#PensionsTensions – New Dimensions Campaign

May 2021

Look out for our forthcoming series of five #PensionsTensions factsheets, in which we present some key pensions risks and assess how they have evolved in the two years since our #meetPAUL (Protection Against Unmitigated Liabilities) campaign. We address the key risks that fall outside the typical Integrated Risk Management framework and so are often unmitigated. We will assign each risk a #PressureMeasure rating showing whether we think the pressure on trustees and sponsoring employers is on an upward or downward trajectory. We will highlight red risk flags, showing some key warning signs, and offer simple mitigation tips to supplement existing areas of risk management. Look out also for our timesaving tips.

Why Now?

We emerge from the challenges of COVID-19 to face a new world in which increased regulatory powers under the Pension Schemes Act 2021 offer extra security for members but may cast a shadow of uncertainty over business activity in the short term. Trustees of defined benefit schemes are busy implementing GMP equalisation solutions; the drive towards consolidation in the defined benefit and defined contribution space continues to gain pace; investment issues, including ESG, are dominating agendas; and administration systems need to be both cyber-proof and dashboard ready.

New pension scheme governance regulations came into force on 13 January 2019 as part of the transcription of the IORP II Directive into UK law. These regulations build on the previous requirements for trustees to maintain adequate internal controls, and require trustees to have an effective system of governance that is proportionate to the size, nature, scale and complexity of their scheme. The single code of practice recently issued by The Pensions Regulator (TPR) incorporates the new governance regulations and additionally sets out new expectations on how risk should be managed. Well-run pension schemes will already be well on their way to meeting TPR’s expectations, but we anticipate that all schemes will need to make some adjustments following a review of their pension scheme’s risk management system against the new code of practice. In short, trustees and sponsoring employers need to ensure that their pension scheme’s risk management system is compliant now and fit for the future.