The Pensions Regulator

Assessing risk

The Pensions Regulator's core activity is identifying and reducing risks in occupational pension schemes.

Our power to collect data about schemes gives us the information we need both to assess the level of risk in individual schemes and to identify trends in the industry as a whole.

What is a risk?

Any situation that may significantly reduce or prevent payment of the benefits due to members will be considered a risk, for example:

• inadequate funding;
• incomplete or inaccurate record-keeping;
• lack of knowledge or understanding on the part of trustees about their role and duties; or
• possible dishonesty or fraud.

Establishing a risk profile

When assessing a scheme's level of risk, we will consider two factors:

• How likely is it that an event will occur that will affect the security of members' benefits?
• What would be the impact of the event, given the nature, size and status of the scheme and the employer?

Our relationship with a scheme depends largely on the risk profile identified. We closely monitor schemes found to have a high level of risk, while schemes at lower risk will attract less regulatory intervention. Where the potential impact of a risk is very high - for example, because the scheme has a very large membership - we maintain a close relationship with trustees.

We review risk profiles - and the corresponding level of regulatory intervention - as and when we receive new information about schemes.