Pensions Weekly Update – 24 April 2024

April 2024
Region: Europe

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’s (TPR) general code of practice came into force last month and many trustees are now making good progress with reviewing and refreshing their systems of governance. There are different ways to tackle the challenge of papering up the required policies and procedures – our approach is to group the 50+ elements of the code into around 24 policy documents (before factoring in proportionality). We can bring our legal experience to bear on about half of these policy documents and can coordinate the work of our fellow advisers in respect of the rest. Having previously developed 12 templates based on the draft code, they have now all been updated for the final code. We are working with many of our clients to adapt these code-compliant templates quickly and efficiently for their schemes in a way that adds genuine value, recognising that each scheme and trustee board has unique requirements. If your scheme is not yet making much progress, we would be happy to talk to you about how we can help. Our resource library contains a lot of useful information.
  • HM Revenue and Customs (HMRC) has updated guidance on information requirements for pension schemes and information pension schemes must give to members. The information that must be given to and by legal personal representatives has been updated to (1) confirm the information that must be given when a scheme has paid a lump sum death benefit and (2) specify the relevant timeframe for doing so.
  • The Work and Pensions Committee (WPC) has published correspondence with the pensions minster, Paul Maynard, around trustees’ fiduciary duties. The letter flags some of the issues that were raised in relation to fiduciary duties at the WPC’s recent inquiry into defined benefit (DB) pension schemes. The WPC notes that evidence given at the inquiry confirmed that it would be helpful for TPR to put the principles of the Financial Markets Law Committee's report on fiduciary duties into guidance for trustees. This would support trustees’ decision making and could help increase trustees’ confidence in the face of potential legal challenges. The WPC letter asks when the Department for Work and Pensions (DWP) plans on holding roundtables on fiduciary duties (these were mentioned in the government’s Green Finance Strategy published over a year ago). The WPC also notes that the government has not yet brought forward legislation to bring investment consultants within the regulatory perimeter of the Financial Conduct Authority (FCA) and asks the pensions minister to explain how the DWP and TPR are working with the FCA to ensure that investment consultants use appropriate models of the impact of climate change when advising pension trustees.
  • We have responded to the government’s consultation on options for DB pension schemes. The consultation follows on from the chancellor’s Mansion House speech last year and subsequent consultation in the autumn of 2023. In the latest consultation, the government is seeking to understand the level of appetite within the pensions industry for facilitating the extraction of surplus from DB pension funds, and the establishment of a public sector consolidator operated by the Pension Protection Fund (PPF). Each of these options is expected to increase pension fund investment in productive finance. There are varying views within the industry on the desirability of both extraction of surplus and the use of a public sector consolidator. Our own survey results indicated that smaller schemes might be interested in a statutory override to allow refund of surplus to employers, but that such an override would not encourage them to change their investment strategy to target surplus generation.
  • In July 2022, the government published its response to consultation on consideration of social risks and opportunities by occupational pension schemes. It surmised that at one time the defence sector would have been considered an inappropriate investment from an ESG perspective, but that things had changed in recent years. The DWP went on to say that “the government will be providing further guidance on defence industry matters in due course”. HM Treasury and the Investment Management Association (IMA) have now issued a joint statement, which includes a view that “investing in good, high-quality, well-run defence companies is compatible with ESG considerations as long-term sustainable investment is about helping all sectors and all companies in the economy succeed”.
  • Have you seen our latest blog post by pensions partner, Matthew Giles? This is the first in our series of blog posts exploring “proportionate” approaches to general code of practice compliance. We discuss what trustees might consider is reasonable, suitable and proportionate for their scheme.

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

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