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 updated two sets of defined contribution (DC) guidance to cover the new disclose and explain requirements applying to the default funds of schemes with DC benefits. Trustees are required to disclose and explain:
Their policies on illiquid asset investments in the scheme’s default statement of investment principles (SIP) (to be included in the first default SIP published after 1 October 2023 and by 1 October 2024 at the latest)
The asset class allocation of their default funds in their annual chair’s statement (from the first scheme year ending after 1 October 2023)
Trustees must also disclose in their chair’s statement any performance-based fees incurred in relation to the default funds. TPR’s press release gives more information and links to its updated guidance and the statutory guidance issued by the Department for Work and Pensions.
Mark Hill, climate and sustainability lead at TPR, has published a blog in relation to climate change scenario analysis. The blog notes that trustees face challenges in assessing whether the financial analysis is consistent with the science. Mr. Hill reports that some climate change (TCFD) reports, which TPR has reviewed, indicate a relatively minor reduction in returns if global temperatures were to increase by 4 degrees Celsius, whereas this does not reflect the science, which, he says, “suggests there would be catastrophic biodiversity loss, the collapse of the insurance sector, increased migration and potentially resource wars.” The blog contains some actions for trustees, such as regular training, and says that where trustees have already completed their scenario analysis but not yet finalised this year’s TCFD report, members would find it useful if trustees were to provide additional commentary in their report on the analysis they carried out and how they expect it to develop.
The UK Sustainable Investment and Finance Association (UKSIF) is an organisation with over 300 members, comprising investment managers, pension funds, banks, financial advisers, research providers and non-governmental organisations, which together hold assets under management of over £19 trillion. Thirty-six financial institutions that are members of UKSIF have written to the prime minister expressing concern at the government’s recent public statements and policy signals, which they say risk undermining confidence in the UK’s commitment to net zero. The letter says that this shift “blurs regulatory visibility for investors and risks the ability of the finance sector to make the large-scale, transformative investments required to accelerate net-zero delivery and unlock growth in the UK”. Signatories to the letter include some of the largest pension funds, such as LGPS Central Limited, Railpen, TPT and USS.
The Financial Reporting Council has announced a record number of signatories to the UK Stewardship Code, following the last round of applications. There are now 277 signatories representing assets under management of £44.6 trillion. The signatories comprise 189 asset managers, 69 asset owners and 19 service providers. TPR encourages pension trustees to sign up to the code and many large funds have done so.
TPR has published information for scheme managers of public service pension schemes in relation to the production of annual benefit statements between 2023 and 2025. TPR notes that, during this period, members that are affected by the McCloud remedy, i.e. the changes introduced to rectify the age discrimination that was found in the 2015 public service pension scheme reforms, must also be provided with remedial service statements. TPR notes that remedial service statements must be provided at a similar time to annual benefit statements, so it will be important that both sets of statements are clear and concise and do not provide conflicting or confusing information for members. TPR recognises that the extra work involved to produce the remedial service statements means that resources may be stretched, but reminds managers that failure to provide accurate, complete or timely annual benefit statements would constitute a material breach of the law, which should be reported to TPR. When considering any such breaches, TPR has said that it will take a risk-based and practical approach.
Have you seen our annual back-to-school publication, Pensions Lessons for Trustees 2023? It is a bumper edition this year! We provide a round-up of recent developments and we look at what is on the horizon, highlighting the actions that trustees should consider adding to their business plan.
To coincide with Pensions Awareness Week, our brand-new series, Pensions Life Hacks, will commence next week. We will offer you some handy tips on how to deal with tricky pensions situations, gained from our first-hand experience.
Congratulations to Patricia Bailey, who has qualified as a solicitor in the firm’s Pensions team! Many of you will already know Patricia as a long-established member of the Pensions team. She started her career with the firm as a paralegal and has successfully managed to juggle client work and studying.
If you would like specific advice on any of these issues or on anything else, please contact a member of our Pensions team.