Greg Kilminster
Head of Product - Content
Delfas signals shift in UK pensions regulation towards prudence and innovation
In a speech at the DG Publishing Private and Public Pensions Summit, Nausicaa Delfas, Chief Executive of The Pensions Regulator (TPR), outlined her vision for the future of pensions in the UK. She highlighted the pressing need for reform and announced a move towards a prudential style of regulation to ensure better outcomes for savers.
A changing pensions landscape
Delfas emphasised the critical role pensions play in financial security and noted the historical evolution of pension schemes since the Finance Act 1921. Despite successes such as automatic enrolment, which has seen over 80% of workers contributing to workplace pensions, Delfas acknowledged stark challenges remain. “Government research suggests that 12.5 million are under-saving for retirement,” she said, attributing this to longer life expectancies, cost-of-living pressures, declining home ownership, and generational gaps in pension provision.
These challenges, she noted, are most pronounced for women, low-to-medium earners, and those born in the 1970s. “Many are wondering if future generations will have enough income to support themselves in later life,” Delfas remarked.
The Mansion House reforms
Delfas welcomed the government’s recent Mansion House reforms aimed at consolidating the pensions market and boosting investment in the UK economy. She highlighted proposals for a minimum size for automatic enrolment default arrangements and easier consolidation mechanisms, which she said could lead to “a thriving and competitive pensions system.”
Without consolidation, TPR’s modelling predicts that within a decade, the master trust market will have seven schemes managing over £50 billion each, with four surpassing £100 billion. Such scale, Delfas asserted, necessitates regulatory adjustments. “We are shifting to a more prudential style of regulation, addressing risks not just at an individual scheme level, but also those which impact the wider financial ecosystem,” she said.
TPR’s key priorities
Delfas outlined three core priorities for TPR to safeguard savers’ interests:
- Investments: Delfas underlined the importance of robust investment governance, stating that savers trust schemes to make their contributions “worth it.” She called for clear objectives, regular performance reviews, and adaptive strategies to meet savers’ needs. “It cannot be right to say, ‘only judge me on my performance after 30 years,’” Delfas said. While supporting innovation, she warned that underperforming schemes unwilling to improve may face consolidation. Delfas also encouraged schemes to explore private market investments, provided they are appropriately governed. “Properly considered investments into private markets do have a role to play in a diversified portfolio,” she said.
- Data quality: High-quality data is critical to sound decision-making, Delfas stressed. TPR’s new Digital, Data and Technology strategy aims to improve data standards, reduce regulatory burden, and support innovation. Delfas acknowledged longstanding issues in pension administration, citing industry pressures to cut costs. She revealed plans for closer engagement with major administrators to address systemic risks. “For schemes seeking buy-out or consolidation, poor data quality remains a significant barrier,” she added.
- Trusteeship: Trusteeship is TPR’s top priority. Delfas underscored the need for skilled, critical, and diverse trustee boards, particularly as the market consolidates into fewer, larger schemes. TPR plans to work more closely with professional trustee firms, which manage over £1 trillion in assets, to ensure high standards and mitigate conflicts of interest. Delfas emphasised the importance of “buying decisions [being] made because the service is best for members, not best for the firm.”
Towards prudential regulation
Delfas described TPR’s regulatory evolution, stating, “We are entering a different era of regulation, that protects, enhances and innovates in savers’ interests.”
The regulator will adopt a more market-segmented approach for defined contribution (DC) schemes, grouping them by characteristics such as master trust types and employer-led arrangements. Delfas also announced plans for a “pensions market innovation hub” to support safe experimentation with new models and technologies. “This will provide the regulatory guardrails and enable safe experimentation of new business models and pension technologies, improving market competition and value,” she explained.
Delfas concluded by urging the industry to seize the opportunity to reshape pensions for the better. “Together, we have a unique opportunity to look ahead and make sure pensions work for everyone. Let’s not waste it.”
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PRA highlights risks and governance priorities for credit unions
The Prudential Regulation Authority (PRA) has published its annual assessment of the UK credit union (CU) sector, focusing on operational resilience and governance challenges. The findings have been communicated to the sector in two letters: one for CUs with total assets up to £10 million, and one for CUs with assets between £10 and £50 million. Both emphasise the need for stronger oversight and preparedness amidst evolving risks.
Some context
Credit unions face a demanding operating environment influenced by economic pressures and operational dependencies, including third-party and outsourcing risks. The assessment comes as part of the PRA’s continued supervision strategy, which includes periodic reviews and thematic engagement to safeguard the safety and soundness of financial institutions.
Helen Ainsworth, Senior Manager of the PRA’s Credit Unions Team, outlined the regulator’s expectations for credit unions to address emerging challenges and improve operational standards.
Key takeaways
Operational resilience and disorderly failure
The PRA flagged operational resilience as a critical area of focus, urging credit unions to monitor their financial position and respond swiftly to emerging issues. Risks such as dependency on third-party providers, cyber incidents, and poorly managed operational changes were highlighted.
“Credit union boards need to proactively consider how they would respond to these dependencies and risks,” the PRA stated, underscoring the importance of planning for orderly wind-downs where necessary.
Outsourcing risks
The exit of several third-party providers over the past year has exposed vulnerabilities in outsourcing arrangements. The PRA reminded CU boards that outsourcing does not absolve them of their regulatory obligations and encouraged thorough contingency planning to manage service disruptions effectively.
Corporate governance
Governance was identified as a second key risk, with more than 60% of credit unions in the up to £10 million group and more than 70% in the £10-£50 million group either working towards compliance or seeking transfers or closures. Boards are expected to evidence progress on governance standards, including robust decision-making frameworks and risk management practices.
Liquidity and investments
The PRA highlighted shortcomings in liquidity monitoring and reporting, recommending daily liquidity checks for larger credit unions and accurate inclusion of all accessible funds in regulatory filings. Investment reporting also requires greater transparency, including identification of deposit takers.
Next steps
The PRA is engaging directly with credit unions through conferences and supervisory meetings to address these priorities. Boards are encouraged to strengthen governance, monitor operational risks, and ensure data accuracy.
Helen Ainsworth concluded, “We are committed to engaging with credit unions on regulatory matters in a proportionate way, relying on openness and transparency to safeguard members’ interests.”
Credit unions must act decisively to address the PRA’s findings, ensuring their resilience and governance frameworks align with regulatory expectations. Failure to do so could invite increased scrutiny or intervention from the regulator.
Click here to read the full RegInsight on CUBE's RegPlatform.
MAS imposes civil penalty on JP Morgan for overcharging clients
Singapore's Monetary Authority (MAS) has imposed a civil penalty of S$3.2 million (US$2.4 million) on JP Morgan Chase Bank for misconduct in relation to over-the-counter (OTC) bond transactions.
The penalty follows an investigation by MAS that found that JP Morgan relationship managers had made inaccurate or incomplete disclosures to clients about the spreads they were being charged on OTC bond transactions. This resulted in clients being charged spreads that were above the bilaterally agreed rates.
MAS said that JP Morgan had cooperated fully with its investigation and had self-reported the misconduct. The bank has also admitted liability for the breaches and has taken steps to remediate the affected clients.
"JP Morgan has compensated the affected clients for the overcharged fees. The bank has also enhanced its pricing frameworks and internal controls to prevent similar occurrences," MAS said in a statement.
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Australia consults on new digital competition regime
The Australian Treasury has released a proposal paper outlining a new digital competition regime aimed at addressing anti-competitive practices in digital platform markets. The framework seeks to establish upfront obligations for major digital platforms, enhancing competition and protecting consumers.
Some context
The dominance of global digital platforms has raised concerns over market power, anti-competitive behaviour, and barriers to entry. Following recommendations from the Australian Competition and Consumer Commission (ACCC), the government supports the development of an "ex ante" regime to prevent market harms before they occur.
Key areas of concern include app marketplaces, ad tech services, and social media platforms, where issues such as self-preferencing, lack of transparency, and restrictions on competition have been identified.
Key takeaways
- Scope and designation: The proposed regime targets specific digital platform services critical to the Australian economy. Platforms could be designated based on quantitative factors, such as revenue or user base, and qualitative factors, like market power. Once designated, platforms would be subject to both broad and service-specific obligations.
- Obligations: Broad obligations aim to prevent anti-competitive practices such as self-preferencing, tying, and restrictions on interoperability. Service-specific obligations will address unique issues within services like app marketplaces and ad tech, with flexibility to adapt to technological and market changes.
- Enforcement: The ACCC will oversee enforcement, with powers to monitor compliance, gather information, and impose penalties. The regime allows for international alignment by recognising compliance measures implemented overseas.
Next steps
The Treasury seeks stakeholder feedback on the framework, including its scope, potential obligations, and the balance between regulatory oversight and promoting innovation. Submissions are open until 14 February 2025. The consultation aims to refine the framework, ensuring it addresses competition harms while supporting Australia’s position as a leading digital economy. Stakeholders are encouraged to participate in shaping a regime that balances consumer protection with fostering innovation.
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PRA issues latest Regulatory Digest
The Bank of England's Prudential Regulation Authority (PRA) published its Regulatory Digest for November 2024. The digest highlights key regulatory news and publications from the month, including:
- Policy Statement on the Definition of an Interim Capital Regime (ICR) firm that finalises the PRA's Supervisory Operating Procedure (SoP) for Operating the Interim Capital Regime. The SoP also includes rules relating to the definition of an ICR firm and an ICR consolidation entity.
- Remuneration reform consultation paper. The goal of thees reforms is to make the remuneration regime more effective, simpler, and more proportionate. The proposals aim to ensure accountability for risk-taking and achieve appropriate outcomes for consumers and markets.
- Consultation on the UK Insurance Special Purpose Vehicles (UK ISPV) regulatory framework.
The digest also includes a PS that provides feedback on responses received by the PRA to a previous CP on the review of Solvency II. This PS is the PRA's final PS to implement the conclusions of the Solvency II Review.
Click here to read the full RegInsight on CUBE's RegPlatform.