This month's round-up contains two items relating to TPR, its new guidance in relation to investment consultants' objectives and fiduciary management and its three-year strategy on combatting pension scams.
TPR issues guidance on measures for which it assumes responsibility from CMA
Mark Dowsey, Dave Roberts | August 9, 2022
Trustees are required to run a competitive tender process when appointing fiduciary managers in relation to 20% or more of scheme assets. They are also prohibited from receiving investment consultancy services without having set strategic objectives for their investment consultancy provider.
TPR states that “trustees have been required to comply with these obligations and to self-certify their compliance to the CMA for two years … the introduction of these regulations should not place an additional burden on schemes”.
The Pensions Regulator’s three-year strategy to combat pension scams
Dave Roberts, Mark Dowsey | August 3, 2022
On 3 August 2022, the Pensions Regulator (TPR) published “Our strategy to combat pension scams", which sets out measures it intends to take over the next three years to tackle scammers. The covering press release cites that the current cost of living crisis may leave savers more vulnerable to scammers.
The three pillars of the strategy are to:
Educate the industry and savers on the threat of scams (savers not being enabled to make good decisions)
Prevent practices that harm savers’ retirement prospects (practices by schemes, advisers and providers which lead to saver harm), and
Fight fraud through the prevention, disruption and punishment of criminals (pension fraud and other criminality).
TPR notes that the issues it will focus on include both pension fraud and “practices which lead to saver harm, such as high fees”. It is keen to distinguish between the two, but the effect on savers’ retirement outcomes will often be similar. Its approach and sanctions to tackle the two may be very different.
TPR states that it is primarily concerned with seven types of pension scams. In practice two or more of these may apply in any given case:
Investment fraud – covering scammers who misrepresent high-risk or false investments to savers.
Pension liberation – accessing their pension pots under the age of 55.
Scam pension schemes and providers – schemes that either do not exist or exist but are set up to commit fraud.
Clone firms – scam schemes and providers that are disguised as legitimate entities.
Claims management companies – where savers have been mis-sold a pension and they are asked for an advance fee to begin a claims process. TPR cites a variation where savers who have been scammed are contacted and asked for a fee to get their money back.
Breaches of employer related investment (ERI) restrictions – where employers divert members’ benefits to invest inappropriately in their business.
High fees – excessive fees often layered through unnecessarily complex business structures.
To help enable savers to make informed decisions, TPR will continue to encourage schemes to use anti-scam messaging whenever possible. It will also explore how employers can be used to promote anti-scams messaging.
TPR will encourage all schemes to comply with the Pledge to Combat Pension Scams or Pension Scams Industry Group (PSIG) Code and will consider whether to make compliance with these a mandatory element of the value for members (VfM) assessment for DC trust-based schemes. Continued encouragement of consolidation of poorly run schemes also features in TPR’s plan.
TPR will also review its data sharing agreements with the Money and Pension Service (MaPS) and the Financial Conduct Authority. It also plans to work with MaPS to analyse emerging data on amber transfer flags. TPR will also explore opening a “regulatory sandbox” through which industry can test solutions for scam prevention and intelligence gathering.
For each of the three pillars of its strategy, TPR sets out bullet point actions that it will carry out in years one, two and three.
