Pensions Weekly Update – 29 March 2023

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Here is our weekly summary of key legal and regulatory developments – relevant to occupational pension schemes – that you might have missed, with links for further information.

The Pensions Regulator (TPR) has issued guidance for pension scheme governing bodies and sponsoring employers to improve equality, diversity and inclusion (EDI). The term “governing body” includes trustee boards as well as managers and board members of public service pension schemes. The guidance covers a range of issues, including the pivotal role played by the chairperson in steering EDI progress and ideas for widening the selection pool for new recruits to the governing body. TPR has added a section on inclusive communications to its guidance on communicating and reporting for defined contribution schemes, which covers matters such as avoiding bias and stereotyping, and the importance of using correct pronouns in member specific communications and gender neutral pronouns in general scheme communications.
TPR has undertaken its first review of Task Force on Climate-related Financial Disclosures (TCFD) reports that are required to be published in accordance with climate change legislation introduced in October 2021. TPR reviewed 71 TCFD reports and, overall, found an encouraging level of engagement with the requirements. TCFD reports ranged in length from 10 to 85 pages, with an average of 34 pages. TPR said that there were several areas of good practice, and it has flagged some common areas for improvement, including providing more background information on a scheme so that the disclosures are easier to interpret. TPR said that a small number of TCFD reports reviewed were of disappointing quality. Going forward, TPR reminds trustees that it has discretion to issue penalties of up to £5,000 per individual trustee and £50,000 per corporate trustee where there has been a failure to comply with the statutory disclosure requirements.
Finance (No. 2) Bill 2023 has been published, which incorporates the spring budget resolutions in relation to pensions, and which we covered in our weekly update of 16 March 2023. HMRC has also published a lifetime allowance guidance newsletter.
The draft Occupational Pension Schemes (Administration, Investment, Charges and Governance) and Pensions Dashboards (Amendment) Regulations 2023 received parliamentary approval on 13 March 2023 and are due to come into force on 6 April 2023. The regulations apply to defined contribution schemes and introduce disclose and explain requirements in relation to illiquid asset investments in default funds (effective from October 2023), and provide an exemption for specific performance fees from the regulatory charge cap. These regulations follow the outcome of consultation on broadening the investment opportunities of DC schemes. The regulations also require trustees to disclose the asset class allocation of their default fund(s) in their annual chair’s statement from the first scheme year ending after 1 October 2023.
TPR has issued a press release stating that work is underway on a new initiative to check that savers are receiving value from their pensions. Under the initiative, TPR will be checking that trustees of pension schemes that offer defined contribution (DC) benefits, and which have assets under management of less than £100 million, are complying with the new value for money requirements that came into force in October 2021. This is part of a wider initiative to encourage DC consolidation where schemes are failing to meet basic regulatory requirements and/or offer members value for money.
In our weekly update of 16 March 2023, we noted that a private members’ bill had been introduced into the House of Commons that would introduce the concept of a “pot for life”, if passed. The bill was withdrawn on 21 March 2023 and it does not look like it will proceed at this time.
The Living Wage Foundation has launched a Living Pension Standard to increase pension savings for low paid workers. Living wage employers that meet the voluntary pension savings target can apply for accreditation.