ON THIS PAGE
- DB Funding Code laid in Parliament
- FCA consults on new VFM framework
- Changes to Ombudsman processes
- TPR review of trustee ESG compliance
- Watch this space
- Have your say
Welcome to our monthly update on current legal issues for trustees of DB and hybrid pension schemes, designed to help you stay up to date with key developments between trustee meetings and to support the legal update item on your next trustee agenda. We also have a separate DC-only briefing.
DB Funding Code laid in Parliament
The final draft DB Funding Code has now been laid in Parliament (read more).
Under the revised funding regulations, trustees must set a funding and investment strategy identifying a long-term objective for the scheme, as well as the scheme’s intended funding and investments at the ‘relevant date’, which must not be later than the end of the scheme year in which the scheme reached/is expected to reach significant maturity. ‘Significant maturity’ is set in the Code as ten years (eight years for cash balance schemes).
The Pensions Regulator (TPR) will publish templates for the statement of strategy shortly. Further guidance will also be published on TPR’s approach to regulating DB schemes, including more detail on the twin track approach and regulatory filters used to assess valuations for further engagement.
ACTION: Read the final draft DB Code and arrange training on the implications for your scheme.
FCA consults on new VFM framework
The Financial Conduct Authority (FCA) is consulting on a value for money (VFM) framework for savers in DC default arrangements (read more). The government intends to legislate to apply equivalent measures to trust-based schemes in due course, and TPR encourages trustees to engage with this consultation.
The proposed framework has four key aspects –measurement of investment performance, costs and service quality against specified metrics; assessment of performance against other arrangements on a consistent and objective basis; disclosure of assessment outcomes; and action to improve schemes that do not provide VFM.
ACTION: Review the proposals and consider responding to the consultation.
Changes to Ombudsman processes
The Pensions Ombudsman (TPO) has announced that it will no longer be possible for complainants to use its Early Resolution Service as an alternative to their scheme’s internal dispute resolution procedure. It has published an updated factsheet reflecting this change and setting out wording that can be used to signpost members to its services (read more).
ACTION: Check that TPO contact details are up to date in standard communications and make any relevant changes to wording about the early resolution service.2 aoshearman.com
TPR review of trustee ESG compliance
TPR has published a market oversight report setting out findings from its review of how pension scheme trustees are complying with their ESG duties, based on a review of statements of investment principles(SIPs) and implementation statements (read more).
Overall, TPR would like to see more than minimum compliance in respect of the contents of these documents – for example, greater evidence of trustee oversight where the management of financially material risks, engagement and voting have been delegated to an investment manager; more scheme-specific detail on voting activity and trustees going beyond climate change reporting to include other material ESG considerations, such as nature loss and social factors.
ACTION: Read the report and consider whether TPR’s recommendations could be implemented in your SIP or implementation statement.
Watch this space
- Further technical changes to the rules replacing the Lifetime Allowance are expected, with retrospective effect. HMRC has published numerous FAQs explaining details of the new rules (read more).
- The forthcoming Pension Schemes Bill (read more) is due to cover measures including the automatic consolidation of deferred DC small pots, the introduction of a standardised VFM test for DC schemes and the framework for commercial DB consolidators (superfunds). It will also introduce duties for trustees to offer decumulation options to members and will remove the need for pension schemes to apply to the County Court to enforce the recovery of an overpayment following a TPO decision.
- The government has also launched a multi-phase pensions review, which will look over the next few months at actions to support greater productive investment and better retirement outcomes, including identifying any further actions to drive investment that could be included in the Pension Schemes Bill. A later phase will consider the wider pensions landscape, including pension adequacy (read more).
- There is currently no date for revised regulations on changes to the notifiable events regime (read more).
Have your say
The FCA’s consultation on a value for money framework for savers in default arrangements is open until 17 October 2024. The intention is that equivalent measures will apply to trust-based schemes and TPR encourages trustees to engage with the consultation (read more).
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