The appointment of Sarah Smart as Chair of the Pensions Regulator Contents

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The appointment of Sarah Smart

The Pensions Regulator

1.The Pensions Regulator (TPR) is a non-departmental public body sponsored by the Department for Work and Pensions (DWP). Its role is to regulate work-based pension schemes. Its main responsibilities include:

a)Ensuring that employers put their staff into a pension scheme (known as automatic enrolment) and pay money into the scheme;

b)Protecting people’s savings in workplace pension schemes;

c)Improving the way that workplace pension schemes are run;

d)Ensuring that employers balance the needs of their pension scheme with growing their business;

e)Reducing the risk of pension schemes ending up in the Pension Protection Fund, a statutory fund which protects members of defined benefit pension schemes if their scheme becomes insolvent.1

2.TPR’s past record of performance is mixed. The implementation of automatic enrolment has been a high profile success. But our predecessor Committees, in both the 2015 and 2017 Parliaments, made serious criticisms of the way in which TPR carried out its role in some high profile cases involving defined benefit schemes whose sponsoring employer had become insolvent.2 We ourselves have expressed concern this year about TPR’s capacity—working alongside other regulators—to tackle pension scams effectively. As the new Chair of TPR takes up the role, the Covid-19 pandemic continues to have an impact on the funding levels of several large defined benefit pension schemes and to make it difficult for some smaller employers to fulfil their auto-enrolment duties. In addition, Parliament has recently given TPR new powers in the Pension Schemes Act 2021. We will continue to scrutinise TPR’s performance closely.

3.DWP launched the recruitment campaign for the new Chair of TPR in November 2020. It was originally due to end on 16 December 2020, but the deadline was extended to 3 January 2021 because of the low number of applicants. In the end, there were 8 candidates, of whom 5 were interviewed and 2 were found appointable. DWP has not been able to supply us with information about the diversity of candidates, as it would usually be expected to do, because the number of people involved is so small that there would be a risk that individuals’ data could be identifiable.

4.The Chair of TPR is responsible for providing strategic leadership for the organisation. The job advert lists the following as the key duties of the role:

a)Leading TPR’s Board, whose membership includes the Chief Executive and both Executive and Non-Executive Directors;

b)Providing strong leadership and working closely with the Chief Executive to ensure that TPR is “ effective and efficient and so provides excellent value for money”;

c)Ensuring that TPR has a constructive relationship with DWP Ministers and officials;

d)Reviewing TPR’s strategic direction and ensuring that this aligns with DWP’s priorities;

e)Supporting and motivating TPR’s executive team while also holding them to account;

f)Representing TPR in the media, at conferences and to expert external stakeholders.3

5.The previous Chair of TPR, Mark Boyle, took up the role in April 2014, and his second term ended on 31 March 2021. The Minister for Pensions and Financial Inclusion, Guy Opperman, wrote to us on 25 March to tell us that he was appointing Sarah Smart as interim Chair until the new Chair takes up the role permanently, which is expected to take place by 1 June.4 DWP subsequently informed us that Mrs Smart is the Government’s preferred candidate for the role.

6.We would like to put on record our thanks to Mark Boyle for his service as Chair over the past seven years.

The suitability of Sarah Smart

7.Sarah Smart has been a Non-Executive Director of TPR since 2016. Before being appointed as interim Chair, she was the Senior Independent Director, which involves providing support to the Chair, acting as an intermediary for other directors, and deputising for the Chair on occasion. In addition to her role at TPR, she also sits as an independent member on the Investment and Funding Committee of the Unilever UK Pension Scheme and as the independent Chair of the Financial Times Governance Committee. She was the independent Chair of TPT Retirement Solutions (The Pensions Trust) from 2010 to 2018. Her other previous posts include Chair of the Audit Committee at UK Athletics and roles at Standard Life Investments and PricewaterhouseCoopers. Mrs Smart is also the co-founder of SmartCats Consulting, through which she has delivered ad hoc consultancy projects since 2008, and is currently working on “developing a tool to assess the effectiveness of strategic investment decision making”.5

8.As part of her application, she declared that her spouse is the Chief Executive of British Airways Pensions. In response to the Committee’s written questions about how she intends to manage this potential conflict of interest, Mrs Smart said:

My spouse (Fraser) is the Chief Executive of British Airways Pensions which manages and supports the Trustees for the two main British Airways UK defined benefit schemes: New Airways Pension Scheme and Airways Pension Scheme. He has held this position since October 2016.

Fraser is fully supportive of me taking on the role of TPR Chair and recognises that it is not appropriate for him to remain in this position long-term. He is currently exploring how he may effect his departure from the role in a way that achieves the two objectives of managing this potential conflict of interest and protecting the interests of the scheme members.6

9.Mrs Smart explained that she currently manages the conflict of interest by recusing herself from any discussions about the British Airways Pension Schemes and by ensuring that any Board papers or minutes that refer to the schemes are redacted appropriately before she receives them.

10.We asked Mrs Smart about the possible conflict of interest during the oral evidence session. She told us that, upon learning that she was the Government’s preferred candidate for the role, she and her spouse discussed how he might effect his departure from the scheme in a way that protects the interests of its members. She confirmed that her spouse has not yet handed in his notice, but that should she be appointed, he intends to leave his role in September (or earlier if possible). During her time on the Board, she has managed the conflict by recusing herself from any meetings where the British Airways Pension Schemes were discussed. She explained that, as a non-executive director, she had little involvement in the day-to-day casework of the organisation. Should the need arise for her, as Chair, to have closer interaction with TPR’s casework teams, she proposed nominating a non-executive director to liaise with anyone undertaking casework relating to the British Airways Pension Schemes.

11.We asked whether it is credible that, should TPR need to become involved in the British Airways Pension Schemes, the Chair could effectively recuse themselves from this work. She said that she was “very confident” that she could carry out the role while recusing herself from any work on the scheme, and that she envisages this arrangement continuing on an indefinite basis. She also assured us that her spouse has recognised that it would not be appropriate for him, on leaving his current role, to take up a role in another significant pension scheme.

12.Mrs Smart has also said that she intends to continue her work on the development of an investment monitoring tool. In her response to the Committee’s questions, she explains that the market for this tool includes trustees of pension schemes in the UK. She intends to manage this conflict of interest by recruiting additional staff to ensure that she does not have contact with organisations that fall within TPR’s regulatory remit.

The pre-appointment hearing

13.The job description for the position of Chair focuses on the following criteria:

a)The ability to lead a high profile board and take strategic decisions of long-term significance and with legal and financial consequences;

b)Excellent stakeholder management skills, including the ability to engage and build effective relationships with Ministers and “other key figures in the pensions landscape”;

c)Knowledge of work-based pension schemes and experience of the pensions industry, and a willingness to build knowledge of how the public sector operates;

d)Experience of working within a regulatory environment;

e)Knowledge of understanding and risk management.

14.It is against these criteria that we assessed Sarah Smart’s suitability for the role, using her CV and responses to our written questions which she provided in advance of the hearing. In line with Liaison Committee guidelines on pre-appointment hearings, we also took evidence from her in person to test her professional competence and independence. We thank Mrs Smart for her evidence, which is appended to this report.

15.We questioned her about:

• Her past experience, including her experience on TPR’s Board, and any gaps in her knowledge and experience;
• Her personal independence and how she intends to balance the role with her other professional commitments;
• TPR’s 15-year corporate strategy and the challenges that the organisation may face in the future;
• The depth and breadth of her knowledge of the pensions landscape, and her views on issues such as pension scheme governance, defined benefit pension schemes, and tackling pension scams.