Pensions Weekly Update – 19 July 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.

Nausicaa Delfas, chief executive of The Pensions Regulator (TPR), has published a blog welcoming the government's new package of pensions measures that were announced by the chancellor in his Mansion House speech on 10 July. The blog notes that TPR supports the growth of collective defined contribution methods of saving, and scheme consolidation, where appropriate. Ms. Delfas says that there needs to be a change of mindset within the pensions industry to bring about sophisticated investment governance practices, the scale to drive efficiency and highly qualified trustees challenging advisers to make sure all savers get the best possible pensions. She notes that the new value for money framework will enshrine in legislation the requirement to focus on value rather than cost. There are some updates to look out for. TPR will shortly be updating its defined contribution (DC) guidance to reflect new duties on trustees to report on their policy on illiquid investments. TPR says that it will provide new guidance on investing in productive finance and it will update the existing investment guidance for defined benefit (DB) and DC schemes in the autumn. Finally, TPR says that its DB funding code of practice will clarify the use of growth assets, particularly for open and immature schemes.
TPR has published its annual report and accounts for 2022-23. Two new initiatives were introduced into the mix last year: equality, diversity and inclusion (EDI) and TPR's climate change strategy/environmental, social and governance (ESG). TPR has been promoting EDI both internally and externally and, on the ESG front, it has been rolling out its project to check that trustees are complying with their duties to publish their statement of investment principles and implementation statement (this duty applies where a scheme has 100 or more members.) TPR’s climate change strategy involved providing feedback and sharing with the industry TPR's findings on the first wave of schemes to produce TCFD reports. TPR's annual report notes that TPR has continued to work closely with the Department for Work and Pensions (DWP), the Financial Conduct Authority, Bank of England and the Money and Pensions Service to ensure that there is joined-up protection for retirement savers and to ensure that schemes are delivering value for money. There are three big projects that have not been finalised in the last financial year, owing to the need for legislation and/or insufficient parliamentary time. These are pensions dashboards, the new general code of practice and the DB funding code. Finally, as a reminder that TPR will take enforcement action where necessary, the annual report includes a few facts and figures: in the last financial year, it issued financial penalties by frontline regulation totalling £107,600; it issued 50,301 fines for automatic enrolment non-compliance; it opened 145 new DB supervision cases; and its prosecutions resulted in four convictions totalling nearly 13 years in prison with two suspended sentences.
The Pension Protection Fund (PPF) has also published its annual report and accounts for 2022-23. These show that despite assets under management falling from £39 billion to £32 billion during the financial year, owing to the liability driven investment crisis, it has increased reserves from £11.7 billion to £12.1 billion and now has a funding ratio of 156% (up from 137.9% in the previous year). The PPF has continued with its strategy of sustainable investment over the financial year, including investment in a fund specialising in resilience infrastructure, social housing investment and seeding an afforestation fund that plants new areas of woodland. The annual report reflects on the independent report on the PPF in December 2022, prepared for the DWP by Lesley Titcomb (former TPR chief executive). It notes that Ms. Titcomb had suggested in her report that the DWP and PPF could work together to identify whether the PPF's good practices and expertise could be shared more widely for the public good. This recommendation has clearly been taken forward in the proposals put forward by the chancellor in his Mansion House speech.
Watch out for an analysis and key takeaways by our pension partner group of the chancellor's Mansion House proposals, which have generated much discussion within the pensions industry.

If you would like specific advice on any of these issues or on anything else, please contact a member of our Pensions team.