On 25 March, the Pensions Regulator (TPR) published the findings of some research on trust-based schemes that it commissioned in 2024. This was based on quantitative telephone interviews with 215 Defined Benefit (DB) and 200 Defined Contribution (DC) schemes.
The press release drew out the ‘headline-grabbing’ – “Pension schemes representing nine in 10 DC savers invest in productive assets, new data shows” although this is mainly a consequence of 28 million people being members of Master Trusts (MTs). There are several other elements that are, arguably, more interesting.
From the research, 92% of schemes surveyed had a long-term objective (LTO) of some sort – no change from 2023. Unsurprisingly, most of these (62%) intended to buy out. Only 1% of schemes had a LTO of entering a commercial consolidator. The report went on to state that, although not an LTO, 20% (skewed to small and medium schemes) considered a commercial consolidator to be “an attractive option”. 12% suggested they would enter a public consolidator, if available.
Around a third of DB schemes invested in UK or overseas productive assets (private equity, infrastructure, renewables and venture capital), 54% of schemes had dedicated resources or time to assessing climate-related risks and opportunities and 57% consider corporate governance risks and opportunities when making investment decisions. Equality, diversity and inclusion (EDI) and other social factors were less frequently considered (47% and 42% respectively).
Awareness of TPR’s general code of practice stood at 94%, up from 59% in 2023, and more than half of schemes had carried out a gap analysis, with a further 30% planning to do so.
The research found that 70% of schemes had a cyber security incident response plan (CSIRP), but most (54%) relied on “the plan of a third-party such as the employer or their administrator” with some of those failing to seek assurance that this covered the scheme appropriately. MTs and large schemes (72% and 65% respectively) had a scheme-specific CSIRP.
In contrast to DB schemes, only 17% of DC schemes had dedicated resources to climate issues – although all MTs and 92% of large schemes had done so. Around 25% of all DC schemes had considered wider ESG factors.
As to investment in UK productive finance, 22% of schemes reported investment in one or more of infrastructure, private equity, renewables, private market long-term asset funds or venture capital – with the percentage of schemes investing in those assets increasing with scheme size. However, the research indicated a general lack of appetite for increasing investment in those areas over the next 12 months.
More than a quarter of schemes agreed that there were barriers to further investment, but for most this was a function of their size or circumstances (eg the intention to wind up shortly). Ten of the 18 MTs surveyed said their fiduciary duty is a barrier to increasing investments in UK productive assets. Only 2% of large schemes cited this as a barrier and no small or medium schemes did so.
Nearly half (47%) of schemes were aware of TPR’s general code, but this varied significantly by scheme size. Of the 47%, 40% had carried out gap analysis against their existing systems, with a further 27% planning to do so.
Almost 90% of trustee boards (of medium-sized schemes only) had discussed pensions dashboards and 70% had considered how to connect, with 63% using a third-party provider and 31% intending to build their own IT solution.
Just over half of respondents were aware of the proposed changes to automatic enrolment – reducing the ‘eligibility’ age from 22 to 18 and abolishing the lower qualifying earnings threshold for contributions. Awareness of these changes was correlated with scheme size, with 89% of MTs being aware.
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On Monday 3 March, the Pensions Regulator (TPR) published its data strategy "Data strategy: Transforming our data for better saver outcomes". This forms part of the "digital, data and technology" (DDaT) strategy that was announced in October 2024. TPR states that the strategy is aimed at data and non-data professionals, including “scheme administrators, trustees, anyone involved in managing pension schemes, and us at TPR”.
While the document outlines how TPR intends to change how it manages data that it collects and manages, it also sets out TPR’s expectations of the industry. It is evident that TPR’s new approach will affect schemes and their administrators directly and heralds the end of manual record-keeping for UK pension schemes.
TPR states that it is “a collaborative and adaptive five-year plan to drive adoption of the latest technologies and standards for data”. It is the latest of a series of announcements from TPR, emphasising the importance of good quality data in order to “reduce unnecessary regulatory burden”, “facilitate effective market competition” and “benefit savers through industry innovation”.
As well as making a general call to ensure that scheme data is digitised – to assist its collection, sharing and analysis – TPR is “advocating for open standards for data”. Common standards will facilitate, in particular, analysis and modelling, which TPR hopes will enable it to take a more proactive stance in anticipating risk and intervening, where appropriate. It states that it wants “to move away from form-based data entry to Application Programming Interface (API)-based data ingestion”. API comprises a set of rules and protocols to more readily allow software applications to share information.
TPR also wants to collaborate with trustees, pensions professionals and others associated with schemes to “bring in best practice and good innovation ideas”. To support this, it lists various further initiatives including:
TPR hopes that this will reduce the regulatory burden and encourage innovation and transparency. It aims to support this by “creating an internal data marketplace that links to the National Data Library and the wider external data ecosystem”; anticipating that this will also improve its ability to analyse “large volumes of market data, near real time where needed, and [enhance its] horizon scanning and risk analysis”. TPR states that its investment in new tools will improve its modelling, analysis and forecasting. It will also publish its data “where possible”, which it hopes will enable those involved with schemes to build on TPR’s datasets and “gain additional insight”.
TPR also says that its new tools will enable it “to analyse trends and predict risk”, which will lead to “more nuanced conversations with schemes about their investment decisions and risk controls”.
Ultimately, TPR contends that its new strategy alongside industry innovation, will benefit members and states that it will “start to measure [its] own performance based on [members’] outcomes”.
Finally, there is further exhortation within the strategy document for schemes “to get their houses in order” in preparation for connecting to Pensions Dashboards. TPR promises to write to all chairs of trustee boards “several times in the year leading up to their dashboard’s connection date, setting out the clear actions they must take”.
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