Pensions Weekly Update – 27 September 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.

Barry Kenneth, chief investment officer at the Pension Protection Fund (PPF), has published a blog that explains the PPF's investment strategy. This follows on from the government's Mansion House proposals and stated aim of encouraging more defined benefit pension funds to invest in productive finance. Mr. Kenneth says in the blog that the PPF has always pursued a long-term investment strategy that includes productive finance assets. The PPF currently invests 30% of its total assets in productive finance. Mr. Kenneth defines "productive finance" in this context as comprising equity and real assets (i.e. real estate, infrastructure, timberland and farmland). This, in turn, is split in the proportions: 52% real assets and 48% in equities. Around 20% of these productive finance assets are invested in the UK. Examples of investments that the PPF has made over the years include the Thames Tideway Tunnel, Cross London Trains, and sustainable forestry across Australia, New Zealand, the US, the UK, Ireland, the Baltics and the Nordics.
The Department for Work and Pensions (DWP) has published its findings of an independent review of The Pensions Regulator (TPR) that was carried out earlier this year. The review concludes that TPR is “broadly well-run and well-regarded” and has some notable successes in its track record, but needs to be known for taking “tougher action when necessary”. The review makes 17 recommendations where improvements could be made and we can expect to hear more about these in the coming months. The recommendations include:

That the DWP should consider giving TPR greater rule-making powers
That consideration should be given to extending TPR’s remit to cover pensions administrators

The Taskforce on Nature-related Financial Disclosures (TNFD) has published its final recommendations that will provide companies and financial institutions (including pension schemes) with a risk management and disclosure framework to identify, assess, manage and, where appropriate, disclose nature-related issues. The TNFD says that its framework is similar to that of the Taskforce on Climate-related Financial Disclosures, which the largest pension schemes are required to implement by virtue of specific pensions legislation. The TNFD's recommendations include links to guidance that will assist organisations to assess and identify nature-related risks and opportunities and undertake scenario analysis. The TNFD notes that nature "is no longer a corporate social responsibility issue, but a core and strategic risk management issue alongside climate change".
In our latest pensions life hack, we look at the importance of understanding the risks of derivative contracts.
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