31 May 2023
Pensions bulletins – 6 of 7 Insights
In the second issue of our Taylor Wessing Pensions Bulletin we give a snapshot of the latest pensions developments below.
Please get in touch with your usual Taylor Wessing pensions contact if you would like to discuss anything you have seen in the Bulletin.
It has been reported that TPR is considering trustee registration as part of its plans for the future of trusteeship which it will be looking at with 'much greater intensity' this year. The challenge for TPR has been that, although trustees must be identified through scheme returns, the data provided has been inconsistent, which means it is not always possible for TPR to easily identify and contact each trustee. TPR says that registration, whereby each trustee would have a unique identifier, would resolve this issue as well as allowing TPR to better understand trustee standards and the make-up of trustee boards. TPR has also said that:
TPR's latest annual funding statement has been issued. The statement says that valuations taking place at present will be subject to the law as currently in force, although clearly the principles in the funding statement are supportive of the general direction of travel laid out in proposed changes to the scheme funding regime. Key points to note are:
We reported in our April bulletin on the cyber attack that has taken place at outsourcing provider Capita. Following the incident, TPR wrote to a number of trustees who have Capita as their scheme administrator reminding them of their obligations in the context of a data breach. TPR has subsequently issued a statement telling trustees that they should contact members proactively to warn them about pension scams, and also that trustees should monitor increased or unusual transfer requests.
That this data breach has taken place reinforces the importance for trustees to understand the risks posed by cyber threats to their scheme and to have appropriate plans in place to deal with a breach. TPR suggests that scenario-testing may also be a good idea. In a recent webinar, we discussed how trustees might meet this growing challenge – if you would like to access the webinar recording, please speak to your usual TW pensions contact.
TPR has updated its Guidance on 'protecting schemes from sponsoring employer distress'. The original version of the Guidance was published in Autumn 2020 during the challenges brought about by the Coronavirus Pandemic. The revised guidance recognises the more recent challenges posted by recent economic turbulence, and again urges trustees to be alive to the potential impact on the employer's ability to support the pension scheme. Key suggestions made in the Guidance are that trustees should:
The Guidance also helpfully outlines key approaches the trustees should take on an ongoing basis, where an employer starts to show signs of distress and when it is facing the prospect of insolvency. In an accompanying blog, TPR says that employers and corporates should be aware that they can contact TPR to discuss any plans that may impact the pension scheme, and also that TPR is available to provide trustees with support to achieve good outcomes in any scenario.
There is currently a requirement, broadly, to take financial advice when transferring DB benefits of over £30,000 to a DC arrangement. In its first statutory review of this the DWP has noted that there is some evidence that these requirements may be disproportionate in relation to some 'low risk' transfers. Indeed, according to the review, the £30,000 threshold and adviser costs have been identified as major issues in the current process. It therefore plans to work with regulators, the Treasury and industry to determine if changes could be made to improve the saver experience, without undermining the policy objective of making sure members are aware of the risks of transferring out of DB schemes. We will monitor progress and highlight any changes proposed, especially where this will require schemes to make adjustments to their transfer processes.
Legislation has been finalised which will make it a criminal offence for trustees to be indemnified out of scheme assets for fines in relation to penalties imposed under the dashboard regulations. Although the timetable for the launch of dashboards has been pushed back, the finalisation of this legislation reflects a continued commitment that the project will go ahead, so trustees should continue to prepare for when it is 'goes live' again.
TPR has published a blog stressing that ignoring ESG (the elephant in the room, according to TPR) is no longer an option for trustees. While recognising the challenges around ESG, including the quality of data, TPR says pension schemes should still be able to comply with their duties and that it intends to start a review of a cross section of statements of investment principles and implementation statements 'in the Autumn' – the regulatory initiative being in 2 phases:
TPR has said that it is keen that schemes ensure disclosures are not vague and generic and that it will be publishing examples of good practice in due course. This is a useful reminder that compliance with the ESG reporting requirements has to be more than a box ticking exercise and that trustees should give careful thought, taking advice where necessary, to how their disclosures are framed.