Pensions Weekly Update – 14 February 2024

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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.

In the government’s green finance strategy 2023, it was noted that a working group of the Financial Markets Law Committee (FMLC) would give further consideration to clarifying pension trustees’ fiduciary duties. The green finance strategy was followed by the chancellor’s Mansion House speech and package of pension reforms, which included a call for evidence on pension trustees’ skills and capabilities. As part of the call for evidence, the Treasury sought feedback on whether pension trustees understood their fiduciary duties, but the outcome of the call for evidence was relatively quiet on this topic. We, therefore, anticipated that the FMLC paper would include a review of pension trustees’ fiduciary duties, including in the context of productive finance. The FMLC has now produced its paper on pension trustees’ fiduciary duties, but it does not explore the possibilities around productive finance specifically. Instead, it considers trustees’ duties in the context of sustainability and climate change, while providing a thorough explanation of fiduciary duties generally. The FMLC has reinforced the current position (that the financial impact of environmental, social and governance (ESG) factors should properly be considered) rather than advocating radical changes. The paper also emphasises the part that stewardship should play once investments have been chosen.
The Pensions and Lifetime Savings Association has published an update to its retirement living standards to reflect the increase in household costs and the change in priorities for retired people following the COVID-19 pandemic (which includes spending additional time with family and friends). It is estimated that a couple will need £22,400 for a minimum standard of living (which can be satisfied by the full basic state pension) but £43,100 for a moderately comfortable standard of living. This helps to highlight the gap that needs to be plugged by other income, particularly private pensions savings, ahead of the government’s forthcoming consultation on the extension of automatic enrolment (which was expected by the end of 2023).
The Pensions Minister, Paul Maynard, announced that a new defined contribution (DC) small pots delivery group has been established to provide recommendations on how best to implement the government’s proposed multiple default consolidator approach (set out in its consultation response in November 2023), which would involve a small number of authorised schemes acting as consolidator vehicles for deferred DC pension pots of less than £1,000. The new group includes regulators and professional bodies representing employers and the pensions industry.
Following on from an inquiry by the Work and Pensions Committee, The Pensions Regulator (TPR) has produced a report that reviews the impact on the defined benefit (DB) landscape following the pressure on leveraged liability driven investment strategies immediately following the mini-budget of September 2022. The report provides some facts and figures around the value of DB schemes in 2022 compared to 2021 and includes an analysis of factors contributing to the improvement or deterioration in scheme funding. TPR notes that it will be some years before the full extent of the episode is known for each scheme, but that it will continue to review data as and when it becomes available following subsequent scheme valuations.
Colleagues in our Restructuring & Insolvency team have published a blog looking at changes to the statutory regime governing special administrations for regulated water companies and how those changes could impact the amount that pension trustees of water company sponsored schemes might receive under the section 75 debt regime.
Pensions partner Clifford Sims will soon be retiring from the firm after 20 years as a partner. Clifford has made a selfless contribution to the pensions industry, and we wish him a healthy and happy retirement. We also wish Clifford the very best of luck at next week’s Pensions Age Awards, where he is shortlisted for personality of the year, together with our Pensions team, which is shortlisted for pensions law firm of the year.