UK Regulator TPR Names Nausicaa Delfas Chief Executive

U.K. workplace pension watchdog The Pensions Regulator has named the Financial Conduct Authority’s Nausicaa Delfas as its new chief executive, effective at the end of March 2023.

Nausicaa, who had recently begun working as the FCA’s executive director of governance in October, will succeed Charles Counsell, who began his term in April 2019 and announced in June that he would step down at the end of March 2023.

“Nausicaa has a proven track record of delivering transformational change, and her background in governance will be vital as we ensure those who deliver pension savings are meeting the challenges of new legislation and as we continue to improve our effectiveness by becoming a more data- and technology-led organization,” Sarah Smart, the chair of TPR, said in a statement.

Smart also thanked Counsell for his “outstanding work as CEO,” adding that he “worked tirelessly to help TPR become the clearer, quicker and tougher regulator it is today.”

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Prior to her current role, Delfas was interim CEO and chief ombudsman at the UK’s Financial Ombudsman Service. Before that, Delfas worked at the FCA for more than nine years in several roles, including executive director of international and interim chief operating officer. As executive director of international, Nausicaa was responsible for the FCA’s international strategy and delivery, including its post-Brexit plans.

Before her first stint at the FCA, Delfas was head of department at the Financial Services Authority for nearly 12 years, and prior to that, she was an attorney at the Freshfields Bruckhaus Deringer law firm for close to eight years.

“I am delighted to be joining TPR as CEO at a time of significant change and challenge,” Delfas said in a statement. “TPR plays a key role in protecting work-based pensions and the post-retirement income of over 30 million people. I look forward to leading this organization in its critical work.”

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Tags: Charles Counsell, chief executive, FCA, Financial Conduct Authority, Nausicaa Delfas, The Pensions Regulator, TPR, UK

A provision in the SECURE 2.0 legislation, that passed the Senate Thursday as part of the $1.7 trillion federal omnibus spending package, would cap the variable premiums paid by plan sponsors to the Pension Benefit Guaranty Corporation at 5.2% and end the policy of indexing them to inflation.

The SECURE 2.0 package, which includes myriad retirement- and pension-related provisions, would become law if the omnibus spending bill passes. The House is voting on the measure Friday.

The PBGC insurance premium calculation has two parts, confirmed Bruce Cadenhead, partner and global chief actuary in wealth at Mercer.

The premium that would be changed by SECURE 2.0 is the variable-rate premium, which is calculated as a percent of a plan’s unfunded vested benefits (the difference between the present value of what a plan owes to participants and what it actually has the funds to cover). This is the amount the PBGC is “on the hook for” if a plan fails.

The percent of unfunded liabilities has historically been indexed to inflation. This means that the percent of unfunded liabilities owed as insurance would increase in perpetuity if left unchanged. Section 349 of the SECURE 2.0 bill would cap it at the 2023 level, which is 5.2% of unfunded liabilities, up from 4.8% in 2022.

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The other part of the calculation is a flat rate (charged per person in the plan, which is indexed to inflation and changes each year. This premium would not be changed by SECURE 2.0.

Cadenhead notes that the PBGC has a budget surplus that is projected to grow and could well afford to drop premiums. However, it is difficult to cut insurance premiums, because the revenue they generate counts as general federal revenue for the purposes of Congressional budget scoring, even though the money is not, in fact, general revenue and is set aside for the PBGC. Congress, according to Cadenhead, has used premiums to offset spending for things such as highways for accounting purposes, even though the funds are not actually used for that purpose. This scoring rule has not changed.

Since charging higher premiums to struggling plans can cause those plans to struggle even more, the PBGC caps the variable rate at $652 per participant in 2023. This cap helps plans that are poorly funded to not pay high fees to PBGC that otherwise could be used to fund the plan.

Cadenhead notes, however, that the proposed cap comes with perverse incentives. Plan sponsors could decide to remove participants from their plans through lump sum payments or other pension risk transfers and therefore change the number of participants on whom they calculate their PBGC fees, thereby lowering their premiums without actually changing the underlying structure and risk of the plan.

SECURE 2.0 provides for no changes to this element either.