From IDS Pensions Bulletin 207, July/August 2007

The Pension Regulator sets out its future strategy

The Pensions Regulator has published its corporate plan for the period 2007–2010. In this article we report details of the challenges to which the Regulator will have to respond together with its operational workload estimates for the next 12 months.

Medium-term strategy

The Pensions Regulator’s existing medium-term strategic priorities to 2008/09 are listed as responding to the following four key challenges:

• strengthen funding of defined benefit (DB) schemes

• improve governance of work-based pension schemes

• reduce risks to members of work-based defined contribution (DC) schemes, and

• deliver effective risk-based regulation relevant to our environment and stakeholders.

The Pensions Regulator’s focus in relation to DB funding will be on three themes. The first is to maintain the resources and skill sets allocated to examining valuations, recovery plans and corporate transactions. A second theme will be analysing scheme funding trends on the basis of the recovery plans and scheme returns that the Regulator receives, as well as from other sources of intelligence. Resulting from this analysis, reviewing and refining its public communications will be the third of the Regulator’s themes in relation to DB funding issues.

The Regulator will, over the three-year period, be looking for a year-on-year improvement in the extent to which trustees demonstrate knowledge and understanding of the governance requirements for their schemes, as evidenced by surveys of knowledge, understanding and key aspects of governance.

The Pensions Regulator has identified five key risks common across DC schemes that can have a direct impact on the level of benefits following retirement: allocating contributions accurately and on time; inappropriate investment choices, or failure to monitor investment performance; the danger that charges and fees are not transparent; failing to choose a suitable type of annuity on retirement; and members lack of information and understanding to enable them to make appropriate decisions about crucial aspects of their pensions.

The demographics of pension schemes in the UK mean that the Regulator has a relatively small number of schemes with the bulk of scheme members, and a long tail of much smaller schemes. This has informed its decisions on how its regulates, for example by proactively targeting the biggest schemes and focusing more on education and support for the smallest schemes to promote high standards and to prevent problems from developing.

Workload estimates

The Regulator has estimated its workload volumes in 2007/08 for the key activities it undertakes. Based on these estimates, it has drawn up the following service standards for delivery of these activities:

• answer 80 per cent of incoming calls in less than 20 seconds

• have lower than five per cent abandoned call rate

• respond to 90 per cent of emails and written correspondence for general enquiries within five working days of receipt, and

• respond to 90 per cent of more detailed technical emails and written correspondence within 20 working days of receipt.

What’s in IDS Pensions Bulletin 207