 2008 we were given responsibility for applying the automatic enrolment programme to over 1 million employers and, from April 2015, we will have additional duties in respect of the governance and administration of public service pension schemes 1. This year, we expect to acquire a new statutory objective in relation to defined benefit (DB) scheme funding. The new objective makes it explicit that our approach to regulating DB funding should seek to minimise any adverse impact on employers sustainable growth plans while balancing the requirements of our existing objectives. Our revised DB code of practice and funding policy, to be published later this year, will set out how we will incorporate the new objective into our regulatory approach. In particular, we will encourage trustees and employers to work collaboratively to use the flexibilities in the system appropriately to best suit the needs of both the scheme and sponsor. Viewed collectively, these developments have added significantly to the complexity and scope of our role, and inevitably have an impact on our approach. The wide-ranging focus areas are all at different stages of maturity extending from initial policy development through to case management and policy review. Therefore, our new responsibilities have not only increased the breadth of our task, they have also generated the need for us to engage with an increasingly diverse audience. Our central focus remains the application of our operational approach to educate and enable those with pension responsibilities, such as trustees and now employers, and only where appropriate to undertake enforcement action. As a risk-based regulator, we formulate our strategy and allocate our resources based on an assessment of the risks to achieving our statutory objectives. Our role is not to address every issue or to eliminate all risks to work-based pension schemes, but to strategically select cases and mitigate risks where our intervention will be most effective. 1 In this Corporate Plan, the term public service pension scheme refers to the schemes established under the Public Service Pensions Act 2013 and the Public Service Pensions Act (Northern Ireland) 2014. Although public service schemes are established as DB schemes primarily, references to DB schemes in this plan refer to private trustbased DB schemes only. 3

Foreword We are changing the cadence of our engagement across the range of our work to be proactive rather than reactive, to provide an authoritative voice and to share our knowledge and expertise in ways that promote better outcomes. The recent publication of our research into the costs of administering DB schemes to help trustees and employers compare the efficiency of their schemes among peers is an example of this. We plan to undertake a similar study later this year in respect of defined contribution (DC) schemes. We intend to place greater store in activities that help those with pension responsibilities to ask the right questions and so help themselves to do the right thing. Importantly, looking ahead and as we mature as an organisation, we intend to place an increased emphasis on our organisational efficiency and effectiveness. We will also review the way in which we operate, including the timing of our interventions and the way we measure our performance. As this plan will demonstrate, we are starting a journey to ensure that the measurement of our actions clearly relates to the achievement of the right long-term outcomes. The three years of this plan will cover our next public body triennial review and the Department for Work and Pensions (DWP) review of automatic enrolment. We were pleased to receive recognition of our strong governance arrangements as part of the January 2014 triennial review of pension bodies and we will look to build on this in preparation for the next review in 2016. We will continue to inform the regular DWP-led evaluation reports in the run up to the full review of automatic enrolment in 2017, to which we also hope to make a helpful contribution. We are sure that future action taken by our government, the EU, pension providers, advisers, scheme members and many others will ensure that our task evolves further. However, through continuing to work closely with our sponsoring department the DWP, other departments and financial regulators, and drawing on the growing expertise of the team at the regulator, we believe that we are well placed to rise to new challenges. Mark Boyle Chair, The Pensions Regulator May 2014 Stephen Soper Interim chief executive, The Pensions Regulator May 2014 4

Executive summary The Pensions Regulator is the UK regulator of work-based pensions. We are a non-departmental public body established under the Pensions Act 2004 2. Regulatory approach We have a range of functions directed by six statutory objectives (see page 12) including our new objective, in relation to DB funding only, to minimise any adverse impact on the sustainable growth of an employer 3. As a risk-based regulator, we formulate our strategy and allocate our resources based on an assessment of priority risks in the context of our statutory objectives. We focus on those areas where our actions are likely to have the greatest impact. We aim to achieve compliance by educating and enabling those who have responsibility for pensions and by taking enforcement action where it is appropriate. The pensions landscape: issues and risks Both the memberships and assets of private pensions are currently concentrated within DB schemes, where 74% of assets (approximately 1 trillion) are held and which account for 12.7 million memberships. There are also currently more than 5 million memberships of work-based DC pensions. By 2018, the DWP estimates that there will be between 6 and 9 million people newly saving into pension schemes as a result of automatic enrolment. We believe most of these members will be in DC schemes and expect the assets currently in these schemes (around 400 billion) to more than double over the next 15 years. The government s strategy for work-based saving aims to increase the amount people are saving in pensions and the amount they receive, enable industry innovation, increase transparency and confidence, and ensure the UK system is sustainable. In particular, the pensions reforms announced in the March 2014 Budget are designed to boost freedom and choice for savers on retirement. Risk is a feature of pension provision. Although we cannot guarantee that all risks to member benefits are removed, we seek to ensure that members, trustees and others understand and manage the risks facing their schemes. 2 In this Corporate Plan, references to the law that applies in Great Britain should be taken to include corresponding legislation in Northern Ireland. 3 This objective is due to come into force in July 2014. 5

Executive summary Our research and analysis indicates a number of areas of concern in respect of governance and administration standards, particularly in smaller DC and DB schemes. Addressing these risks in DC schemes is especially important given that the vast majority of the schemes used for automatic enrolment will be DC schemes, where poor governance can more directly affect member outcomes. Key current risks relating to automatic enrolment include those around employers preparation for their staging date, especially in the case of small employers, and the potential for late payments to schemes. For DB schemes, the main risks relate to under-funding. Although the economy is beginning to recover, affordability remains an issue for many employer sponsors. A further key risk to pension schemes of all types is the growing level of funds inappropriately released through pension liberation or otherwise misused. Strategic plan 2014-2017 For the period of this Corporate Plan, we have adopted four corporate priorities to guide our strategy (see page 27). They are derived from our statutory objectives and reflect the risks and challenges we expect to see over the next three years. To promote good governance and administration of work-based pension schemes We seek to improve scheme governance and administration by ensuring that those who govern schemes are aware of, understand and engage with the obligations and the standards set out in law and in our regulatory material. Our research and analysis indicates that standards in some schemes remain inadequate and, within the three years covered by this plan, we will review our strategic approach to increasing the quality and skills of those who govern schemes. In respect of DC schemes, we will continue to raise awareness of the core messages in our DC regulatory strategy, code of practice and guidance around good governance and administration, and promote compliance with the government s new quality standards. Regarding DB schemes, we will help trustees to gain an understanding of the overall risk facing their scheme by encouraging them to consider the areas of employer covenant, funding plans and investment strategy in the round rather than in isolation of each other. 6

Executive summary From April 2015, we will have an extended role in respect of public service pension schemes, with responsibility for regulating their governance and administration but not their funding. We will publish our strategy and code of practice for public service pension schemes in autumn 2014. We will also consult on a revised trustee knowledge and understanding code of practice and update the existing Trustee toolkit 4. Where we believe member benefits are at risk due to poor governance, we will consider taking enforcement action. To promote security and good outcomes for members of work-based pensions Our focus is to support the adequate funding and security of DB schemes, and help DC schemes to achieve good member outcomes. For DB schemes, we will employ a suite of risk indicators to inform our approach to assessing risk and use our annual funding statements to set out our views in relation to the risks facing schemes with effective valuation dates that year. To support employer sponsors to fulfil their obligations in respect of DB funding and also to achieve our new statutory objective to minimise any adverse impact on their sustainable growth, we will encourage trustees and employer sponsors to work together closely. To support DC schemes to deliver good outcomes, we will promote the practical guidance set out in our code of practice on risk management, investment (especially in default funds), conflicts of interest, adviser appointment and administration. We will also work with the Institute of Chartered Accountants in England and Wales (ICAEW) to support implementation of the voluntary assurance framework for master trusts and consider whether to build on this through voluntary assurance initiatives for group personal pensions and administrators. The Financial Conduct Authority (FCA) regulates providers of work-based DC personal pensions and we will support it in this task. The security of member benefits is increasingly threatened by pension liberation activity, potentially involving deception. Responsibility for tackling this issue rests with a number of government departments and agencies. Over the period of this plan, we will continue to raise awareness of the risks associated with pensions scams and pension liberation among those who govern schemes and work with government and industry partners to mitigate those risks. We will take a strategic approach to case work in order to tackle those liberation models and pensions scams that are new and pose a systemic risk to member benefits. We will continue to monitor work-based DC and DB schemes through scheme return analysis, thematic reviews and individual scheme risk assessment. Where appropriate, we will consider taking enforcement action. 4 Our online learning resource, the Trustee toolkit, which encapsulates the basics of trustee knowledge and understanding, is available free of charge to all trustees. 7

Executive summary To promote employer compliance with their pension responsibilities We will support employers to comply with their automatic enrolment duties and the employment safeguards by prompting them to prepare effectively and achieve particular milestones. We will also raise awareness and understanding through media campaigns, speaking engagements, webinars and industry liaison events. Additionally, to help ensure that employers receive well-informed and comprehensive advice as well as appropriate products, we will work with the external adviser market to improve knowledge and understanding around the legal requirements on employers. Given that DC schemes have, to date, been most employers choice of provision for automatic enrolment 5 and our expectation that this trend will continue, we will help employers to select quality schemes that, where relevant, meet voluntary assurance standards. We will also work with employers and providers to support the timely flow of contributions to schemes. We recognise the significant role that employer sponsors play in respect of DB schemes, and we will continue to provide tailored guidance to help them comply with their obligations. We will also engage with those schemes that present the greatest risk to member benefits. In line with our operational approach, where education and enablement activities are not successful or appropriate, we will consider taking enforcement action. To improve our organisational efficiency and effectiveness To ensure regulatory resources and activities are targeted where they can help us to meet our corporate priorities and statutory objectives, we are placing the pursuit of greater efficiency and effectiveness at the heart of our three-year plan. This includes the following elements: adopting a programme of continuous efficiency gains reviewing our operating model to enable us to fully utilise our skills and resources reviewing our approach to the performance management of our staff including measures to ensure the workforce can be deployed flexibly enhancing our approach to corporate planning, resource management and performance evaluation upgrading our core IT systems, including case management and document management. 5 Within the private sector. 8

Executive summary Additionally, we will continue to focus on the effective governance of strategic, operational and reputational risks, and develop our use of digital media. Business plan 2014-2015 Details of our workload assumptions for 2014-2015, including our estimated caseload, are set out on pages 42-45. We use key performance indicators (KPIs) as annual measures of regulatory interventions. We also monitor key outcomes on schemes, individuals and employers. Our KPIs are set out on pages 46-50. Pages 51-55 provide information on the resources required to meet our statutory objectives and corporate priorities during 2014-2015. The funding of regulation is derived from two main sources: a grant-in-aid from the DWP which is recoverable from a levy on pension schemes and a separate grant-in-aid from general taxation. This arrangement gives rise to two separate budget heads: the levy budget and the automatic enrolment budget. We have controls in place to ensure there is no cross-subsidy between the two streams of funding. The levy budget for 2014-2015 is 37.4 million and the automatic enrolment budget for 2014-2015 is 40.4 million. As we have identified a need for substantial investment in IT reflecting a long period of under investment and a significant increase in both the volume and complexity of our work, we are also in discussion with the DWP in relation to additional funding. Subject to the approval of future business cases, in 2014-2015 an initial 7.4 million tranche has been set aside by the DWP to start the process of essential IT infrastructure replacement. This funding is over and above the costs set out in this Corporate Plan and will be drawn down from the DWP following approval of the individual business cases. We are placing the pursuit of greater efficiency and effectiveness at the heart of our threeyear plan. 9

Introduction The Pensions Regulator is the UK regulator of work-based pensions. We are a non-departmental public body established under the Pensions Act 2004. Our sponsoring body is the DWP and Parliament sets the legal framework within which we regulate. We are responsible for regulating occupational DB schemes and occupational DC schemes, and for regulating limited aspects of work-based personal pensions. We are also tasked with maximising employer compliance with the employer duties and safeguards related to automatic enrolment into pensions. From April 2015, we will have an extended role in respect of public service schemes, with responsibility for regulating their governance and administration but not their funding. The Corporate Plan The Corporate Plan sets out our regulatory approach, the pensions landscape, our strategic plan for 2014-2017 and our business plan for 2014-2015. Regulatory approach This section outlines our statutory objectives; risk-based approach; operational approach of educate, enable, enforce; key audiences; making complaints; and performance evaluation. The pensions landscape: issues and risks This comprises an overview of the current landscape and a summary of the key issues and risks. Strategic plan 2014-2017 This section sets out our corporate priorities and outlines our three-year strategic plans to achieve them. Business plan 2014-2015 The financial year 2014-2015 is covered here, comprising information on our workload assumptions, our KPIs and a summary of the resources we require to deliver our plans. 10

Introduction Other public bodies concerned with pensions In addition to central government departments, in particular the DWP, HM Treasury (HMT) and HM Revenue and Customs (HMRC), the regulator works alongside a number of other public bodies which have responsibilities regarding pensions. These include: Pension Protection Fund (PPF): The main function of the fund is to provide compensation for members of eligible DB schemes where the sponsoring employer becomes insolvent and the scheme is underfunded The Pensions Advisory Service (TPAS): TPAS provides information and guidance to members of the public on all pension matters, covering state, company, personal and stakeholder schemes Pensions Ombudsman: The Ombudsman has powers to decide on pensions complaints that affect individual members. It can also consider some issues from trustees or managers of pension schemes and participating employers European Insurance and Occupational Pensions Authority (EIOPA): The EIOPA is an EU authority set up to promote supervisory convergence and coherent application of regulatory standards across the EU, with a view to improving the functioning of the internal market for insurance and pensions Financial Conduct Authority (FCA): The FCA is the regulator responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the PRA. This includes supervising the establishment, operation and winding-up of personal pension schemes Prudential Regulation Authority (PRA): The PRA is the prudential regulator for deposit-takers, insurers and designated investment firms. Some PRAauthorised firms provide work-based pension schemes to their employees and ex-employees, and some also offer financial products and services in support of work-based pension schemes Government Actuary s Department (GAD): GAD provides actuarial advice to the government and to a number of UK occupational pension schemes, including some of the largest pension schemes in the country. In particular, it advises many public service pension schemes, including the schemes for teachers, the National Health Service and the armed forces Money Advice Service: The Money Advice Service is an independent service set up by the government to help members of the public to manage their money, including retirement decisions. 11

Regulatory approach The regulator operates under statutory objectives set out in the Pensions Act 2004 6. These guide the exercise of our powers which are derived from a range of legislation dating from 1993 to 2014. Our statutory objectives are: 1. To protect the benefits of members of occupational pension schemes 2. To protect the benefits of members of personal pension schemes where direct payment arrangements are in place 3. To reduce the risk of situations arising which may lead to compensation being payable from the PPF 4. To promote, and to improve understanding of, the good administration of work-based pension schemes 5. To maximise employer compliance with employer duties and the employment safeguards 6. In relation to DB scheme funding only, to minimise any adverse impact on the sustainable growth of an employer. In undertaking our work we take account of the Regulators Code 7 and the principles of good regulation set out in the Legislative and Regulatory Reform Act 2006. That is to be: proportionate, accountable, consistent, transparent and targeted (PACTT). We track and evaluate our performance against these principles. We also operate within other relevant legislation, including the Human Rights Act 1998 and the Data Protection Act 1998. 6 As amended by the Pensions Acts 2008 and 2014. 7 This replaced the Regulators Compliance Code and it came into force in April 2014. 12

Regulatory approach Risk As a risk-based regulator, we formulate our strategy and allocate our resources based on an assessment of priority risks in the context of our statutory objectives. We categorise the risks we identify in terms of the threat they pose, the extent to which we can mitigate them and the regulator s willingness to accept risk. We focus on those areas where our actions are likely to have the greatest impact. Our risk appetite statement (see Appendix 1 on pages 56-58) is set and reviewed annually by the Board. It outlines how we balance risk and opportunity in pursuit of achieving our corporate priorities and statutory objectives. This forms a key element of our governance and reporting framework, and its use and effectiveness is monitored regularly by our Audit and Risk Assurance Committee. It also provides further information on how we categorise different types of risk, including external, operational and reputational. Through our information gathering, research capability and analysis of operational data and intelligence, we monitor the regulatory landscape to identify risks and emerging trends. Where appropriate, we proactively intervene to prevent these from crystallising or to minimise their effect. We work alongside other regulators and government agencies to share information on good practice and on risks of mutual interest 8. We do this through both formal, regular engagement and where required by particular circumstances. How risk links to our strategy, operations and performance measurement Identifying key risks in the pensions landscape (see pages 18-25) informs the basis for our regulatory strategy. To establish the main focus areas for our strategy, we analyse the key risks in the context of our statutory objectives and our expectations on how the risks will evolve over time. Subsequently, we determine which risks lie within our power to influence and what operational activities will enable us to effectively monitor or mitigate those risks. This, in turn, directs the allocation of our resources. Our KPIs (see pages 46-50) also reflect our key risks and provide measures of our regulatory performance in mitigating them. 8 Subject to legal constraints. 13

Regulatory approach Educate, enable, enforce Educate, enable, enforce is the operational approach we take to implement our regulatory strategy. Educate and enable Our programme of regulatory communications is focused on, first, educating our key audiences with regard to their obligations and our expectations. Secondly, we produce a range of materials and tools intended to enable trustees, employers and pension scheme managers, among others, to comply with their obligations. We use communications to drive behavioural change and use different channels over the course of our communications programmes. We evaluate our impact at each stage to monitor the effectiveness of our interventions. Our messaging evolves through the following phases: Awareness Understanding Engagement Action (the regulatory outcome). We use our media and stakeholder channels to raise awareness, and our web and direct channels to increase understanding and engagement. In keeping with the government s digital by default strategy, our primary point of contact is via our website at www.tpr.gov.uk. All of the materials we produce, including codes of practice, guidance, regulatory statements, reports under section 89 of the Pensions Act 2004 9, and a variety of web tools, are available online. 9 Under s89 of the Pensions Act 2004 the regulator may, if it considers it appropriate to do so in any particular circumstances, publish a report of the consideration given by it to the exercise of its functions in relation to those circumstances and the results of that consideration. We produce s89 reports to educate and inform our stakeholders and with a view to increasing our regulatory transparency, among other matters. 14

Regulatory approach Enforce Where appropriate, we have a number of enforcement options available to us. Our core powers include: requiring employers to automatically enrol eligible job holders into a pension scheme and comply with their other employer duties and the employment safeguards requiring employers to fulfil their role in maintaining the flow of contributions into pension schemes in a timely manner requiring employer sponsors to put compliant funding plans in place for their DB pension schemes, and where there has been avoidance requiring the employer sponsor and those companies associated with the employer sponsor to support the scheme enforcing standards of trustee governance, including the appointment and removal of trustees, and securing assets where we consider they have been misused or misappropriated. Decisions to exercise our regulatory powers are taken by either those members of staff with delegated authority or, where powers are reserved 10, by the Determinations Panel, a committee of the regulator. Decisions can be referred to the Upper Tribunal. 10 The Pensions Act 2004 requires that certain decisions made by the regulator must be made by the Determinations Panel. The panel is a committee of the regulator but is separate from the case teams to ensure it can make its decisions independently and impartially, considering all the evidence before it from each party. 15

Regulatory approach Key audiences Each of the groups set out below has very different responsibilities and needs, and we tailor our communication tools and guidance accordingly: Trustees There are around 100,000 pension scheme trustees and they are pivotal in protecting member benefits and delivering good member outcomes. Many are lay persons, which sometimes introduces issues of capability and capacity. Our main focus for trustees is to provide a range of information to assist them throughout the lifecycle of a scheme. Employers Employers have a critical role in the establishment of work-based pension provision and in maintaining contributions to their scheme. Under their automatic enrolment duties, which commenced in 2012 for the largest employers, approximately 1.35 million employers must select a pension scheme which meets the qualifying criteria 11 and pay contributions to that scheme. Employers also have a key role to play in supporting the DB schemes they sponsor and in choosing a good DB or DC scheme for their workers. We provide guidance and tools to help employers comply with their obligations. Public service scheme managers and pension boards The law requires that a scheme manager must be identified for each new public service scheme to be responsible for managing or administering the scheme and provide for the establishment of a pension board to assist the scheme manager. Our educational focus is to build a new toolkit to help them meet their responsibilities. Intermediaries and payroll providers Intermediaries and payroll providers are third parties who offer advice, information and services to employers and trustees in relation to pension provision or, in the case of employers, their automatic enrolment obligations. They have a high level of influence over employer and trustee behaviour and play a key role in supporting them with their existing and new duties. We work with representative stakeholder bodies to provide them with tools to assist their members in understanding the evolving regulatory environment. 11 See our interactive beginner s guide to automatic enrolment at www.tpr.gov.uk/tools 16

Regulatory approach Pensions and administration providers Pensions and administration providers should deliver products that enable members to receive a good outcome from their savings. We will continue to work with them closely to promote the provision of quality schemes and to improve standards of administration, including record-keeping. Individuals We have direct contact with individuals on a number of issues. These include whistleblowing, pension liberation, member charges, retirement decisions and maintaining contributions. On other matters, we work closely with a range of public bodies, including the DWP, TPAS and the Money Advice Service (see page 11), to provide guidance and information to individuals and to raise awareness of important pensions issues. As automatic enrolment moves forward, we will continue to review our materials aimed at small and micro employers, including how we can support them in communicating with their individual employees. Making complaints If those we regulate or related individuals are dissatisfied with the way in which we have made decisions or the service they have received from the regulator, we operate a two-stage formal complaints process 12. We can deal with any complaint about the way in which we have carried out, or failed to carry out, our role. This includes complaints about mistakes or lack of care, unreasonable delay, unprofessional behaviour, bias or lack of integrity by the regulator and its staff. The Parliamentary Ombudsman can also investigate complaints against the regulator. Normally the Ombudsman will only accept a case if our internal complaints procedure has been exhausted. Performance evaluation We seek to continually improve our performance. The Board and senior management team review the regulator s performance on a regular basis and take action to ensure we achieve our targets. Where necessary, the senior management team makes recommendations to the Board regarding emerging risks to achieving our Corporate Plan and how to resolve them. We also set KPIs which are reviewed and updated annually. Our 2014-2015 KPIs are set out in this plan on pages 46-50. 12 View full details at www.tpr.gov.uk/ complaint 17

The pensions landscape: issues and risks Landscape Our powers apply to both private pensions and public service pensions. We are concerned with four main types of private work-based pension products: DB (trust-based), hybrid (trust-based), DC occupational (trust-based) and DC work-based personal pension (contract-based). The work-based pensions landscape, summarised in the table below, also includes public service schemes where the local government pension schemes (LGPS) are funded but the others operate on a pay as you go basis 13. Private schemes Public service schemes Current landscape DB Hybrid DC trust DC contract Unfunded LGPS Schemes 5,530 1,380 37,690 2,020 106 101 Memberships 7.8m 4.9m DB 1m DC 1.7m 2.7m*** 8m 5m Assets 1,118.5bn* 270bn** 115bn** N/A 211bn**** Sources: The pension register, The Pensions Regulator January 2014 except: *The Purple Book, The Pensions Regulator and PPF March 2013; **Pensions in the national accounts, Office for National Statistics (ONS) April 2010 (includes 110 billion of decumulated assets); ***Annual survey of hours and earnings, ONS 2012; ****2012-2013 LGPS annual reports Both the memberships and assets of private pensions are currently concentrated within DB schemes, where 74% of assets are held and which account for 12.7 million memberships. Although the majority of DB schemes are now closed to new members there are more than 4,000 private pension schemes where new DB pension rights are being accrued. DB schemes hold overall assets of over 1.1 trillion and the value of the pension benefits on a buy-out basis currently amounts to more than 1.8 trillion. The proportion of private DB schemes open to new members remained broadly constant between 2012 and 2013 at 14%. 13 The table above reflects the schemes that will be public service schemes under the Public Service Pensions Acts. There are other funded and unfunded public body schemes which may or may not become public service schemes in due course but these will not materially affect the figures in the table above in terms of either memberships or assets. 18

The pensions landscape: issues and risks Figure 1: 2013 distribution of DB schemes by status 14% 2% Closed to new members but open to future accruals of existing members: 3,326 (54%) Closed to future accruals: 1,868 (30%) Open: 841 (14%) Winding up: 115 (2%) 30% 54% Even closed DB schemes are expected to have obligations that project over the next 60 years and beyond, as illustrated by the chart below 14. See page 22 for details of the risks arising from the maturing of DB schemes. Figure 2: Estimated cash outflow from DB schemes 60 Current status: Deferred bn (constant prices) 45 30 15 Active Pensioners 0 2014 2019 2024 2029 2034 2039 2044 2049 2054 2059 2064 2069 2074 2079 14 Our estimates as shown are for illustration only, based on data reported by UK pension schemes and a number of assumptions. In particular, the estimates assume that all schemes are closed to future accruals and all members commute 20% pension at retirement. 19

The pensions landscape: issues and risks By 2018, the DWP estimates there will be 6-9 million members of pension schemes who have joined due to automatic enrolment. DC schemes have, to date, been most employers choice of provision for automatic enrolment and we expect this trend to continue, with a particular increase in the membership of multi-employer master trusts and group personal pensions. Although it will be a number of years before DC schemes hold as many assets as DB schemes, the chart below illustrates the significant increase in DC assets from the current figure of around 400 billion that we expect to see through to 2030 15. Figure 3: DC assets forecast 1,200 DC scheme assets (assuming retirement at 65) bn (constant prices) 1,000 800 600 400 200 0 2014 2018 2022 2026 2030 15 Our projection as shown is for illustration only, based on internal modelling and assumptions. It is determined by, among other things, rate of retirement, investment return, and contributions from existing and future DC scheme members. 20

The pensions landscape: issues and risks Public service schemes are currently going through a period of significant change in preparation for the Public Service Pensions Act 2013 coming into force by April 2015. Currently, there are more than 200 registered schemes of this type accounting for around 13 million memberships. Once the proposed reforms have been completed, these schemes will have redesigned their benefits and introduced new governance arrangements. Policy context To help people save for their retirement, the government wants workbased pensions to be affordable for employers and attractive to workers. The government s strategy for work-based pensions aims to: increase the amount people are saving in pensions and the amount they receive for their savings enable industry innovation and development of new products increase transparency and build trust, confidence and engagement in pension saving, and make sure the UK pension system is sustainable and stable. We expect the assets held in DC schemes to more than double over the next 15 years. In order to achieve these aims, the government has introduced automatic enrolment and is also working on a number of new initiatives. These include introducing legislative minimum quality standards for work-based DC schemes and a system of automatic transfers whereby the pension pot follows the member as they move jobs, and exploring the potential for new types of pension provision such as defined ambition schemes. Additionally, as part of his March 2014 Budget speech, the Chancellor announced a number of new proposals intended to increase freedom and choice in pensions. From April 2015, people retiring with DC provision will be able to choose whether they want to purchase an annuity or a drawdown product, or alternatively extract all of their pension savings in a lump sum subject only to the marginal rate of income tax. The reforms also include a commitment to deliver the right guidance and support to help people make a retirement decision that best suits their personal circumstances. 21

The pensions landscape: issues and risks Issues and risks Risk is a feature of pension provision. We are not able and do not seek to remove all risk; taking some risk may lead to greater rewards and lower costs for members and employer sponsors. There are also a number of wider economic, political and demographic risks affecting the pensions sector over which we may have little or no control. We, therefore, prioritise our interventions in terms of risk, cost and perceived benefits in a consistent way, choosing the most appropriate course of action from our suite of enabling, educational and enforcement tools. In doing so, we seek to ensure that members, trustees and others understand and manage the risks facing their schemes 16. DB schemes The primary risks facing DB schemes arise from their current state of under-funding. The ability of the employer to make good this deficit, together with key financial factors such as interest rates and inflation, largely determines the extent to which the promises made by DB schemes will be met. Despite an increase in economic growth in 2013, which is forecast to continue through 2014-2015, we believe affordability for scheme sponsors will remain an issue for many employers. The anticipated economic recovery over the coming year should help other employers to strengthen their position as they find new opportunities for growth and investment. However, there are risks which arise as the economy recovers, including the possibility of increased insolvencies, given that bank forbearance may end in a growing economy. Also, economic growth can result in increased merger and acquisition activity, which brings with it greater scope for avoidance and the need for clearance of complex financial transactions. The reduction or severing of employer support, leading to scheme failure, may result in substantial claims on the PPF and an increased risk of uncompensated losses to members. The PPF expects total claims from March 2008 to March 2013 to amount to 3.5 billion 17. Looking to the longer term, the fact that the majority of DB schemes are now closed to new members, with the proportion of active membership down to 18% of total membership, means that DB schemes in the UK are maturing rapidly (see chart on page 19). This presents significant risks for schemes managing a liability where benefits paid out exceed income from planned contributions and investments. Schemes that have planned sufficiently well in advance for this phase of their lifecycle should not be affected unduly. For others, the reduced remaining timeframe within which to balance their finances may place strain on their investment strategy and expose (through the need for additional contributions) the employer sponsor s business to operational constraints and ultimately greater risks to its sustainability. This is at a time when a small and decreasing percentage of the workforce will be benefiting from the scheme, thereby increasing the risk of employer sponsor disengagement. 16 See pages 13 and 56-58 for further information on our approach to risk. 17 For further information, view the Purple Book 2013 at www.tpr.gov.uk/ purple2013 22

The pensions landscape: issues and risks Automatic enrolment Automatic enrolment is the core employer duty of the pension reforms introduced by the Pensions Act 2008. The reforms require employers to automatically enrol their eligible job holders into a qualifying pension scheme, make a minimum contribution into the scheme and complete registration with the regulator 18. By 31 March 2014 around 15,000 employers had reached their staging date. By the end of the current financial year a further 32,000 employers will have staged. During the final two years covered by this plan we estimate an additional 770,000 employers will be subject to the duties. For many, this will be a new and untested process which may give rise to risks associated with both the quality of the schemes to be used and the implementation of automatic enrolment itself (see box on page 25). Figure 4: Automatic enrolment employer staging volumes by quarter 250 Q1: 1 April 30 June Q2: 1 July 30 September Q3: 1 October 31 December Q4: 1 January 31 March Number of employer PAYE schemes (000s) 200 150 100 50 0 Q1 2014/15 Q2 2014/15 Q3 2014/15 Q4 2014/15 Q1 2015/16 Q2 2015/16 Q3 2015/16 Q4 2015/16 Q1 2016/17 Q2 2016/17 Q3 2016/17 Q4 2016/17 Q1 2017/18 Q2 2017/18 Q3 2017/18 Q4 2017/18 Medium-sized employers, 50-249 people Small and micro employers, Fewer than 50 people New employers 18 In order to complete registration, employers must submit a declaration of compliance to the regulator. 23

The pensions landscape: issues and risks DC schemes While, by design, DC pension schemes entail members carrying a wide range of risks, in particular those driven by economic and demographic factors, there are many risks that can be reduced by good governance or regulatory intervention. Key among these risks are poor trustee oversight and poor value for money, both of which are sometimes associated with small-scale provision although much less so with larger schemes. The risk of poor governance by trustees is especially important in DC schemes given that weak investment strategies and bad record-keeping, for example, can more directly affect member outcomes. Our 2014 scheme governance survey 19 suggests that the current state of trustee training structures is uneven. It found that only 25% of schemes have a training plan in place for trustees and only 62% of schemes report usage of the Trustee toolkit. The frequency with which schemes review their skills is also a cause for concern. The DC features survey 2013 20 notes that around one quarter (24%) of all DC schemes review their skills less than every three years. There are significant variations in response by scheme size, with smaller schemes being less likely to respond positively. The effective running of schemes requires that adequate internal controls are in place. A lack of internal controls is a primary risk driver associated with a range of negative member outcomes, including misappropriation of assets and poor record-keeping. Evidence from our scheme governance survey 2014 suggests that at least 36% of DC schemes do not have documented internal controls and, even in DC schemes where controls are documented, 38% do not report having a risk register, while the DC features survey 2013 reports that 45% of schemes do not have a documented plan of accountabilities and responsibilities for all elements of scheme management. Additionally, anecdotal evidence points towards a number of potential administration risks including disclosure errors, poor communication and processing errors. Pension liberation A further important risk in pension provision is the risk of pensions scams and of pension liberation, which may attract tax charges and in some cases may be fraudulent. The level of funds inappropriately released through pension liberation is increasing at a significant rate we estimate at least 420 million 21 from occupational pension schemes since 2011. 19 View the survey at www.tpr.gov.uk/ governance2014 20 View the survey at www.tpr.gov.uk/ dcfeatures2013 21 This figure represents the amount of such activity that has been reported to us to date. We recognise the actual figure may be significantly higher. 24

The pensions landscape: issues and risks Automatic enrolment: key challenges Employers Large employers (250+): Most employers in this group have now successfully automatically enrolled their eligible job holders and completed registration, or are about to undertake registration, with the regulator. Their next challenge will be the triennial process of re-enrolling employees and re-registration with the regulator, which is due to commence in summer 2015. Medium-sized employers (50-249): Our focus from early 2014 lies with this group. More than 30,000 medium-sized employers will stage between April 2014 and April 2015 and our research suggests that medium-sized employers are less likely than large employers to have in-house expertise. This will increase reliance on the readiness of pension providers, independent financial advisers (IFAs), employee benefit consultants (EBCs), software providers and payroll bureaux to provide accurate, timely and affordable products and services to the relevant employers. There is a risk that some employers will leave it until the last minute to set up pension schemes or update their payroll systems. Small (5-49) and micro (1-4) employers: Looking ahead to mid 2015, small and micro employers will start to reach their staging dates. There are approximately 1.3 million employers in this group and many may have limited access to, or motivation to seek, advice. Therefore it is critical for them that they automate as much of the enrolment processes as possible. The timely availability of the relevant supporting tools and material through pension providers, payroll software and/or middleware developers will be vital. Advisers, pensions providers and payroll software developers Medium and small employers are likely to seek advice from IFAs, accountants, payroll administrators or bookkeepers, among others. It is important that advisers know their client s staging date and have a good understanding of the legislation. Pension providers have the challenge of ensuring their products are suitable for automatic enrolment and have the capacity to supply employers in time for their staging dates. It is essential that automatic enrolment products and services, such as payroll software or payroll bureaux, are available to enable employers to comply with the legislation and are available in time for employers to make use of them. Employers will expect software programmes to automate as many of the legislative requirements as possible to support them in being compliant. Employers should choose their scheme and payroll software no fewer than six months before their staging date to provide as much lead time as possible for providers to deal with the volume of demand each month. 25

Strategic plan 2014-2017 26

Corporate priorities For the period of this Corporate Plan, we have adopted four corporate priorities to guide our strategy. They are derived from our statutory objectives and reflect the risks and challenges we expect to see over the next three years. To promote good governance and administration of work-based pension schemes: Influencing good governance and administration is central to our role and is an essential function in protecting member benefits. The responsibility for the sound operation of pension schemes resides with those who manage and govern them: trustees and providers in the case of private pension schemes, and scheme managers in the case of public service schemes, with assistance from pension boards. To promote security and good outcomes for members of workbased pension schemes: Two key tasks for the regulator are promoting adequate funding levels in DB schemes 22 balanced with achieving our new statutory objective to minimise any adverse impact on the sustainable growth of an employer, and supporting DC schemes to deliver good member outcomes. Trustees and employers should work together in an open and transparent manner to formulate appropriate funding plans for DB schemes that aim to pay the promised level of benefits, while recognising the needs of the employer sponsor and its long-term ability to support the scheme. It is equally important that those with responsibility for the growing quantity of assets held in DC schemes deliver value for money and good outcomes for members. To promote employer compliance with their pension responsibilities: For automatic enrolment to be effective, we believe there should be a pro-compliance culture among employers so that they are aware of and understand their obligations, want to comply with their legal duties and advocate that non-compliance by other employers is not acceptable. Where eligible job holders are automatically enrolled into a DC scheme, employers must ensure they maintain a timely flow of contributions to that scheme. In respect of DB schemes, employers must comply with their scheme funding obligations. To improve our organisational efficiency and effectiveness: As a public body it is essential that we operate as efficiently and effectively as possible, with due regard to the standards set out in HMT s Managing Public Money guidance. Our Board has ultimate responsibility for ensuring the regulator is run properly as a public body with effective internal controls and for ensuring compliance with statutory and administrative requirements for the use of public funds. In addition, our risk-based approach enables us to concentrate our finite resources on the areas where we can have the greatest impact. 22 Private DB schemes only. 27

Strategic plan 2014-2017 The following table illustrates the link between our corporate priorities and statutory objectives. Corporate priorities To promote good governance and administration of workbased pension schemes To promote security and good outcomes for members of workbased pension schemes To promote employer compliance with their pension responsibilities To improve our organisational efficiency and effectiveness Related statutory objectives To protect the benefits of members of occupational pension schemes To promote, and to improve understanding of, the good administration of work-based pension schemes. To protect the benefits of members of occupational pension schemes To protect the benefits of members of personal pension schemes where direct payment arrangements are in place To reduce the risk of situations arising which may lead to compensation being payable from the PPF In relation to DB scheme funding only, to minimise any adverse impact on the sustainable growth of an employer. To maximise employer compliance with employer duties and the employment safeguards To protect the benefits of members of occupational pension schemes To protect the benefits of members of personal pension schemes where direct payment arrangements are in place. As a public body it is essential that we operate efficiently and effectively. This relates to all of our statutory objectives. 28

Strategic plan 2014-2017 To promote good governance and administration of work-based pension schemes Schemes are governed and administered by trustees, scheme managers, pension boards, administrators and providers. We seek to improve scheme governance and administration by ensuring that those who govern schemes are aware of, understand and engage with the obligations and standards set out in law, in our trustee knowledge and understanding code of practice and in other regulatory material. Our 2014 scheme governance survey continued to reflect uneven standards of governance and administration, with less successful results in smaller DC and DB schemes. For example, those schemes were less likely to rate their board of trustees governance as effective and less likely to have strong internal controls in place 23. The increasing number of scheme memberships under automatic enrolment highlights the need for trustees to expertly select, manage and monitor their scheme s investments and, in the case of DC schemes, to communicate with members regarding scheme performance, likely retirement outcomes and the extent of compensation arrangements. Therefore, during the period of this plan, we will review our strategic approach to the achievement of high standards of governance and administration in occupational pension schemes. We will seek to raise significantly the level of knowledge and understanding that those with responsibility for governing pension schemes can demonstrate. With specific reference to DC schemes, we will focus on continuing to raise awareness and understanding of our six DC principles among those who govern DC schemes. These principles are underpinned by 31 quality features which encapsulate those activities, behaviours and control processes that are more likely to deliver good member outcomes. We expect trustees to produce a governance statement explaining the extent to which their scheme has incorporated our features 24. 23 View the survey results at www.tpr.gov.uk/ research 24 Download a governance statement template from www.tpr.gov.uk/ governancestatement 29

Strategic plan 2014-2017 In respect of DB pensions, well-governed schemes are a cornerstone of our strategy to protect DB member benefits, along with strong employers and appropriate funding plans. Central to good governance is trustee knowledge and understanding of risks to their scheme, especially in the key areas of employer covenant, funding plans and investment strategy. In order to gain a good understanding of the overall risk faced by their scheme, we will encourage trustees to take an integrated approach to risk management, which will involve considering these areas in the round rather than in isolation of each other. For all scheme types, we aim to support trustees through our education and enablement activities such as producing quick guides, carrying out promotional activities and organising webinars and workshops. Where possible, we will evaluate the extent to which there has been behavioural change as a result of this work. We will also consult on a revised trustee knowledge and understanding code of practice and update the Trustee toolkit to ensure they are aligned to our new and revised strategies, codes, guidance and policies for DB and DC schemes. We are moving to an ongoing record of development for trustees who use the toolkit rather than issuing completion certificates. This should enable us to track individual trustee knowledge and understanding as it evolves. Where we believe that member benefits in trust-based DB schemes, trust-based DC schemes or in public service schemes are at risk as a result of poor governance, we will consider taking enforcement action. Our options include issuing improvement notices to trustees or public service scheme managers who are not complying with their duties as well as our powers of trustee appointment and prohibition. Central to good governance is trustee knowledge and understanding of risks to their scheme. 30

Strategic plan 2014-2017 Code of practice for public service pension schemes From April 2015, public service pension schemes will be managed or administered by scheme managers. Our code of practice for public service pension schemes will be published in autumn 2014 and will cover: conflicts of interest knowledge and understanding for members of pension boards publication of information about pension boards, governance and administration internal controls record-keeping late payment of employer and employee contributions information about member benefits and disclosure of information to members internal dispute resolution, and reporting breaches of the law. Prior to our responsibilities coming into force in 2015, we will build new web content to promote the effective governance and administration of public service pension schemes. This will include dedicated tools as well as any guidance on our code of practice and other matters. We will build new web content to promote the effective governance and administration of public service pension schemes. 31

Strategic plan 2014-2017 To promote security and good outcomes for members of work-based pensions Our focus is to support the adequate funding and security of DB schemes, and help DC schemes to achieve good member outcomes. Where DB schemes are subject to the Pensions Act 2004, they are required to meet the statutory funding objective. Where a scheme is not funded to this level, a recovery plan must be put in place 25. We will assess the risk schemes pose to our objectives against our suite of risk indicators to decide on those we wish to further engage with. At this stage, we may seek to gain a better understanding of issues including employer affordability and sustainable growth plans. We will also continue to engage proactively with a small number of schemes prior to their recovery plan submission date. This will allow us to understand how schemes and employers are incorporating our messages and guidance into their funding plans, and to help them reach acceptable outcomes. To support employers to fulfil their obligations in respect of DB funding in a way that helps to achieve our new statutory objective, we will encourage trustees and employer sponsors to work together closely. This will include ensuring that trustees reach appropriate funding outcomes that reflect a reasonable balance between the need to pay promised benefits and minimising any adverse impact on an employer s sustainable growth. We will also seek to ensure that trustees focus on the importance of understanding the employer covenant and give full consideration to the employer sponsor s affordability, growth and investment plans within the context of the needs of the scheme. We will encourage trustees and employers to work collaboratively to use the flexibilities in the system appropriately to best suit the needs of both the scheme and sponsor. Where compliance with scheme funding requirements proves critical to the sustainability of a sponsoring employer, we may work with all relevant parties to determine a workable solution that takes account of each party s objectives and duties. In light of our new objective, we will finalise our revised code of practice and regulatory strategy and policy for DB schemes in the summer of this year. The code sets out the standards and practices we expect from DB scheme trustees. The strategy and policy explain how we intend to approach the regulation of DB schemes. 25 Section 226 (1) Pensions Act 2004. 32

Strategic plan 2014-2017 In particular, we will set out our focus on the key risk areas which influence the overall ability of DB schemes to pay benefits in full employer covenant, funding and investment. This includes our approach to using a suite of risk indicators to inform our risk assessment process, taking into account the strength of the sponsoring employer s covenant and the scheme s needs. This will help us to be transparent about our expectations for DB schemes, consistent with our overall policies and messages, and to focus our resources on those schemes where our intervention is most appropriate. We will use our annual funding statements over the period of this plan to set out our views in respect of the risks faced by schemes with effective valuation dates that year. For DC schemes, our new DC regulatory strategy, code of practice, accompanying regulatory guidance, and compliance and enforcement policy are designed to improve the quality of schemes and to support the market to deliver good member outcomes. For example, with reference to our quality features, the DC code sets out practical guidance for trustees on the areas of risk management, investment, conflicts of interest, adviser appointment and administration. Our regulatory guidance references a broader range of issues, including retirement choices and communicating to members about investment strategies and costs and charges. We ask trustees to consider scheme costs and benefits, and to carry out value for money assessments. We also encourage trustees to assist members by designing a robust retirement process that supports retirees in the decisions they need to make. In light of the 2014 Budget, and the commitment to provide a guidance guarantee to members at or approaching retirement, we will work with the government and the FCA to ensure that the framework for this guarantee meets the needs of occupational trust-based schemes and their members. DC schemes will also need to comply with the government s new legislative minimum quality standards which are due to come into force in 2015 and, where relevant, we will update our DC materials to ensure alignment. In view of the increase in the use of DC master trusts as a result of automatic enrolment, we have worked with the ICAEW to develop a voluntary assurance framework for master trusts. In addition, we are considering voluntary assurance initiatives for administrators and group personal pensions. As illustrated in the diagram below, this approach builds upon a combination of legislation, industry initiatives and enforcement activity in order to deliver higher standards of governance and administration for work-based DC pension schemes. We will encourage trustees and employers to work collaboratively to use the flexibilities in the system appropriately to best suit the needs of both DB schemes and employer sponsors. 33

Strategic plan 2014-2017 Figure 5: The regulation of DC schemes The Pensions Regulator and FCA enforcement Voluntary independent assurance for master trusts/group personal pensions/administrators Voluntary governance statement Minimum quality standards Legislative requirements The FCA regulates the providers of DC work-based personal pension schemes and we will work closely with the FCA to support it in this task. The dual regulatory structure, whilst based on different statutory objectives, has a common aim to protect consumers (the FCA) and members (the regulator). Furthermore, with the introduction of the DWP s quality standards, both DC workbased personal pensions and DC occupational pensions will be subject to minimum standards for the first time, which will inform the regulatory approaches of both the FCA and the regulator. Additionally, the regulator will support a value for money audit of both trust- and contract-based workplace pension schemes through our membership of an Independent Project Board (IPB) established under the auspices of the Association of British Insurers. The IPB will report by the end of 2014. Over the period of this plan, we will continue to monitor DB and DC work-based schemes through scheme return analysis, thematic reviews and individual scheme risk assessment. We will also respond to breaches of the law reported to us by whistleblowers. As a result of our monitoring and risk analysis activities, there will sometimes be a need for further investigation in particular cases. Where a breach has occurred, or where there is a risk to member benefits or to the PPF, we have a range of enforcement options available. These include improvement notices, civil penalties and our powers of trustee appointment and prohibition. 34

When we consider enforcement action in respect of a DB scheme, we will not only consider using our funding powers but also whether the use of other powers is appropriate. This may include issuing a financial support direction under section 43 of the Pensions Act 2004 in order to ensure that employer support for the scheme is adequate. Where appropriate, we will continue to publish reports under section 89 of the Pensions Act 2004 on our considerations in particular circumstances. This may be in relation to any area of work within the responsibility of the regulator. In particular, we will use this power to explain how we ve used our functions to deter the operation of pension liberation schemes (see page 36). Further information on our approach to monitoring and enforcement is set out in our regulatory strategies and policies. The DWP s quality standards will see both DC work-based personal pensions and DC occupational pensions become subject to minimum standards for the first time. 35

Strategic plan 2014-2017 Financial crime and pension fraud The security of member benefits is increasingly threatened by financial crime, including pension fraud. Fraud relating to pensions can take a number of forms but, over the period of this plan, we will focus our efforts on addressing pension liberation fraud and other pensions scams. Pension liberation is the mechanism by which an individual transfers their pension funds to another arrangement in order to access it, typically before age 55. To do so is not necessarily illegal, but is likely to give rise to a tax liability. However, there are certain kinds of pension liberation that may involve some form of deception or wrongdoing, up to and including criminal activity, and we categorise those cases as pension liberation fraud. The level of funds inappropriately released through pension liberation is increasing at a significant rate based upon the cases reported to us, we estimate at least 420 million from occupational pension schemes since 2011 26. It is vital that individuals are made aware that their participation in pension liberation activity could result in the loss of all of their pension savings in addition to a very high tax charge. Action to disrupt pension liberation fraud and other pensions scams is led by the Project Bloom task force, which brings together government departments, regulators and criminal justice agencies. We will continue to play an active role in Project Bloom to help raise public awareness of the issues and to undertake strategic case work where appropriate. In particular, we intend to: focus our attention on those cases where members are being deceived into transferring their benefits into an inappropriate arrangement, in particular, for example, where we consider the model being used to release the funds in that way is new and poses a systemic risk to the security of pension benefits. Where appropriate, we will publish details of our regulatory activity and any determinations in section 89 reports to act as a deterrent continue to work with government and industry partners, including the DWP, HMRC, the FCA and the Pensions Administration Standards Association to raise awareness among trustees, administrators, providers and members of the risks associated with pension liberation fraud and other pensions scams work with government and industry partners to take a co-ordinated approach to mitigating risks associated with and disrupting pensions scams and pension liberation fraud, including consideration of the potential for legislative or regulatory change work as part of an industry group with the objective of producing a voluntary code that sets the standard for dealing with requests by members for transfers between pension schemes and the due diligence that is needed. 26 This figure does not include work-based personal pensions. 36

Strategic plan 2014-2017 To promote employer compliance with their pension responsibilities To meet this corporate priority, we will support employers to comply with their automatic enrolment duties and the employment safeguards, guide employers to select quality schemes for automatic enrolment, and support the employer sponsors of DB arrangements to fulfil their obligations in respect of scheme funding. Communication and engagement remain central to delivering the automatic enrolment programme. Our current focus is on preparing medium-sized, small and micro employers to stage across 2014 2018 which, due to the large number of employers and workers affected, presents a significant challenge. We will support employers by prompting them via mail and email to achieve particular milestones throughout their planning timeline. We will deliver strong regional and national media campaigns, and undertake a range of speaking engagements, webinars and industry liaison events. Our communications programme will also include providing information for employers on the triennial re-enrolment and re-registration process, which will start for large employers from mid 2015. To help ensure that employers receive well-informed and comprehensive advice as well as appropriate products, we are working with the external adviser market to improve knowledge and understanding around the requirements on employers. In 2014-2015, this will be targeted towards pension and payroll providers, EBCs, IFAs and payroll bureaux, which are the advisers most commonly used by medium-sized employers. The majority of these advisers already demonstrate a good understanding of the reforms 27 but there are still gaps in knowledge around areas such as registration requirements and worker eligibility, and this is where we will focus our efforts. We will evolve this programme to include business advisers, accountants and bookkeepers as we approach the staging dates of small and micro employers. Over the period of this plan, we will continue to implement our automatic enrolment compliance and enforcement strategy and policy. In particular, we will deter and prevent non-compliance risks; identify, assess and address instances of non-compliance; and investigate and enforce against breaches where appropriate. We will review our strategy and policy throughout the implementation of automatic enrolment to ensure they remain reflective of our priorities. We will also continue to work with other compliance agencies such as HMRC and the Gangmasters Licensing Authority to assess compliance risk and develop ways of gathering intelligence. 27 Download our intermediaries tracker survey at: www.tpr.gov.uk/ intermediaries-2013 37

Strategic plan 2014-2017 Given our expectation that DC master trusts or group personal pensions will be most medium-sized, small and micro employers choice of provision for automatic enrolment, we will support the use of voluntary assurance frameworks to help employers select quality products without the need for them to seek independent financial advice. Employers must pay a minimum employer contribution for all eligible job holders automatically enrolled and they may voluntarily pay more. To help ensure that members of both occupational and work-based personal DC schemes receive the contributions they are due, and to reduce the risk of late payments, we will promote the core messages set out in our reporting late payments codes of practice. We will also concentrate on ensuring that systems and processes for maintaining contributions are in place to support the bulk staging of medium-sized, small and micro employers from 2014. We recognise the significant role employers play in supporting DB schemes, and we will encourage trustees and employers to work together to ensure that DB scheme members receive the benefits they have been promised. We will continue to provide tailored guidance to help employer sponsors to comply with their obligations and, in particular, we will promote awareness and understanding of our new DB code of practice and annual funding statements. We will also continue to engage with those schemes that present the greatest risks to member benefits. We will support the use of voluntary assurance frameworks to help employers select quality products. As the UK recovers from the recession, we are anticipating a potential rise in both complex clearance applications and cases where parties, including employer sponsors, seek to avoid their DB pensions obligations. This can be explained by an increase in corporate activity, by the end of bank forbearance and by the pressures generated by increased working capital requirements as employers start to grow. For those reasons, we will seek to strengthen our analysis of structures and transactions that may undermine support to DB schemes, and act where appropriate. 38

Strategic plan 2014-2017 To improve our organisational efficiency and effectiveness Many aspects of the regulator s work have changed since its establishment under the Pensions Act 2004. The pensions landscape has also altered significantly. While there are still around 12.7 million memberships in private DB schemes, over the last decade we have seen a significant growth in the memberships of DC schemes, including a greater use of new forms of provision such as master trusts. In addition, as a result of pensions reform, the regulator has been given new tasks including maximising employer compliance with their automatic enrolment duties and the employment safeguards, and in respect of the governance and administration of public service schemes. In light of this environment, the regulator has grown and become a more complex organisation. To meet the challenges this presents, we are placing the pursuit of greater efficiency and effectiveness at the heart of our threeyear plan. We will embark on a programme of continuous efficiency gains which will involve targeting areas where, sometimes through investment, we can achieve ongoing reductions in our operating costs. We will ensure that our expenditure for the period of this plan is in line with the income provided. Additionally, we will maintain our commitment to cost reductions and ensure we meet the requirements of the 2010 and 2013 Comprehensive Spending Reviews. We will review our operating model to ensure it allows us to function as efficiently as possible, avoids unnecessary duplication of activities and enables us to fully utilise our skills and resources. In addition, taking an end-to-end approach, we will review our core business processes and seek to reduce costs, where appropriate, through automation. We will review our approach to the performance management of our staff, including the introduction of improved time and work management information, a greater focus on the active management of our teams to achieve their objectives, and measures to ensure that the workforce can be deployed flexibly. This activity will contribute to our goal of having the right staff with the right skills. Additionally, we will build on the improvements resulting from the introduction of a new HR system in 2013. We will further enhance our approach to the setting of our corporate priorities and improve the measures of the outcomes we seek to achieve. We will also place a greater emphasis on evaluating our performance, ensuring that we keep on track to achieve our plan and improving our resource management. 39

Strategic plan 2014-2017 Over the period of this plan, we are proposing to upgrade our core IT systems including case management and document management. This investment in IT is needed as a result of the increasing number of employers subject to the new automatic enrolment duties and as our interface with a growing number of DC schemes expands. This need is further reinforced by the fact that, after 10 years of operation, a number of our IT systems are reaching the end of their operating life. We will continue to invest in the provision of expert support and services to the regulatory teams. This includes strengthening our approach to the management of business change, the better sharing of expert legal knowledge, providing enhanced case management support and improving the recovery plan valuation process. We will further develop our use of digital media as a means of reaching our key audiences, in keeping with the government s digital by default strategy, and continue to take a targeted approach to communications. For example, in relation to automatic enrolment, we will use social media and other digital channels to ensure our messages reach different employer groups as they approach their staging dates. Where possible, we will evaluate the extent to which our communications drive behavioural change. Finally, we will continue to monitor the strategic, operational and reputational risks faced by the regulator. To this end, we have put in place dedicated risk committees in each of our main areas of regulatory focus to concentrate on risks specific to those areas. They report into an overarching risk committee staffed by senior management. The most serious risks are escalated to our Audit and Risk Assurance Committee and Board. We will use social media and other digital channels to reach different employer groups as they approach their automatic enrolment staging dates. 40

Business plan 2014-2015 41

Workload assumptions As set out earlier in this Corporate Plan (page 13), we are a risk-based regulator and therefore we focus our attention on those areas which present the most risk and where our actions are likely to have the greatest impact. We operate within the wider environment of continuous economic, political and demographic change, which may alter the level of risk in certain areas during the year and, in turn, affect our priorities and workload. The workload assumptions set out below are based on our assessment of current risks within the existing environment. This section includes the volume of work related to the quantifiable tasks that we carried out in 2013-2014 (actual) as well as the volume of work that we plan to carry out in 2014-2015 (estimated). A comparison of our estimated caseload in 2014-2015 and our actual caseload in 2013-2014 reflects the following trends: We expect the resources allocated to DB funding cases to be broadly similar to last year. This is in line with our DB strategy, which sets out our risk-based approach. Through our proactive engagement with schemes we will seek to identify those schemes that will benefit most from our intervention. We expect this to result in the regulator opening fewer, but potentially more complex, cases We expect to see a gradual increase in the number of DC cases due to our proactive monitoring work, such as thematic reviews, and an anticipated rise in the number of issues reported to us in response to the publication of our new code of practice for the governance and administration of occupational trust-based DC schemes With an increase in the number of employers reaching their staging date for automatic enrolment in 2014-2015, we anticipate a potential rise in the number of automatic enrolment cases We expect the number of cases on pension liberation fraud and other pensions scams to remain constant or increase. However, we intend to focus on cases where new models are being used for example to inappropriately release pension funds or otherwise misuse them, which we expect to be challenging and resourceintensive. 42

Business plan 2014-2015 Communications and publications April 2013 March 2014 April 2014 March 2015 Guidance 20 20 Codes 3 2 Guides 7 3 Policy 1 2 Statements 5 4 Research 25 25 Speaking events 315 400 Social media updates 835 1,130 Total 1,211 1,586 Casework Education, enablement and enforcement April 2013 March 2014 April 2014 March 2015 Proactive compliance drives 120 240 Regulatory case action 9,045 14,185 Process applications 20 50 Recovery plans 1,650 1,800 Outbound campaigns 5,000 5,000 Employers contacted 49,530 186,500 Outbound staging/campaign letters 110,335 295,150 Outbound nudge emails 32,485 648,105 Total 208,185 1,151,030 43

Business plan 2014-2015 Operations Customer contacts, employer compliance and levy collection April 2013 March 2014 April 2014 March 2015 Scheme returns 62,230 62,000 Enquiries 112,685 210,375 Inbound webforms (nominations) 15,065 19,310 Levy collections 79,710 71,740 Total 269,690 363,425 Figure 6: 2014-2015 effort by corporate priority 14% 9% 40% To promote employer compliance with their pension responsibilities: 40% To promote security and good outcomes for members of work-based pension schemes: 37% To promote good governance and administration of work-based pension schemes: 14% To improve our organisational efficiency and effectiveness: 9% 37% 44

Business plan 2014-2015 Figure 7: 2013-2014 actual cost by regulatory area DB 41% DC 22% DC 22% ( 12.4m) Automatic enrolment 37% ( 21.3m) DB 41% ( 23.1m) Automatic enrolment 37% Figure 8: 2014-2015 budget cost by regulatory area DB 27% DC 21% DC 21% ( 16.5m) Automatic enrolment 52% ( 40.4m) DB 27% ( 20.9m) Automatic enrolment 52% 45

Key performance indicators Our aim is to measure, as far as practicable, our regulatory interventions against our corporate priorities, both in terms of what the interventions have achieved and how effectively we deliver them. These measures are principally secured through survey results and management information. They are reported to the regulator s Board and the DWP on a quarterly basis. We also report on our KPIs in our Annual Report and Accounts. As set out in the following table, they are structured by and aligned to our four corporate priorities. Corporate priority: to promote good governance and administration of work-based pension schemes KPI Scheme governance Record-keeping Target Usage of our Trustee toolkit among lay trustees to average 3,250 module completions per quarter throughout the year. To publish outcomes of our investigations where we find breaches of pensions regulation with respect to record-keeping standards and practices. To carry out communications activity relating to the DC quality features, in advance of the proposed implementation of the DWP s legislative minimum standards. Public service pension schemes DB knowledge and understanding A positive outcome from our end-to-end operational testing of our procedures, processes and systems for use in our regulation of these schemes. A high level of understanding of our expectations set out in our 2014 annual funding statement, measured through a survey among employers, trustee boards and actuaries: 80% of audiences to be aware of the key messages in the funding statement 94% of audiences to understand the key messages in the statement 75% of audiences to rate the statement as helpful 84% of actuaries to advise on the use of flexibilities in a way that is consistent with the regulator s views. Governance of DC schemes 86% of schemes being used for automatic enrolment to be aware that the regulator has published details of the DC quality features that are more likely to deliver good member outcomes. 46

Business plan 2014-2015 Corporate priority: to promote security and good outcomes for members of work-based pension schemes KPI Funding of DB schemes Reduce risks of DB schemes entering PPF Sustainable growth of employers sponsoring DB schemes Quality of DC schemes Target 49% of trustee boards with a DB scheme to fully integrate risks with respect to scheme funding, scheme investments and covenant. A target for the total PPF deficit we address in cases opened on the basis of the risk indicators in our forthcoming DB funding policy. The target for this KPI will be agreed in Q1 2014-2015. A measure of our audience s perception of our delivery against our new statutory objective to minimise any adverse impact on the sustainable growth of an employer, in relation to DB funding only. We will obtain a baseline measure of this in Q2 2014-2015 against which we will set an appropriate target for Q4 2014-2015. A high proportion of members who are in schemes used by automatic enrolment to have 80% of the features in place. We will set a target during Q1 2014-2015. Value for money of DC schemes We will develop with industry and government partners an approach which will allow trustee boards to evaluate their scheme s value for money. We will set a target in 2015-2016 which relates to the evaluation approach being developed. 47

Business plan 2014-2015 Corporate priority: to promote employer compliance with their pension responsibilities KPI Qualifying scheme for automatic enrolment in place Employer communications effectiveness Employer compliance with duties in DB schemes Target The number of employers who register with the regulator. For those employers whose staging date falls in 2014-2015, we will target 95% to be aware and 80% to understand their duties two months before their staging date. 99.8% of DB schemes adhere to their schedule of contributions prior to any required interventions by the regulator. 48

Business plan 2014-2015 Corporate priority: to improve our organisational efficiency and effectiveness KPI Governance standards of the regulator Value for money of the regulator Target In any one year, a positive result from a review of the governance of the regulator from: a third party audit, the DWP s triennial review of the regulator or from a Board effectiveness review. We will adjust the regulator s operating model so as to achieve more efficient internal work processes. We will also measure the baseline level of the cost per member of regulatory activities, against which we will set an appropriate target for 2015-2016. Delivery against better regulation principles (PACTT) Customer service 70% (on average) of our key audiences to rate us positively on the constituent parts of the better regulation principles. 85% of customers rate as excellent, very good or good the overall service they received from the regulator. Among users of our website, 78% as the average result of the following two measures: the proportion who obtained all or most of the information they were looking for on our website the proportion who rated the website positively on a number of key ratings. Employee engagement An employee engagement index score of 75. The index comprises seven elements including commitment, satisfaction and advocacy. 49

Business plan 2014-2015 The Board adopts our KPIs on an annual basis. They are based on proposals from the senior management team. Where possible, we seek to achieve stability in our KPIs so that they will apply over a number of years. However, they are set in response to our assessment of the key risks to the achievement of our statutory objectives and corporate priorities so it is also to be expected that KPIs may change from year to year. In the event of a change being considered necessary, the Board takes a decision on whether or not to amend, add or withdraw a KPI. Measuring our effectiveness, especially over a one-year timeframe, is not straightforward given that pensions are a long-term product and it may be decades before it becomes clear to what extent members have received good outcomes. It is also the case that pension outcomes are generally affected by factors outside of the regulator s control for example, the state of the economy including inflation and interest rates, and demographics. Our regulatory performance is also set in the context of the broader outcomes which the government seeks to achieve such as increasing pensioner incomes and reducing dependency on the state. Nevertheless, to inform our regulatory interventions, we monitor the key outcomes for the schemes, employers and others who are affected by our activities: Governance: capability and competence of trustees and others who govern pension schemes Record-keeping standards: presence of common and conditional data Outcomes for DB members: members of DB schemes receive their full entitlement Funding of schemes entering PPF: DB schemes where sponsor becomes insolvent are funded below the PPF valuation level Compliance with automatic enrolment becomes an accepted part of an employer s duties. In addition, with regard to the outcomes for DC members, we will develop a set of long-term indicators which will signal the extent to which member outcomes are improving. In order to measure this, we will track over time the elements that we believe are required to achieve good member outcomes 28. 28 Appropriate contribution, investment and decumulation decisions; effective and efficient administration; protection of assets; and value for money. 50

Resource summary This section provides information on the resources required to meet our statutory objectives and corporate priorities during 2014-2015. Funding The funding of regulation is derived from two main sources: a grant-inaid from the DWP which is recoverable from a levy on pension schemes and a separate grant-in-aid from general taxation. We collect the levy on behalf of the Secretary of State for Work and Pensions and it is intended to recover the costs of The Pensions Regulator, TPAS and the Pensions Ombudsman. The government has decided to freeze the levy rates for 2014-2015 and 2015-2016. The funding of regulation specifically relating to the automatic enrolment programme is met out of general taxation and is not offset by the scheme levy. This arrangement gives rise to two separate budget heads: the levy budget and the automatic enrolment budget. We have controls in place to ensure there is no cross-subsidy between the two streams of funding. As we have identified a need for substantial investment in IT reflecting a long period of under investment and a significant increase in both the volume and complexity of our work, we are also in discussion with the DWP in relation to additional funding. Subject to the approval of future business cases, in 2014-2015 an initial 7.4 million tranche has been set aside by the DWP to start the process of essential IT infrastructure replacement. This funding is over and above the costs set out in this Corporate Plan and will be drawn down from the DWP following approval of the individual business cases 29. We are very aware of the need to deliver a balance between effective protection for pension savers and a cost efficient use of the funds with which we are entrusted. Despite a growth in regulatory activity in respect of automatic enrolment and DC regulation over the three-year period from 2011-2012 to 2013-2014, resulting in the overall increase in our costs, we have delivered cost reductions and sought to minimise cost increases to our core levy budget. In doing so, we have operated within our funding envelope over this period and we will continue to seek ways of delivering our responsibilities in the most cost efficient manner. 29 The funding for the IT infrastructure replacement is not included in the tables that follow on pages 52-54. 51

Business plan 2014-2015 Projected budget for 2014-2015: total expenditure analysed by business area Our budget is managed to deliver our regulatory responsibilities in respect of DB schemes, DC schemes and automatic enrolment. The operational teams are supported by a number of cross-cutting directorates, the budgets of which have been allocated across each of the three main business areas to show how much each costs in total. This is summarised in the table below. Operational team Budget 000 DB 20,924 DC, governance and administration 16,465 Automatic enrolment 40,375 Total expenditure 77,764 The above expenditure includes support service costs of 26.3m. 52

Business plan 2014-2015 Budget comparison 2013-2014 to 2014-2015 The levy-funded expenditure in 2013-2014 was 1.3m below budget primarily due to staff vacancies and less spent on communications, partially offset by increased expenditure on case-related professional services. The levy budget for 2014-2015 is 37.4m, in line with our Corporate Plan 2013-2016. The increase in salary costs in the budget reflects the growth in staff volumes across the levy business during 2013-2014 alongside the increased volume of planned work relating to DC schemes and to our extended role in relation to public service schemes in 2014-2015. The fixed asset budget in 2014-2015 is significantly lower than in 2013-2014, largely reflecting a one-off investment in our building infrastructure in 2013-2014. The tables below compare the 2013-2014 budget, the 2013-2014 actual expenditure and the 2014 2015 budget for levy and automatic enrolment. The categories shown in the table below illustrate the major areas of expenditure. Over the course of the coming year we plan to review how we present this information, and assess whether we can provide greater clarity on the deployment of regulatory funds. Category (levy budget) 2013-2014 budget 000 2013-2014 actual 000 2014-2015 budget 000 Income (9) (12) (9) Salaries 22,624 21,769 26,375 Non-payroll staff costs 2,570 2,578 1,341 Other staff costs 1,965 1,630 1,833 Consultancy 358 1,009 237 Professional services 2,619 3,792 2,529 Communications/publications 931 142 516 Managed contracts 338 286 338 Accommodation/general office costs 2,491 1,739 2,342 IT and telecoms 537 335 642 Depreciation 669 528 669 Fixed asset costs 1,735 1,729 576 Total levy expenditure 36,828 35,525 37,389 53

Business plan 2014-2015 The automatic enrolment spend for 2013-2014 was 21.3m. The underspend against budget is related mainly to a provision for risks which ultimately did not arise. The increase in budget for automatic enrolment in 2014-2015, and through to 2016-2017, reflects the increased number of employers required to comply with the automatic enrolment duties. The 2014-2015 automatic enrolment budget is 1.6m lower than identified in our Corporate Plan 2013-2016 due to a reduction in the overall automatic enrolment requirements partially offset by an additional 4.1m for campaign activity previously undertaken by the DWP. Category (automatic enrolment budget) 2013-2014 budget 000 2013-2014 actual 000 2014-2015 budget 000 Total automatic enrolment expenditure 29,812 21,319 40,375 Looking ahead: budgets for 2014-2015 to 2016-2017 A comparative summary analysis of the budgets is shown in the table below. It includes the planned levy expenditure, which is consistent with our Corporate Plan 2013-2016, and the adjusted planned automatic enrolment expenditure as explained above. Levy 2014-2015 000 2015-2016 000 2016-2017 000 Staff 27,716 28,570 29,427 Non-staff 8,428 9,463 9,747 Depreciation 669 919 947 Capital 576 876 902 Levy total 37,389 39,828 41,023 Automatic enrolment Automatic enrolment total 40,375 44,995 68,740 Total (levy + automatic enrolment) 77,764 84,823 109,763 54

Business plan 2014-2015 Head count In 2014-2015 we plan to employ an average of 583 full-time equivalent (FTE) roles over the year. The staff number reflects the range of new tasks being undertaken by the regulator particularly in respect of DC regulation and scheme governance and administration. Proposed investment in our IT infrastructure and systems may require additional FTEs which are not included in this number. Future plans for staff numbers are subject to ongoing review of the business requirements across the regulator. 55

Appendix 1: Risk appetite statement This statement sets out how we balance risk and opportunity in pursuit of achieving our objectives. It forms a key element of our governance and reporting framework and is set by the Board, which also reviews the statement annually. The regulator distinguishes between those risks which are operational in nature, and as such within our control (such as information security), and those external risk factors (such as the risk of an economic downturn) which are not directly within our control but which nevertheless must be identified and considered to address those risks we can influence. Overarching statement We are not averse 30 to taking risks; and our approach is based on judgement and the circumstances of each potential intervention, and an assessment of its impact. This means we will not seek to intervene in all situations, rather we prioritise in terms of risk, cost and perceived benefits in a consistent way, choosing the most appropriate course of action from our suite of enabling, educational and enforcement tools. External/regulatory The whole pensions system is undergoing reform, involving new legal frameworks, the creation of new delivery models and a host of new entities for us to engage with and regulate. We are averse to risks to our statutory objectives created by those who we regulate failing to meet the standards required by law as explained in our codes of practice and guidance. However, we have an open appetite for taking well-managed risks where innovation and change create opportunities for discernible benefits and clear improvement in our ability to achieve our objectives. 30 The regulator s risk appetite follows the same classifications as HMT (see page 58), as set out in Thinking about risk. Managing your risk appetite: A practitioner s guide. November 2006 56

Appendix 1: Risk appetite statement Operational In acknowledgment of the growth and operational maturity of our multiple regulatory functions, we maintain a cautious risk appetite towards sustaining appropriate operational processes, systems and controls to support delivery but adopt a more open appetite for the development and enhancement of these systems. We are heavily reliant upon information and data to be able to operate as an effective risk-based regulator. The accidental or deliberate wrongful disclosure of sensitive or restricted information has the potential to erode trust, damage our reputation and ultimately prevent us from being able to function. As such we have a minimalist appetite for such risks. Fraud We are averse to the risks of internal fraud and fraudulent behaviour and will maintain appropriately robust controls and sanctions to maximise prevention, detection and deterrence of this type of behaviour. We will not seek to intervene in all situations, rather we prioritise in terms of risk, cost and perceived benefits. Legal We adopt an averse appetite to behaving in a way which is likely to give rise to a successful judicial review of the regulator. We are prepared to adopt a more open risk appetite where we are working with relatively untested legislation. Reputational We rely on our reputation in order to influence and secure the engagement of the regulated community, industry participants and stakeholders. The support of these parties is essential to achieving our objectives and so we hold a strong commitment to being seen as a proportionate and respected authority within the pensions arena and retain an overall cautious risk appetite with regard to our reputation. However, we are prepared to take a stance which may be opposed by some of our audience where we believe it is necessary for the achievement of one or all of our statutory objectives. 57

Appendix 1: Risk appetite statement Classifications The regulator s risk appetite follows the same classifications as HMT. HMT describes the classifications as follows: Classification Averse Minimalist Cautious Open Hungry Description Avoidance of risk and uncertainty is a key organisational objective Preference for ultra-safe business delivery options that have a low degree of inherent risk and only have a potential for limited reward Preference for safe delivery options that have a low degree of residual risk and may only have limited potential for reward Willing to consider all potential delivery options and choose the one that is most likely to result in successful delivery while also providing an acceptable level of reward (and value for money etc) Eager to be innovative and to choose options offering potentially higher business rewards, despite greater inherent risk 58

Appendix 2: Governance The Board The Board 31 meets around eight times a year and comprises the chair, non-executive members, the chief executive and executive directors. The chair and Board members are appointed by the Secretary of State for Work and Pensions. Its key responsibilities are: to oversee our strategic direction and make key decisions on corporate and operational policy; to ensure the regulator is properly run as a public body with effective internal controls; and to guarantee that statutory and administrative requirements for the use of public funds are complied with. Board committees As required under section 8 of the Pensions Act 2004 (the Act), the Board has a committee of non-executive members. This committee has two sub-committees to carry out delegated functions: an Audit and Risk Assurance Committee and a Remuneration Committee. We are also required to maintain a committee called the Determinations Panel (section 9 of the Act) whose purpose is to exercise, on behalf of the regulator, certain major regulatory functions, as set out in Schedule 2 of the Act. In summary, these powers may be used either where the regulator considers that certain enforcement action needs to be taken in respect of pension schemes, their trustees or employers, or where trustees, or other interested parties, ask that certain actions be taken to safeguard the interests of scheme members. The purpose of this arrangement is to ensure that we take regulatory action in an impartial and fair way. The senior management team The senior management team which includes the chief executive and three executive directors with responsibility for our main operational areas of DB regulation; DC regulation, governance and administration; and automatic enrolment co-ordinates business planning and the operational management of the regulator. 31 View Board member biographies on our website at www.tpr.gov.uk/board 59

How to contact us Napier House Trafalgar Place Brighton BN1 4DW T 0845 600 0707 F 0870 241 1144 E customersupport@thepensionsregulator.gov.uk www.thepensionsregulator.gov.uk www.trusteetoolkit.com This publication can be found on our website at www.tpr.gov.uk/plan The Pensions Regulator May 2014 You can reproduce the text in this publication as long as you quote The Pensions Regulator s name and title of the publication. Please contact us if you have any questions about this publication. We can produce it in Braille, large print or on audio tape. We can also produce it in other languages.