1. Art and Diseño

The
Corporate
plan
2012-2015
Contents
Foreword
page 3
Introduction
The Pensions Regulator
The Corporate plan
page 6
page 6
page 7
Regulatory approach
How The Pensions Regulator operates
The regulated community
page 8
page 8
page 10
Strategic plan 2012-2015
Strategic theme 1: Reducing risks to DB scheme members
Strategic theme 2: Reducing risks to DC scheme members
Strategic theme 3: Automatic enrolment
Strategic theme 4: Better Regulation
page 11
page 11
page 14
page 18
page 21
Business plan 2012-2013
DB deliverables 2012-2013
DC deliverables 2012-2013
Automatic enrolment deliverables 2012-2013
Better Regulation deliverables 2012-2013
page 24
page 25
page 27
page 29
page 30
Key performance indicators 2012-2013
How we measure performance
Strategic theme 1: Reducing risks to DB scheme members
Strategic theme 2: Reducing risks to DC scheme members
Strategic theme 3: Automatic enrolment
Strategic theme 4: Better Regulation
page 32
page 33
page 34
page 36
page 38
page 39
Resource summary
page 41
Financials
page 41
Workload assumptions
page 47
Appendix 1: The pensions landscape
page 49
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Corporate plan 2012-2015
Foreword
As the pensions industry continues to deal with the ongoing economic
volatility, and prepares for automatic enrolment to become a reality, the pace
of change for all involved in workplace pensions will continue to increase.
With such a high level of industry activity, it is inevitable
that cases requiring our investigation or interventions
will increase. Our workload has steadily grown across
all areas of business over the past few years, and we
expect that trend to continue in 2012-2013.
The regulator has three main focus areas and our
operations are structured around these. The priorities
for each area are set out in this plan. In 2012-2013
we will:
• continue our work to improve the solvency,
governance and administration standards of
defined benefit (DB) pension schemes
• work with the industry to ensure that all defined
contribution (DC) schemes have the features
necessary to enable members to achieve a good
outcome from their savings
• support employers in understanding their new
duties under automatic enrolment and preparing
for them effectively.
In addition, we will continue to focus on achieving
economy, effectiveness and efficiency in line with
the Spending Review 2010 settlement and the Red
Tape Challenge.
With automatic enrolment, workplace pensions will be
an increasingly significant component of retirement
provision for many more people in the UK. We take
our responsibility for making this process work as
effectively as possible very seriously. However, the
majority of memberships, and pension scheme assets,
are still in DB schemes. These are difficult times for
schemes and sponsors and a significant portion of
our resources remain dedicated to protecting those
members and the Pension Protection Fund (PPF).
We are a risk-based regulator. We make choices
about where and how we engage with the industry
to achieve our goals based on the risk to members’
benefits. We seek to do this as transparently as
possible. In a world where outcomes do not often
become apparent until pensions are in payment
– usually many years hence – setting performance
indicators and evaluating our success is sometimes
not straightforward. Where possible, however,
we endeavour in this document to indicate what
we plan to do, and how we will monitor progress.
We welcome views, as always, on how our task
of protecting member benefits might be better
approached, monitored or evaluated.
continued over...
Corporate plan 2012-2015
3
Foreword
In each of our key focus areas, this document sets out
the main tasks we set ourselves for 2012-2013. The
key elements of these are as described below.
In protecting members of DB schemes, we will:
• help make trustees and employers facing valuation
dates of December 2011-March 2012 aware of
the key issues as we see them, and how we will
approach our regulatory duties for this tranche of
recovery plans (due in 2013)
• explain, later in the year, how we will use our
learning (from six years of operation and two
complete cycles of recovery plans) to target our
limited supervisory resources proactively at higher
risk schemes
• provide support and guidance to DB scheme
trustees on holistic risk management by looking
across investment, funding and covenant risk areas
to create a more comprehensive view of member
security in schemes. It is likely we will revise our
code of practice on scheme funding
• remain fully engaged in the discussions
currently underway in Europe on the reform of
the Institutions for Occupational Retirement
Provision (IORP) Directive and be fully involved in
the impact assessment being undertaken on the
funding proposals contained in the IORP review.
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Corporate plan 2012-2015
In protecting members of DC schemes, we will:
• explain to the supply and demand sides of the
pensions industry how they might demonstrate
that our six key principles for delivery of DC
pensions are present in their arrangements
• work with trust-based schemes in particular
to ensure that schemes are sufficiently robust
and durable
• work to embed our six DC principles with
providers and advisers.
In maximising employer compliance with automatic
enrolment duties, we will:
• raise general levels of awareness and
understanding of the duties among employers
and advisers so that the requirements of
automatic enrolment are properly anticipated and
preparations start in good time
• send specific communications at 12 months and
3 months to employers subject to the duties and
work closely with these employers, their advisers
and suppliers in the first tranche of automatic
enrolment to anticipate and resolve issues
• start to build intelligence, investigation and
enforcement capabilities in preparation for small
and micro employers being brought into the
programme in later years.
Foreword
These are challenging ambitions. We set out these
plans and our resource budget in a period of spending
cuts, low public sector resources and constrained
public sector growth. We have planned accordingly,
with a focus on value for money and doing only
what is necessary to achieve our objectives. In all our
endeavours, our core asset is our people.
In 2012-2013, our challenge is to continue to
demonstrate the value of working at the regulator
to current and prospective employees. We do so
in a world of shrinking real public sector pay and
increased employee pension contributions. The
people who work at the regulator are committed and
capable. Management’s task is to maintain morale and
capability through what is likely to be a difficult year.
We have every confidence that the professionalism
and dedication of colleagues at the regulator will
continue to be the first and most enduring impression
for those we deal with in the industry, consistent with
the industry’s feedback to us over the last two years.
Our approach of educate, enable and enforce
will remain embedded in everything we do. We
will continue to work with trustees, employers,
pension specialists and business advisers, providing
guidance and education to make clear what is
expected of them and enabling them to achieve high
standards. Whilst supporting people in meeting their
responsibilities, we will be firm with those who do not
respect their obligations.
We look forward to working with you as we move
ahead together to reach the outcomes we all desire.
Michael O’ Higgins
Bill Galvin
Chair, The Pensions Regulator
Chief executive, The Pensions Regulator
With automatic enrolment,
workplace pensions will be an
increasingly significant component
of retirement provision for many
more people in the UK.
Corporate plan 2012-2015
5
Introduction
The Pensions Regulator
The Pensions Regulator is the regulator of workbased pensions, established under the Pensions Act
2004 as an executive non-departmental public body
of the Department for Work and Pensions (DWP).
Our objectives, as set out in the Pensions Act 2004
and Pensions Act 2008, are to:
• protect the benefits of members of
work-based pension schemes
• promote, and improve understanding of the good
administration of work-based pension schemes
• reduce the risk of situations arising which may
lead to compensation being payable from the
Pension Protection Fund (PPF)
• maximise employer compliance with employer
duties and the employment safeguards introduced
by the Pensions Act 2008.
We are responsible for regulating work-based
pension schemes consisting of occupational DB
schemes, occupational DC schemes, work-based
personal pensions and stakeholder pensions. We
are organised around the three main areas of DB
regulation, DC regulation and automatic enrolment.
In the case of work-based personal pensions, the
provider is also subject to regulation by the Financial
Services Authority (FSA). We are mindful of the
regulatory reform resulting in the restructuring of the
UK’s financial regulatory framework and will continue to
work with the FSA and its successor bodies to ensure
the regulation of DC provision remains appropriate.
The regulator is a member of the European Insurance
and Occupational Pensions Authority (EIOPA).
EIOPA will play an influential part in the future UK
pensions landscape and has recently given advice
to the European Commission on the review of the
IORP1 directive. We work in this forum to support our
statutory objectives.
We are funded via a Grant-in-Aid from the DWP –
some of which is recovered from eligible schemes via
the general levy. The setup and operating costs of
the Employer Compliance Regime (ECR) established
under the Pensions Act 2008 are being met by the
DWP. The regulator is financially accountable to the
Secretary of State for Work and Pensions.
We are fully committed to delivering efficiency
savings in line with the Spending Review 2010
settlement. This includes seeking continuous
improvement in processes and technology.
1
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Corporate plan 2012-2015
Institutions for occupational retirement provision
Introduction
The Corporate plan
This Corporate plan sets out our regulatory approach
and covers our Strategic plan for 2012-2015 and our
Business plan for 2012-2013.
The Strategic plan describes our strategic priorities
for 2012 to 2015. These are outlined in terms of the
following areas:
• reducing risks to DB scheme members
• reducing risks to DC scheme members
• automatic enrolment
• better regulation.
Figure 1
Our strategic themes and their link to our statutory objectives
Statutory themes
Statutory objectives
Reduce risks
to the PPF
Promote good
administration
Protect members’
benefits
Maximise employer
compliance
Reducing risks to DB scheme members
Reducing risks to DC scheme members
Automatic enrolment
Better Regulation
The annual Business plan covers the year ahead
and includes:
• our deliverables for 2012-2013
• our performance measures for
the period 2012-2013
• the resources we will need to deliver
our priorities for 2012-2015
• our workload assumptions for 2012-2013.
Finally, an Appendix provides some background
information on the pensions landscape.
Given the evolving nature of the policy and pensions
landscape, during the year we shall keep our priorities
under review in order to ensure that our resources are
allocated or re-allocated appropriately. We also retain
a contingency in our budget which allows some scope
to draw down funds for extra tasks if required.
This Corporate plan sets out our
regulatory approach and covers our
Strategic plan for 2012-2015 and
our Business plan for 2012-2013.
Corporate plan 2012-2015
7
Regulatory approach
How The Pensions Regulator operates – educate, enable and enforce
Our role is to ensure people responsible for providing access to and managing
work-based pensions fulfil their obligations. We work with trustees, employers,
pension specialists and business advisers, providing guidance and education
to make clear what is expected of them and enabling them to achieve high
standards. While supporting people in meeting their responsibilities, where
necessary, we use our enforcement powers against those that do not respect
their obligations.
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Corporate plan 2012-2015
Regulatory approach
Our approach is to ‘Educate, Enable and Enforce’.
We seek to educate trustees in their duties via the
use of tools such as the Trustee toolkit and enable
the regulatory community via the publication
of regulatory guidance, codes of practice and
statements. We are determined to ensure that those
we regulate follow the rules and we are prepared
to use our powers where it is appropriate and
proportionate to do so. When we use our major
powers, decisions are taken by the Determinations
Panel, whose constitution ensures it is independent
of the case teams to enable it to make impartial
decisions, based on the evidence before it.
Our operational approach is based on risk
assessment. Risk assessment is used to prioritise and
determine the probability of identified risks occurring
and their potential impact on the achievement of
our statutory objectives. The aim at every level is to
ensure resources are focused on the most significant
risks and to manage these with a clear understanding
of who is accountable for the action being taken to
mitigate risks.
We are committed to the principle of reasonableness
and will ensure that all our actions consider the
probability and size of the potential impact on
members’ benefits and the impact on those within
our regulatory remit, including sponsoring employers.
In early 2012, we set out our high-level strategy for
achieving our new role while adapting our approach
to regulation to reflect the growing DC market and its
dynamics. This included the five strategic principles
which will guide our regulatory approach:
• to engage the market at the most
appropriate part of the value chain
• to adopt an evidence-based approach to
segment the market according to the risk
presented to member benefits
• to ensure our approach will be proportionate
to the risks presented to our objectives
• to ensure that there is clear
accountability for member outcomes
• to work closely with Government and
other regulators to maximise the overall
effectiveness of our approach.
In late 2012, we will set out our ongoing strategy for
the regulation of DB schemes.
continued over...
We continue to focus on operational efficiency to
minimise the burden on pension schemes of meeting
their legal duty to register and submit data to the
regulator. In doing so, we are committed to the
principles of good regulation – to be proportionate,
accountable, consistent, transparent and targeted.
Corporate plan 2012-2015
9
Regulatory approach
The regulated community
Trustees
Pensions, administration and payroll providers
There are over 100,000 pension scheme trustees and
they are instrumental in the delivery of good member
outcomes2. Many will be lay persons, effectively in a
position of running financial institutions. Although
this removes conflicts of interest created by the profit
motive, it introduces issues of capability and capacity.
We believe that, in the first instance, the most
appropriate regulatory tools are communications
and education. Our communications and education
programme to trustees encourages them to update
and increase their knowledge by use of our online
Trustee toolkit and further ‘bite-sized’ learning.
Pensions administration and payroll providers are
ssential to the delivery of products that enable members
to achieve a good outcome from their savings. We
will work with them to encourage the delivery of
products that provide good member outcomes.
Employers
Employers have a critical role in the maintenance
and stability of work-based pension provision. Under
their new duties they must select a pension scheme
that meets the qualifying criteria for automatic
enrolment. They will also wish to ensure that they
select a scheme that meets their needs and the needs
of those who will be automatically enrolled into it.
We believe an engaged employer can significantly
minimise the risks associated with poor governance
and administration. Aside from our role in promoting
understanding of the pension reforms, we continue
to work with employers (who already provide workbased pensions) by providing information tailored to
different segments of the employer population.
Members
We have limited direct contact with members (mainly
in a whistleblowing capacity) but our primary focus
is on providing good practice guidance for those
responsible for communicating with members. We
will monitor knowledge and understanding among
members to make judgements about our priorities
and continue to work closely with the Pensions
Advisory Service (TPAS) the DWP and other
organisations communicating directly to the member.
Intermediaries
Intermediaries are third parties who offer advice and
information to employers and trustees in relation
to pension provision or their automatic enrolment
obligations. They have a strong level of influence over
employers’ and trustees’ behaviour and will play a
key role in supporting them with their new duties –
particularly in the selection of a suitable scheme. We
continue to develop our relationships with advisers
and intermediaries. Our aim is to maximise the use
of intermediaries as a conduit to employers, identify
and communicate good practice, and encourage
advisers to ensure that products used by employers
for automatic enrolment are consistent with the six
key principles for DC schemes (see page 15).
2 For more information, see our recently published strategy document ‘Delivering
successful automatice enrolment – The Pensions Regulator’s approach to the
regulation of employers and schemes’.
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Corporate plan 2012-2015
Our role is to ensure people
responsible for providing access to
and managing work-based pensions
fulfil their obligations.
Strategic theme 1:
Reducing risks to
DB scheme members
Strategic objective
DB risks engage three of our statutory objectives: to protect the benefits of
members of work-based pension schemes, to reduce the risk of compensation
being payable by the PPF and to promote good administration of work-based
pensions schemes.
Corporate plan 2012-2015
11
Reducing risks to DB scheme members
Current issues
Regulatory strategic plan 2012-2015
The biggest challenge this year is the economy.
Continued economic volatility, uncertain investment
returns, low interest rates and low gilt yields have all
come together to deepen scheme deficits. This is
clearly a difficult time for everyone involved with DB
pension provision.
All schemes have now carried out two valuations
under the scheme specific funding regime and have
experience in how to apply the funding framework.
We will continue to work with schemes to ensure
appropriate funding targets are set within the
changing landscape, and with employers to set
reasonably affordable plans for achieving those
targets. To achieve this, we will ensure our approach
reflects the different risks in each segment of the
landscape, outlining our expectations of those facing
these challenges, and working with parties to ensure
good outcomes are achieved.
A rapidly changing landscape has brought with it new
and increased challenges for schemes, sponsoring
employers, their advisers and the wider pensions
industry (including the regulator). De-risking, and
particularly transfer exercises, have become a focus
for many schemes and challenges still remain to
ensure exercises are run with transparency and
fairness for all parties.
The DB pensions landscape continues to evolve as
schemes close, liabilities are legitimately removed
from the employers’ balance sheet, and new provision
moves away from DB. Only 16% of DB schemes are
open to new members (see Chart 1 below).
Chart 1
Distribution of DB schemes by status
Winding up
128 (2%)
Closed to
new members
3,739 (58%)
Closed to
future accrual
1,552 (24%)
Open
1,013 (16%)
This reduction in the DB landscape has been a
steady trend for several years and shows no sign of
abating especially in light of the very challenging
economic environment.
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Corporate plan 2012-2015
We will use our experience of the last six years
to deliver on the principles of good regulation
ie to be proportionate, accountable, consistent,
transparent and targeted, and share our experience
and understanding with the pensions industry to
drive continued improvements in standards. Through
development of a more segmented approach (in
which we will take a greater interest in schemes that
fall into more risky segments eg those schemes with
a very weak employer covenant), we will be able to
drive good behaviour and be more transparent and
targeted in our expectations and intentions in specific
areas of risk.
DB schemes are faced with a challenging and changing
environment. Pressure to manage liabilities may
lead entities and individuals to consider actions they
would not otherwise do. We have seen continuing
innovation in the DB landscape including new derisking products, sophisticated funding solutions
as well as the continued use of more established
methods. We welcome innovative solutions that are
appropriate for specific circumstances.
Our challenge is to ensure actions do not
inadvertently, or in some cases intentionally, place
the burden of risk disproportionately on the security
of members’ benefits and the PPF. All trustees need
to be aware of moral hazard risk, and it will remain a
particular focus for the regulator.
Reducing risks to DB scheme members
Governance and administration
Our key focus will be on ensuring a fair distribution
of assets to pension schemes while recognising
the range of pressures, existing and emerging, that
employers face. In any economic climate, some
employers will struggle to meet their pension
liabilities. The regulator is committed to helping
employers and trustees work through these issues
and continues to believe that a strong and engaged
employer is the best support for a scheme. We expect
funding plans to continue to be based on affordability,
recovering deficits as quickly as is reasonably
affordable whilst ensuring over the medium and long
term, liabilities are appropriately managed.
We are keen to ensure the highest standards of
governance for DB pension schemes including robust
internal controls, clear accountabilities for decisionmaking and appropriate management of conflicts.
Where we believe poor funding outcomes arise from
poor governance, we have a variety of regulatory
options from educating and liaising with trustees and
industry to enforcement options such as improvement
notices and/or possibly the replacement of trustees to
fix the underlying causes.
A small minority of employers find themselves in
a position where their ability to meet the liabilities
they face is beyond their reach. We expect trustees
and employers to acknowledge this reality rather
than taking excessive risk in the hope liabilities may
be met. We are willing to work with trustees and
employers to find a solution that provides fair value
for the scheme and an acceptable outcome for the
employer. However, trustees and their advisers should
be mindful and vigilant to arrangements being made
that seek to remove the covenant from the scheme,
and guard against abandonment.
A rapidly changing landscape has
brought with it new and increased
challenges for schemes, sponsoring
employers, their advisers and the
wider pensions industry (including
the regulator).
Corporate plan 2012-2015
13
Strategic theme 2:
Reducing risks to
DC scheme members
Strategic objective
DC risks engage two of our statutory objectives, namely to protect the
benefits of members of work-based pension schemes and to promote good
administration of work-based pensions schemes.
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Corporate plan 2012-2015
Reducing risks to DC scheme members
Current issues
Six key principles for DC schemes
DC provision continues to grow. The introduction of
automatic enrolment from October 2012 is certain to
change the work-based pensions landscape significantly.
The DWP estimates that as a result of these reforms
the number of individuals saving more or saving for
the first time will increase by 5-8 million. In addition, it
is likely that the ongoing trend for the closure of DB
schemes will result in an increase in DC membership.
In December 2011, we published ‘Six principles of
design and management of a good DC scheme’.
We would like to see all DC schemes, particularly
those used for automatic enrolment, follow them. In
keeping with the six principles:
Regulatory strategic plan 2012-2015
• a comprehensive scheme governance framework
is established at set-up, with clear accountabilities
and responsibilities agreed and made transparent
The introduction of automatic enrolment will result
in many more scheme members who are not actively
engaged with their pension savings, and many
employers offering a scheme for the first time.
Between 2012 and 2017, all employers will review
their pension arrangements for their staff. If sensible
decisions are made this will result in products being
selected which are durable, well governed and
of sufficient scale to deliver a good outcome for
members. We will support employers through this
process by engaging with them and with industry
by providing information to support their decisions.
Our aim is that members are placed in products with
characteristics that can help to deliver good member
outcomes. We will, therefore, be working with
the pensions industry in the five market segments
(outlined on page 16) with a view to assisting schemes
to deliver these.
• schemes are designed to be durable, fair and
deliver good outcomes for members
• those who are accountable for scheme decisions
and activity understand their duties and, are fit and
proper to carry them out
• schemes benefit from effective governance and
monitoring through their full lifecycle
• schemes are well administered with
timely, accurate and comprehensive processes
and records
• communication to members is designed and
delivered to encourage member engagement,
so that they are able to make informed decisions
about their retirement savings.
continued over...
Corporate plan 2012-2015
15
Reducing risks to DC scheme members
DC landscape segments
We have segmented the existing market by scheme
size and type and have identified risks associated with
each segment (see Chart 2 below).
We are developing our approach to ensure we match
our regulatory activities to the risk posed in each of
the market segments, taking account of both current
and future risks in the market.
Chart 2
Segments of the existing DC market
• Micro schemes with fewer than 12 memberships
These typically, though not exclusively, are
composed of financially literate individuals with
a close trustee-member affinity. We will seek to
develop a low burden approach working closely
with Her Majesty’s Revenue & Customs (HMRC)
• Large employer-sponsored schemes
with over 1,000 members
Our focus will be around self regulation, possibly
through voluntary accreditation or self declaration
of compliance with the six key principles. In
addition, we will support trustees by providing
education material and guidance
Large
employersponsored
• Multi-employer schemes with
non-associated employers
Small and
medium
Multiemployer
DC
provision
Contract
Micro
These offer a DC trust based governance model,
but service more than one employer that is not
part of the same corporate structure. We will apply
our existing regulatory toolkit to encourage higher
standards and we will engage with the industry
and our Government partners to consider whether
the current regulatory regime is appropriate
• Small and medium sized schemes
Our approach to this segment will be to use our
existing regulatory toolkit to drive up standards of
governance and administration. We will address
any systemic issues that exist within these segments
and set out our views on good provision
• Contract-based work-based schemes such
as Group Personal Pensions (GPPs)
The regulator and the FSA both have regulatory
responsibilities in relation to this segment and we
will continue to work with the FSA to help ensure
that the benefits of members are protected and
high standards in administration are achieved.
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Corporate plan 2012-2015
Reducing risks to DC scheme members
Governance and administration
The provision of good scheme governance and
administration is driven from both the demandside of the market (such as trustees and employers)
and supply-side institutions (such as providers,
administrators and intermediaries).
We will continue our focus on ensuring the demandside of the market puts in place robust governance
structures with clear lines of accountability and
responsibilities are agreed and made transparent. We
will continue the process begun in December 2011
on the six key principles for DC schemes and work
with both the demand and supply-side of the industry
to agree the criteria and standards for administration
and governance that underpin the principles.
In addition, we will focus on encouraging the
supply-side of the market to facilitate good member
outcomes and supporting trustees in becoming more
demanding clients of administrators. This will include
continuing to focus on ensuring the existence of
adequate internal controls and monitoring the uptake
of our record-keeping guidance.
We will engage the market at the most appropriate
part of the supply chain. This will involve working
both with our traditional audience of trustees and
employers and increasingly with providers and
advisers. We will also be working with other agencies
(particularly HM Treasury, the FSA and the DWP).
We are developing our approach
to ensure we match our regulatory
activities to the risk posed in each
of the market segments, taking
account of both current and future
risks in the market.
Corporate plan 2012-2015
17
Strategic theme 3:
Automatic enrolment
Strategic objective
The regulator is responsible for maximising compliance with the employer duties
and employment safeguards in the 2008 Act, as well as protecting the benefits
of members of work-based pension schemes once they have been enrolled.
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Corporate plan 2012-2015
Automatic enrolment
Current issues
Automatic enrolment is the core employer duty of
the pensions reform which will commence in October
2012 for large employers. The new employer duties
will be phased in for all employers over a number of
years (see Table 1 below), starting with the largest
employers from October 2012. Eventually, this
requirement will apply to all UK employers.
These reforms mean that employers in Great Britain
and Northern Ireland will have to automatically place
their eligible jobholders into a qualifying pension
scheme and make minimum contributions on their
behalf (this contribution will be increased in phases).
The full extent of the duties is set out in the Pensions
Act 2008 and secondary legislation.
Table 1
The Automatic enrolment staging profile (Source: DWP)
Employer size (by PAYE scheme size)
or other description
Automatic enrolment
duty date
From
To
1 October 2012
1 February 2014
50 to 249 members
1 April 2014
1 April 2015
Test tranche for less than 30 members
1 June 2015
30 June 2015
30 to 49 members
1 August 2015
1 October 2015
Less than 30 members
1 January 2016
1 April 2017
Employers without PAYE schemes
1 April 2017
–
New employers April 2012 to March 2013
1 May 2017
–
New employers April 2013 to March2014
1 July 2017
–
New employers April 2014 to March 2015
1 August 2017
–
New employers April 2015 to December 2015
1 October 2017
–
1 November 2017
–
New employers October 2016 to June 2017
1 January 2018
–
New employers July 2017 to September 2017
1 February 2018
–
New employers October 2017
Immediate duty
–
250 or more members
New employers January 2016 to September 2016
continued over...
Corporate plan 2012-2015
19
Automatic enrolment
Regulatory strategic plan 2012-2015
Our strategy focuses on ensuring that all employers
are ready for automatic enrolment. Our initial focus
will be on large and medium employers, as the duties
will apply to them first, but we will eventually be
communicating with all employers. A key focus is also
to ensure that the advisers to whom employers will
turn are ready to offer support. This includes pension
providers, business software providers, administrators
and financial and business advisers.
Our employer audience is diverse, encompassing
large engaged corporations, and the owners of very
small businesses, who are not familiar with pension
provision. We will tailor our approaches for employers
of different sizes and business sectors utilising
different methods and language, communicating
over different timescales, and focusing on different
business advisers.
The educational products that we have already made
available include detailed guidance for large and/
or knowledgeable employers and advisers, business
software guidance, checklists for trustees, employers
and accountants, direct letters to employers as they
approach their staging date, and online interactive
tools to introduce small businesses to the new
requirements. We will continue to work to make sure
that employers have access to the information and
guidance that they need.
Our aim is to establish a pro-compliance culture
by supporting employers and making it as
straightforward as possible to comply, but also
making it clear that wilful or persistent noncompliance will result in regulatory action being
taken. Such action could include compliance notices,
fines, and escalating penalties, but we will not take
enforcement action unless we have previously given
the employer a chance to be compliant.
Our strategy focuses on ensuring
that all employers are ready for
automatic enrolment.
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Corporate plan 2012-2015
Our enforcement approach is to:
• establish and maintain a pro-compliance
culture among employers
• maximise deterrence for those who are
considering committing a breach of the law
• prevent non-compliance by ensuring effective
controls are in place
• swiftly detect non-compliance by putting in place
effective systems to facilitate whistle blowing,
employer registration, and the analysis and sharing
of information and intelligence with other agencies
• investigate breaches of the law in a fair,
objective and professional manner to seek to
ensure that those responsible are held to account
for their actions
• fully examine the causes of breaches and ensure
that they inform our regulatory approach so as
to minimise the risk of such breaches occurring
again and
• effectively enforce against non-compliance by
applying appropriate civil and criminal sanctions.
In developing our employer compliance regime
to support automatic enrolment, we will work with
agencies already operating in the field of employer
compliance regimes including those responsible
for national minimum wage, health and safety and
gangmaster licensing. We aim to ensure effective
joint working in order to identify and address those
employers with a high risk of non-compliance, while
minimising the regulatory burden. Such collaboration
will necessitate our having a common or shared view of
risk with relevant agencies, and processes for sharing
and transferring risks. This will allow us to leverage
the most appropriate and proximate regulatory
regime to achieve our respective objectives.
Employers should have good systems of
administration in place to enable the timely payment
of contributions and exchange of information
between all parties involved in running the scheme
so that it is clear what contributions are due and paid
to schemes. This enables those running schemes to
meet their statutory duties to monitor contributions.
We will publish guidance on maintaining
contributions in 2012.
Strategic theme 4:
Better Regulation
Strategic objective
Since the launch of The Pensions Regulator in April 2005, we have been
committed to being risk-based and aligned with the principles of good
regulation ie to be proportionate, accountable, consistent, transparent and
targeted. Economy, effectiveness and efficiency are guiding principles in all
the regulator’s work and we are committed to the cross-government Smarter
Government initiative and efficiency priorities.
Corporate plan 2012-2015
21
Better Regulation
Current issues
Regulatory strategic plan 2012-2015
The difficult economic climate puts considerable
pressure on both employers and work-based pension
schemes. In light of these pressures, it is extremely
important that we fully apply the principles of
good regulation and be mindful of the burden on
employers and schemes. We are fully committed to
the Government’s Red Tape Challenge and its work to
reduce the overall burden of regulation.
The regulator will continue to further the good
regulation agenda by:
We will continue to work with other government
agencies to ensure that we deliver our objectives
while keeping the burden on business to a minimum.
This will also involve continuing to evaluate our
regulatory toolkit and the extent to which our powers
are effective and remain fit for purpose.
Accountability – As a public body, we continue to
be accountable for our conduct and operations to
Parliament, our stakeholders and the general public.
We have a complaints procedure in place.
All public bodies must operate within tight
expenditure constraints and we are committed
to economy, effectiveness and efficiency in all
our activities. Reducing our overall burden on the
environment also remains a priority.
In March 2011, the Work and Pensions Select
Committee adopted a report on automatic enrolment
and the National Employment Savings Trust (NEST)
and made a number of recommendations for the
Government to consider regarding the role that it and
the regulator might play in to ensure that the pensions
reforms are a success. These recommendations
included measures to ensure that the pension
schemes used to receive contributions from people
automatically enrolled into a pension of appropriate
standard and that measures to promote compliance
with the automatic enrolment duties are effective.
The regulator will consider the recommendations
made and, in conjunction with the DWP, take action
where appropriate. It will also play a full part in
providing evidence to the Work and Pensions Select
Committee’s next inquiry on pensions which is due to
take place over the summer of 2012.
At the time of writing this report, the National Audit
Office (NAO) was in the process of undertaking a
‘value for money’ review on the regulator. We expect
the NAO to produce its report shortly after this
document has been published. We will give careful
consideration to the recommendations it makes and if
appropriate amend our plans accordingly.
22
Corporate plan 2012-2015
Proportionality – In deciding whether to use our
powers, we ensure we consider the circumstances
surrounding the breach of the law including the risk
of harm to our objectives and the seriousness of any
breach, and apply the most appropriate remedy.
Consistency – We carry out our work in a fair and
reasonable manner by using a similar approach in
like cases to achieve similar ends. We ensure that we
assess our risks and use our enforcement options in a
consistent way where appropriate.
Transparency – We will remain committed to being
as transparent as we can within the constraints placed
upon us by legislation and the need to maintain
commercial confidentiality. We publicise and where
appropriate consult on our strategy, policies and
guidance, as well as our compliance activities and
enforcement outcomes. We will continue to publish
our key data and analysis publications on an annual
basis: these are the Purple Book (DB pensions
universe risk profile), Recovery plan analysis and An
analysis of the DC trust-based landscape.
Targeting – We direct our compliance activity at the
most serious risks. We engage with other regulators
to coordinate our action where we can do so thereby
avoiding duplication and burden on employers and
third parties.
Better Regulation
The regulator will continue to promote economy,
effectiveness and efficiency by:
Economy – Continuing our commitment to
the cross-government Smarter Government
initiatives and efficiency prioritisations targeted at
reducing back office costs. We acquire and maintain
human and capital resources in the most efficient
way possible.
• We continue to review and update our
procurement and IT processes to identify
opportunities for cross-organisation cost savings
and group negotiating of procurement contracts
to secure discounts. We seek to operate
economically by ensuring customers and suppliers
are fully aware of procurement processes and
commercial implications.
• Using our flexible resourcing model to draw on
high-calibre permanent staff with a small number
of secondments from the financial services and
professional sectors to bring up-to-date knowledge
and practices into the regulator.
Efficiency – Delivering maximum output for
our resources.
• We are fully committed to delivering our
operations in line with the Spending Review 2010
settlement including achieving efficiency savings.
This includes an ongoing focus on continuous
improvement in processes and technology.
• In line with the Government’s strategy of digital
by default, all of our reports and publications are
now available for downloading on our website,
and we have significantly reduced our production
of paper-based material. We continue to focus
our programme of regulatory communications on
our low cost e-channels and use of social media
communications channels where appropriate.
• We remain committed to maintaining a culture
that is fair and inclusive and promotes respect for
all, both as an employer and as a regulator.
• We continue to work with other public bodies
in order to provide joined up regulation. This
includes assisting the DWP in identifying and
implementing opportunities for reducing
avoidable burdens on schemes and employers
through the Red Tape Challenge and reducing the
overall regulatory burden on schemes.
Effectiveness – Ensuring the ongoing delivery of our
statutory objectives.
• Measure and reduce the environmental impact
of our actions.
• We continue to asses our performance through
a series of key performance indicators across our
four strategic themes.
• We monitor awareness of and attitudes towards
the regulator by means of an annual perceptions
tracker survey which gathers the opinions of a
wide audience ranging from scheme actuaries
to employers. We review areas where we are
perceived as effective and those where we are not.
• We continue to engage with external partners to
achieve exposure to a wide variety of perspectives,
keeping current with economic and regulatory
theories and approaches of other regulators.
In light of these pressures, it is
extremely important that we fully
apply the principles of good
regulation and be mindful of the
burden on employers and schemes.
Corporate plan 2012-2015
23
Business plan
2012-2013
Our business plan sets out our plans for the year ahead and the resources we
will need to deliver our priorities. It consists of:
• our deliverables for 2012-2013
• our performance measures for the period 2012-2013
• the resources we will need to deliver our priorities for 2012-2015
• our workload assumptions for 2012-2013.
The following sections set out our planned deliverables for the year ahead
(2012-2013) in each of our four strategic areas.
24
Corporate plan 2012-2015
Business plan 2012-2013
DB deliverables 2012-2013 This year, our overarching aim will be to help schemes navigate through the
challenging economic environment and to provide clarity to trustees and sponsors on our expectations
regarding valuations and recovery plans.
Scheme
valuations
and scheme
applications
Receive the outstanding scheme valuations from the second cycle of triennial funding
statements and focus on areas of risk this information presents.
Regulatory
guidance
Set out our strategic direction for the regulation of DB schemes.
Deal quickly and effectively with all applications and scheme submissions including
recovery plans.
Publish a spring 2012 statement that will set out our expectations of those trustees
going through the valuation process in the coming months. We plan to make this an
annual statement, helping trustees to understand our expectations within the prevailing
economic conditions.
Provide more clarity on our views on good outcomes and behaviours through the revision
of key funding documents such as our funding code of practice.
Publish where appropriate reports explaining the reasoning behind significant
regulatory decisions.
Revise the timing and production of our Recovery plan analysis statistics on the scheme
funding landscape to produce a richer annual data set.
Market
behaviours
Proactively monitor and engage the market on innovative solutions and ensure
the risks to scheme members and the PPF are adequately considered.
Continue to target those instances where moral hazard and avoidance activity
have placed members’ benefits at risk.
Scheme
segmentation
Segment the DB market and tailor our approach to risks in each segment to better
target our resources on risks to members and PPF levy payers.
Proactively engage with schemes whose valuations present particular risk, and work
with those schemes early in their funding process.
Focus on the longer term funding of schemes, specifically where they are rapidly maturing.
Partnership
working
Continue to work with our government partners and industry stakeholders to
raise standards of scheme governance and protect the security of pension scheme
members’ benefits.
Work with the European Insurance and Occupational Pensions Authority (EIOPA),
our UK government partners, and the pensions industry to ensure the UK position is
recognised in Europe and the right outcome is achieved for UK pension schemes. This will
include engaging fully in the review of the IORP Directive with a particular focus on the
development of a sound impact assessment.
continued over...
Corporate plan 2012-2015
25
Business plan 2012-2013
DB deliverables 2012-2013 continued...
Scheme
administration
Continue to measure the extent to which schemes have adopted the record-keeping
standards, on which we issued guidance in June 2010. This will include measuring the
percentage of large schemes which have a complete set of common data.
Examine the ease of switching administration provider for employers and trustees and
consider the extent to which the current system safeguards member benefits.
Scheme
governance
Monitor, using our annual Scheme governance survey, the way that pension schemes
are run, including the existence of robust systems of internal controls and clear
accountabilities for the decisions made in the scheme.
Undertake governance and administration cases including applications, financial
management, wind-ups, internal controls and record-keeping.
26
Corporate plan 2012-2015
Business plan 2012-2013
DC deliverables 2012-2013
Key principles
for DC
schemes
Build awareness of the six key principles for DC schemes. This will include delivering new
educational content to trustees via the Trustee toolkit to reflect the key
principles for DC schemes, and delivering content to help employers engage with
their advisers in understanding the features of schemes which can assist in leading to good
member outcomes.
Produce a suite of products, messages and tools that will raise the standards of pension
provision used for automatic enrolment, help employers select a suitable scheme for
automatic enrolment, and enable members and trustees to assess their scheme.
Agree the criteria and standards for administration and governance with the demand and
supply side of the industry that underpin the principles and communicate any next steps
we expect industry to take.
Engage in work taking place in the EIOPA to seek to ensure the right outcome is reached
for UK schemes.
Deliver an education and communications programme across all channels in line with the
DC strategy including a communications programme to support automatic enrolment.
Our ECR communications strategy includes helping employers who may be reviewing their
pension arrangements. As part of this help, we will ensure employers and their advisers are
aware of the six key principles for DC schemes. We will engage with employer stakeholder
bodies, intermediary stakeholder bodies and employers via a range of communications
channels ranging from digital to face-to-face engagement where appropriate.
DC landscape
segments
Continue to build our regulatory programme in the five work streams of the DC
programme consisting of micro schemes, small and medium schemes, large employersponsored schemes, multi-employer schemes with non-associated employers and
contract-based provisions (work-based personal pensions). We will:
• Focus on the trustee in small, medium and large employer sponsored
schemes and use our existing regulatory toolkit to drive up standards of
governance and administration
• Engage the industry and our Government partners to review whether the
regulator’s reach in regard to multi-employer schemes with non-associated
employers is sufficient and to understand how regulatory oversight can address
the risks identified
• Define a strategy, in collaboration with the FSA, for contract-based provision to
help ensure that members receive appropriate levels of protection.
Market
developments
Continue to review developments in the DC marketplace including those relating
to charges, investment decisions and annuities. This will include building on the
recommendations expected in 2012 by the Open market option (OMO) review group.
Continue to monitor the proportion of schemes which have default funds established to
reflect the profile of the scheme membership.
continued over...
Corporate plan 2012-2015
27
Business plan 2012-2013
DC deliverables 2012-2013 continued...
Trustee
Knowledge and
Understanding
Measure Trustee Knowledge and Understanding (TKU) among the regulated community
and continue to monitor the effectiveness of the trustee register. Indentify any gaps
within the current Trustee toolkit for DC trustees and publish new material to close
hose gaps.
Scheme
administration
Continue to measure the extent to which schemes have adopted the record-keeping
standards we issued guidance in June 2010. This will include measuring the percentage
of large schemes which have a complete set of common data.
Clarify the role and responsibilities of administrators, who play a key role in helping
industry to adopt good practice standards of administration.
Examine the ease of switching administration provider for employers and trustees
and consider the extent to which safeguards for member outcomes are achieved.
Review the quality of administration for deferred members and use our existing
regulatory toolkit to drive up standards.
Scheme
governance
Consider how the trustee model can best provide good member outcomes.
Monitor, using our annual Scheme governance survey, the way that pension schemes are
run and how key risks are evaluated, including the existence of robust systems of internal
controls and clear accountabilities for the decisions made in the scheme.
Review governance in contract-based arrangements at provider level.
Continue to review the governance of hybrid schemes and
take further action as necessary.
28
Corporate plan 2012-2015
Business plan 2012-2013
Automatic enrolment deliverables 2012-2013 In 2012-2013, the regulator will:
Employer
compliance
Write to employers to notify them of their duty date 12 months and 3 months before their
duty date. An additional 18 month letter will go to large employers.
We will provide:
• A variety of tools to raise awareness, including producing stakeholder guidance,
holding industry stakeholder events and providing online information and tools
• Customer support to all employers
• Information to intermediaries to ensure that employer advisers, know what employers
need to do, when and how they need to do it
• Information directly to employers to support them as they prepare
• Online interactive tools to introduce small businesses to the new requirements and
• Detailed guidance suitable for pensions professionals.
Employer
registration
Put in place effective registration systems and supporting organisational systems by July
2012 to enable employers to register with us in compliance with their duties and to seek
to ensure non-compliance is held at an absolute minimum. This will be developed through
intensive stakeholder engagement and feedback.
Employer and
employee
contributions
Review the framework for maintaining contributions to identify the most efficient and
effective approach to achieving good member outcomes.
Consult on any changes to codes and regulatory guidance which may be necessary to
support the process of maintaining contributions.
Aim to ensure that employers and industry are aware of the regulators’ role in maintaining
contributions.
Work with providers to help ensure that their products comply with legislation and with
business software providers to help ensure that the payroll systems used by employers
support them in being able to comply with their duties.
Regulatory
processes
Develop processes to identify and manage systemic risks as they develop. This will
be supported through the use of intelligence including management information,
whistleblowing, working with other agencies and data analysis.
This will include building our internal organisation and people capacity and working with
external suppliers to manage any outsourced aspects of the compliance process.
Engage in the work taking place in the EIOPA to ensure they take account of the
requirements of automatic enrolment.
Measure stakeholder confidence in the regulator’s ability to deliver its compliance role.
continued over...
Corporate plan 2012-2015
29
Business plan 2012-2013
Better Regulation deliverables 2012-2013 In 2012-2013, the regulator will:
Economy,
effectiveness
and efficiency
Economy
Maintain tight controls, including those set by central government, on all
expenditure. Deliver all changes within a programme of change that measures
all impacts and costs centrally.
Continue to explore e-procurement and IT solutions to provide cost saving vehicles for
goods and services that deliver business benefits.
Carry out a survey of all staff working for us, and benchmark the results against those of a
wide variety of other employers, to help identify areas of strength and any concerns that
we may need to address.
Effectiveness
Continue to measure our operations against a series of key performance indicators as
outlined on pages 32 to 40. We will prioritise our work in accordance with a thorough
assessment of the risks posed to the achievement of our statutory objectives.
Fully consider the recommendations from the Work and Pensions Committee
reports on pensions and the NAO’s value for money review of the regulator and take
action as appropriate.
Continue to monitor awareness of and attitudes towards the regulator by means of a biannual Perceptions tracker survey which gathers the opinions of a wide audience ranging
from scheme actuaries to employers.
We will explore a new Customer Relationship Management (CRM) solution in order to
increase the targeting and effectiveness of our regulatory communications programme. In
addition we will continue to monitor customer quality of service including call pick up rate,
email, letter and fax response rates and proactive contacts.
30
Corporate plan 2012-2015
Business plan 2012-2013
Better Regulation deliverables 2012-2013 continued...
Economy,
effectiveness
and efficiency
continued...
Efficiency
Achieve the 2012-2013 target in line with the Spending Review 2010 settlement. Savings
will be monitored through an internal efficiency programme board whose aim is to achieve
process efficiencies across business with a particular focus on back office operations.
Automate our recovery plan submission process to deliver a more streamlined and
efficient internal and external process.
Undertake a scheme burden project to understand detailed cost drivers for schemes in
preparing scheme returns and develop cost efficiencies. Baseline scheme burden against a
new Key Performance Indicator (KPI) and measure future improvements against this.
Achieve greater efficiency and closer co-operation on a range of policy and transactional
processes. This will include working closely with HMRC to enable appropriate regulation of
micro schemes, shared procurement with other public
bodies and automation of processes.
Work with our government partners to reduce the overall burden of regulation in line with
the Red Tape Challenge.
Implement the 2012-2013 sustainability action plan across the regulator to continue to
work towards delivering a 25% reduction in carbon emissions base lined against 2009-2010
by the target date of 2014-2015. These reductions will be delivered within an overall focus
on cost efficiency.
Corporate plan 2012-2015
31
Key performance indicators
2012-2013
The following sections set our annual Business plan objectives and associated
corporate performance measures for the period 2012-2013.
32
Corporate plan 2012-2015
Key performance indicators 2012-2013
How we measure our performance
Our aim is to measure, as far as practicable, the
outcomes of our interventions in the market, both in
terms of what we have achieved and how effectively
we deliver these outcomes.
Measuring our effectiveness in protecting member
benefits, especially over a one year timeframe, is not
straightforward as:
• pensions are a long-term investment and it may
be decades before it becomes clear whether
members have received their full benefits
• other factors over which we have no or minimal
impact will strongly influence the outcome, such
as underlying market conditions.
Therefore we focus our attention on more
intermediate results that we believe will enable us to
meet our long-term ambitions. So, for example, we
aim our activity at:
As there is a time lag between our actions and these
outcomes becoming apparent, we also measure some
key enablers of our ability to deliver these outcomes.
In particular, we focus on the delivery of key outputs
and the credibility of the regulator. These measures
are principally secured through research and survey
results and we believe that these are good indirect
measures. These measures are reported quarterly
to our board and the DWP using a performance
dashboard specifically developed to present the
outcome measures agreed in the Business plan.
While our KPIs are aligned with our one year Business
Plan, for each of our three main business areas, we
have also set out our long term strategic objectives,
which given the longer timeframe, allow us to focus
more on the eventual pension outcomes for members.
continued over...
• ensuring that schemes and sponsors are aware
of our expectations of them and have the right
approach to managing risks in their schemes
• promoting better governance to reduce the
likelihood of schemes being underfunded or
of administrative failings that impact on
members’ benefits
• increasing the understanding of the risks to DC
schemes, and how to manage them, to reduce
the likelihood of such risks materialising
• increasing employer awareness and understanding
of their duties under the Pensions Act 2008 in
order to maximise compliance.
Corporate plan 2012-2015
33
Key performance indicators 2012-2013
Strategic theme 1: Reducing risks to DB scheme members
In addition to the ‘in-year’ measures below, we shall monitor over the longer-term the extent to which we
are achieving our two major strategic objectives in DB by monitoring:
1. the extent to which all members receive uncompromised pension provision.
And where it is not possible to ensure members receive their full entitlement from their scheme:
2. we will monitor the extent to which schemes where the sponsor becomes insolvent are funded
below the levels which the PPF believe are appropriate.
We aim to publish further details of these longer-term indicators in September 2012.
1.1
Objective
To ensure schemes and their advisers understand the regulator’s position on scheme funding for the
next round of valuations, taking account of the ongoing economic downturn.
Performance indicator
Effectiveness of the regulator’s activity to inform schemes submitting
a scheme valuation in the next cycle.
Measure: scheme funding expectations
We will target in a survey planned for the third quarter an appropriate increase in awareness and
understanding of the regulator’s expectations for the next round of valuations among schemes and
their advisers, against a baseline measure that we will obtain in a survey taking place in the first
quarter of the year.
1.2
Objective
To ensure the regulator is efficient at dealing with recovery plans.
Performance indicator
Reduction in the time the regulator takes to deal with recovery plans.
Measure: recovery plan response time
We will set a target of reducing the time that the regulator takes to close recovery plans, both for
those requiring further investigations and for those that do not.
1.3
Objective
To ensure that trustees and employers have an effective approach to scheme risk management.
Performance indicator
Trustees with a DB scheme manage funding and investment risk with reference to covenant.
Measure: risk management
We will target in the Scheme governance survey planned for the fourth quarter, an appropriately
challenging improvement in a new baseline measure that we will obtain in the autumn Scheme
governance survey.
34
Corporate plan 2012-2015
Key performance indicators 2012-2013
Strategic theme 1: Reducing risks to DB scheme members continued...
1.4
Objective
To educate and enable those responsible for member record-keeping and those who administer
pension arrangements, to improve the standard of record-keeping across the industry.
Performance indicator
Among large DB schemes, an improvement in the proportion of member records with all the
common data items in place according to the regulator’s guidelines for common data.
Measure: record-keeping
We will target 95% for legacy data, to be achieved by December 2012, as measured in our annual
Record-keeping survey.
continued over...
Corporate plan 2012-2015
35
Key performance indicators 2012-2013
Strategic theme 2: Reducing risks to DC scheme members
In addition to the ‘in-year’ measures below, which are designed to encourage good design and governance
of new and existing DC schemes, we shall monitor over the longer-term the extent to which we are
achieving our two major strategic objectives in DC by monitoring:
1. the extent to which features of the DC principles are integrated into work-based DC schemes.
2. the extent to which beneficiaries from DC schemes achieve demonstrably better outcomes.
2.1
Objective
To manage the delivery of the DC programme (including project delivery
and its impact on the regulator’s other activities).
Performance indicator
Project delivery is to plan. The regulator achieves its planned business objectives without disruption.
Measure: delivery milestones
We will look to achieve all of our delivery milestones in 2012-2013 on time and within tolerance.
2.2
Objective
To build awareness of the six principles of design and management of a good DC scheme.
Performance indicator
Good levels of awareness of the principles among both the supply-side and demand-side.
Measure: principles of scheme design and management
We will target in surveys planned for the fourth quarter, an appropriate increase in awareness of the
principles, against baseline measures that we will obtain in the first and second quarters of the year.
2.3
Objective
To educate and enable those responsible for member record-keeping and those who administer
pension arrangements, to improve the standard of record-keeping across the industry.
Performance indicator
Among large DC schemes, an improvement in the proportion of member records with all the
common data items in place according to the regulator’s guidelines for common data.
Measure: record-keeping
We will target 95% for legacy data, to be achieved by December 2012, as measured in our annual
Record-keeping survey.
36
Corporate plan 2012-2015
Key performance indicators 2012-2013
Strategic theme 2: Reducing risks to DC scheme members continued...
2.4
Objective
To ensure that trustees have sufficient understanding of costs and charges incurred by members to
deliver better value for money for members.
Performance indicator
Trustee boards’ collective understanding of the charges incurred by the members in their scheme.
Measure: understanding of costs and charges
We will measure, through the biannual Scheme governance survey, trustee boards’ collective
understanding of the following in relation to the scheme’s funds:
• annual management charge
• total expense ratio
• portfolio turnover rate.
We will set an appropriately challenging target in the survey planned for the fourth quarter, against
the result achieved in the fourth quarter of 2011-2012.
continued over...
Corporate plan 2012-2015
37
Key performance indicators 2012-2013
Strategic theme 3: Automatic enrolment
In addition to the ‘in-year’ measures below, we shall monitor over the longer-term the extent to which we
are achieving our major strategic objectives of maximising employer compliance with employer duties
and the employment safeguards introduced by the Pensions Act 2008 by monitoring the extent to which
the process of automatic enrolment becomes an accepted part of an employer’s duties, akin to all other
established legal obligations.
3.1
Objective
To manage the delivery of the Employer Compliance Regime (ECR) programme (including project
delivery and its impact on the regulator’s other activities).
Performance indicator
Project delivery is to plan. The regulator achieves its planned business objectives without disruption.
Measure: delivery milestones
We will look to achieve all of our delivery milestones in 2012-2013 on time and within tolerance.
3.2
Objective
To maximise on-time compliance with the new employer duties.
Performance indicator
Employers register with the regulator.
Measure: principles of scheme design and management
Cumulative number of employers who have registered with the regulator.
3.3
Objective
To communicate effectively to employers about the pensions reform.
Performance indicator
High proportion of employers whose staging date falls in 2012-2014 are aware of and understand
their automatic enrolment duties, as measured in the Employer tracking survey.
Measure: communications effectiveness
For those employers whose staging date falls in 2012-2013, we will target 95% to be aware and 80%
to understand their duties 3 months before their staging date. For those employers whose staging
date falls in 2013-2014, we will target levels of awareness and understanding that show appropriate
progression towards the targets above.
38
Corporate plan 2012-2015
Key performance indicators 2012-2013
Strategic theme 4: Better Regulation
4.1
Objective
To continue to deliver risk-based regulation in line with the Hampton Principles and to be an
exemplar of best practice.
Performance indicator
The regulator continues to be authoritative and demonstrates improvements in the five principles of
good regulation, as evidenced by research. We will measure this through the biannual Perceptions
tracker survey.
Measure: Hampton Principles
We aim to maintain our strong ratings measured in our Perceptions tracker survey across the
collective results on the Hampton Principles. We will continue a target of 70% of stakeholders
agreeing that the regulator meets the six principles (on average across the principles).
4.2
Objective
External stakeholders have confidence in the regulator’s delivery of DB regulation,
DC regulation and the Employer Compliance Regime.
Performance indicator
Sustained performance in stakeholder confidence, as measured by the Stakeholder perceptions survey.
Measure: stakeholder satisfaction
We will measure the extent to which our stakeholders have confidence in the regulator’s delivery of
DB regulation, DC regulation and the Employer Compliance Regime.
Following the survey taking place in the fourth quarter of 2011-2012, we will set an appropriately
challenging target to achieve in the survey planned for the fourth quarter.
4.3
Objective
To ensure efficiency in our data collection processes.
Performance indicator
New schemes which have registered with HMRC are registered with the regulator or have told us why
they are exempt.
Measure: new schemes registration
We will target an appropriate improvement in the proportion of new schemes which have registered
with HMRC are registered with the regulator.
continued over...
Corporate plan 2012-2015
39
Key performance indicators 2012-2013
Strategic theme 4: Better Regulation continued...
4.4
Objective
To continue to develop appropriate education programmes to influence our core trustee audience (ie
the Trustee toolkit) and to explore the options for extending this approach to other audiences.
Performance indicator
Toolkit usage among lay trustees to match the 2011-2012 targets.
Measure: Trustee Knowledge and Understanding (TKU
We will continue to set quarterly targets for trustee completions of modules of the Trustee toolkit.
Targets are aligned with communications activity and seasonality and are follows:
• Q1: 5,000 completions
• Q2: 4,000 completions
• Q3: 4,000 completions
• Q4: 5,300 completions.
4.5
Objective
To provide a high-quality service to our customers.
Performance indicator
Maintenance of the high customer satisfaction as measured by our customer
and website satisfaction research.
Measure: Customer service
We will aim to achieve an appropriately challenging combined target of customer and website
satisfaction in the surveys planned throughout the year.
4.6
Objective
For regulator staff to remain fully engaged.
Performance indicator
Improve employee engagement as measured in the Employee engagement survey.
Measure: Employee engagement
In the survey which will take place in the first quarter, we will target an improvement in the
engagement index result from the survey in the first quarter of 2011-2012.
40
Corporate plan 2012-2015
Resource summary
This section provides information on the resources
required to deliver our outcomes during 2012-2013.
Financials
Employer Compliance Regime
The regulator receives separate Grant-in-Aid (GIA)
payments from the DWP to fund its regulatory
activities related to the Pensions Act 2004, the
Employer Compliance Regime and activities around
implementation of the Pensions Act 2008.
The costs for work undertaken by the regulator in
respect of the implementation of the Employer
Compliance Regime are being met by the DWP. We
have embedded organisational protocols to ensure
no cross-subsidy with the general levy funding
streams takes place.
The regulator collects levies on behalf of the Secretary
of State for Work and Pensions, part of which covers
the resource expenditure of the regulator (in respect
of its activities under Pension Act 2004).
Projected budget for 2012-2013
Our planned budget for levy regulatory activities
related to the Pensions Act 2004 for 2012-2013 is
£32.9 million which includes £5.9 million to prepare
for the additional work in our core regulatory activities
as a result of the Pensions Act 2008 (PA08). This
budget is £1.7m lower than the Comprehensive
Spending Review projected budget for 2012-2013
(as presented in the 2011-2012 Corporate plan)
reflecting our realistic forecast expenditure resulting
from our 2011-2012 year end cost base. The budget
for 2012-2013 also includes extra resource to deal with
low security schemes to mitigate the PPF’s exposure
to significant liability drift.
continued over...
Corporate plan 2012-2015
41
Resource summary
Projected budget for 2012-2013 continued...
Efficiencies
Our planned budget for ECR activities related to
the Pensions Act 2008 is £11.6 million. This includes
the costs of the Employer Compliance Programme,
aimed at ensuring observance of the automatic
enrolment duties. This figure excludes costs of
operation of a prime contract to support direct
communications with employers for the automatic
enrolment of staff into workplace pension schemes
which will be phased in from October 2012. The
seven-year contract, which has an option for the
regulator to extend it for a further three years, has an
estimated value of £105 million. The detailed cost of
the contract is not included for reasons of commercial
sensitivity. Expenditure for ECR activities (excluding
the prime contract) is planned to increase to £18.2
million in 2014-2015.
We have been asked to prepare plans for a 25%
reduction in our levy cost base over the course
of four years to 2014-2015. This is reflected in the
table below which shows the projected levy budget
(excluding PA08) reducing from £27m in 2011-2012 to
£24.9m by 2014-2015 (adjusted for inflation). Detailed
plans have been developed to identify the ways
they will be achieved and include a combination of
process efficiencies; leveraging opportunities to work
more closely with other Government departments;
improving procurement; and exploiting economies of
scale. We are also reviewing the way in which we carry
out our core regulatory processes.
The planned headcount for 2012-2013 is 417 full time
equivalents (FTEs) in April 2012 increasing to 445 FTEs
by March 2013, reflecting both permanent and short
term resourcing needed across the year to complete
our planned activities. Future year headcount
projections are subject to ongoing review of the
business requirements across the regulator.
The Senior Management Team (SMT) is accountable
and committed to progressing these plans and
regularly reviews this programme of work to ensure it
is on track to achieve the necessary cost reductions.
There are ongoing discussions with the DWP on our
future funding requirements and we will review future
year projections in line with those discussions.
Forecast expenditure in 2011-2012 is significantly
lower than budgeted due to the spending controls
introduced across Government in 2010-2011. The
controls, which continue to apply, have affected
our ability to recruit staff, take forward a number of
planned activities and procure key goods and services
needed to support the achievement of objectives
(further detail below).
The Chief Executive Officer has received delegated
authority to authorise expenditure within prescribed
categories and limits as agreed with the DWP. We
have also begun to deliver efficiency savings across
the organisation in line with the efficiency challenge.
We have worked closely with the DWP, our sponsor
department, in ensuring compliance with the controls
throughout the period and ensuring the processes are
run as smoothly as possible.
42
Corporate plan 2012-2015
Resource summary
Table 2
The regulator’s projected budget for 2012-2015 is set out below
(excluding costs of the prime contract).
Category (Levy)
2012-2013 £’000
2013-2014 £’000
2014-2015 £’000
Staff
19,095
20,089
17,930
Non-staff
7,058
6,325
5,822
Depreciation
459
754
754
Capital
406
406
406
27,018
27,574
24,912
5,927
10,500
10,800
32,945
38,074
35,712
2012-2013 £’000
2013-2014 £’000
2014-2015 £’000
Staff
6,446
10,215
10,839
Non-staff
4,887
4,144
4,127
Depreciation
38
867
1,405
Capital
190
3,150
1,807
Sub total (Levy)
11,561
18,376
18,178
CSR10 total
44,506
56,450
53,890
Sub total (Levy)
PA08
CSR10 total (Levy inc. PA08)
Category (ECR)
continued over...
Corporate plan 2012-2015
43
Resource summary
Budget comparison 2011-2012 to 2012-2013
The regulator’s budget in 2011-2012 was £43.1 million
and in 2012-2013 it will be £44.5 million (see Tables
3 and 4). This covers all the regulator’s activities,
including the in-house costs of the Employer
Compliance Regime. (For reasons of commercial
confidentiality, both years exclude expenditure on
the prime contractor for delivering services related to
employer compliance.)
However, the actual expenditure in 2011-2012 was
considerably under the planned budget. We have set
out below the main reasons for this, and these are set
out in terms of our two main sources of income: the
Levy budget; and the ECR budget.
The regulator’s Levy-related budget in 2011-2012
was £30.4 million but the end of year forecast level of
expenditure was £23.5 million. We incurred less cost
due to the effect of central government spending
controls on recruitment and on the procurement
of external services, including those to undertake
communications with our regulated communities.
As a result of the controls, it took much longer to
recruit new staff, including those needed to replace
employees who left the regulator, and it was not
possible to undertake various regulatory work,
including regulatory communication campaigns.
Therefore for levy-related expenditure, in 2011-2012,
we spent £4.2 million less than planned on staffrelated expenditure, £0.7million less on regulatory
campaigns, and £1 million less on legal and
professional expenditure.
With regard to the regulator’s ECR budget, the
budget (excluding the prime contract) was £12.6
million, but the end of year forecast expenditure was
£7.3 million. Once again, spending controls resulted
in lower expenditure than planned – we spent £2.8
million less on staff-related expenditure, £1.4 million
less on campaigns, and around £0.4 million less on
related research and legal advice.
44
Corporate plan 2012-2015
When comparing the increased budget from 20112012 to 2012-2013, it is also important to distinguish
between the levy-related budget and the ECR budget.
With regard to levy-related budget, which increases
from £30.4 million in 2011-2012 to £33 million in
2012-2013, although this is subject to an incremental
reduction in line with central government targets (a
25% reduction from the 2010-2011 baseline over 4
years), it also includes an additional budget of £4.2
million to meet additional activity in respect of the
duties arising from the Pensions Act 2008.
The fall in the budget for ECR from £12.6 million in 20112012 to £11.6 million is due to a number of factors,
including a planned increase in permanent staff levels
offset by lower non payroll staff levels, a change to
the budget risk reserve in respect of ECR activity, and
certain regulatory communication activity transferring
from the regulator to the prime contract supplier.
Resource summary
Table 3
The regulator’s budget and forecast for 2011-2012
and the budget for 2012-2013
Levy budget analysis by expenditure category
2011-2012
Full year forecast £’000
2012-2013 Budget
£’000
Income
(10)
(10)
(11)
Salaries
16,886
14,355
19,438
Non-payroll staff costs
3,144
1,891
2,341
Other staff costs
1,785
1,357
1,638
279
85
1,412
2,976
1,610
3,069
Communications/
publications
890
211
669
Managed contracts
317
276
343
Accommodation/
General office costs
2,548
2,297
2,523
IT and telecoms
540
377
658
Depreciation
658
616
459
30,013
23,065
32,539
420
441
406
30,433
23,506
32,945
2011-2012 Budget
Consultancy
Professional services
Fixed asset costs
Total levy expenditure
£’000
Corporate plan 2012-2015
45
Resource summary
Table 4
The regulator’s budget and forecast for 2011-2012
and the budget for 2012-2013
ECR budget analysis by expenditure category
2011-2012
Full year forecast £’000
2012-2013 Budget
£’000
Income
(6)
(9)
(8)
Salaries
4,736
3,768
5,618
Non-payroll staff costs
2,356
799
828
Other staff costs
594
328
587
Consultancy
261
67
600
Professional services
756
311
2,415
2,707
1,322
345
Managed contracts
–
–
–
Accommodation/
General office costs
632
560
726
–
–
222
100
26
38
12,136
7,172
11,371
498
81
190
12,634
7,253
11,561
2011-2012 Budget
2011-2012
Full year forecast £’000
2012-2013 Budget
£’000
43,068
30,759
44,506
2011-2012 Budget
Communications/
publications
IT and telecoms
Depreciation
Fixed asset costs
Total ECR expenditure
£’000
Table 5
The Pensions Regulator’s total budget
Total TPR budget
Total TPR expenditure
(Levy and ECR)
46
Corporate plan 2012-2015
£’000
Workload assumptions
The figures in Table 5 on page 48 are the actual and anticipated
workload or traffic volumes for some of the key activities undertaken or
provided by the regulator. The estimated volume is based on current
levels of activity and factors in a degree of uncertainty.
Corporate plan 2012-2015
47
Workload assumptions
Table 5
Workload assumptions
Type of work
Team
Actual volume
April 2011-March 2012
Estimated volume
April 2012-March 2013
DB and Hybrid cases
DB regulation
2,221
2,450
DC cases
DC regulation
149
190
DB and Hybrid enquiries
DB regulation
742
570
DC enquiries
DC regulation
166
130
Scheme return
and levy services
76,506
83,547
Scheme Information
Management (SIM)
28,846
29,550
Levy finance
44,000
42,000
Customer contacts
excluding levy and
scheme returns
Customer communications
21,076
25,330
Codes of practice
published
Various
0
2
Guidance published
Various
3
5
Statements issued
Various
3
1
Strategies published
Various
1
1
Outbound contacts
(staging letters sent)
ECR
18 month
ECR
2,901
8,600
12 month
ECR
349
11,400
6 month
ECR
0
300
3 month
ECR
0
900
Inbound contacts
(letters related)
ECR
18 month
ECR
300
2,300
12 month
ECR
40
2,700
6 month
ECR
0
100
3 month
ECR
0
400
Levy, scheme return
and scheme information,
customer contacts (inbound
and outbound
Scheme returns
Levy invoices
48
Corporate plan 2012-2015
Appendix 1:
The pensions landscape
Corporate plan 2012-2015
49
Appendix 1: The pensions landscape
There are currently around 6.3 million active members
of work-based private pension schemes (see Table
6 below). This group is made up of 3.3 million active
members of occupational pension schemes split
between DC and DB schemes and 3 million members
of DC work-based personal pension arrangements.
In addition there are 12 million deferred or pensioner
memberships across 51,000 occupational schemes,
with a large concentration of members in a small
number of schemes (1,600 schemes have 1,000 or
more members).
Table 6
The pensions landscape
Current
landscape
DB
Hybrid
DC
occupational
DC work-based
personal pensions
(contract)
DC memberships
Schemes
6,280
1,800
45,990
N/A
Total
Total
memberships
8.4m
3.3m
DB
1m
DC
1.5m
3m
5.5m
1.7m
0.5m
DB
0.5m
DC
0.6m
3m
4.1m
Active members
Source: The Pensions Regulator’s research data, ASHE 2009 (ONS)
Active DC
membership
6
Projected increase under auto-enrolment 5m – 8m
{
{
Current active DC membership
Trust
Contract
1.1m
3.0m
Lower range estimated increase 5.0m
Note: totals do not sum to sub totals in table above due to rounding
Source: DWP modelling
The introduction of automatic enrolment from October
2012 is expected to change the work-based pensions
landscape significantly. The DWP estimate that 5-8
million people will be saving more or saving for the first
time (see Table 6 above). In addition, it is likely that
the ongoing trend for the closure of DB schemes will
also result in an increase in DC membership.
50
Corporate plan 2012-2015
Upper range estimated increase 8.0m
How to contact us
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T 0845 600 0707
F 0870 241 1144
E [email protected]
www.thepensionsregulator.gov.uk
www.trusteetoolkit.com
The Corporate plan 2012-2015
© The Pensions Regulator May 2012
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