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.

DC illiquid assets and performance-based fees NEW

The government has published regulations and guidance introducing flexibility to exclude specified performance-based fees from the default fund charge cap and requirements for relevant DC schemes to disclose and explain: (i) their policies on illiquid investments; and (ii) the proportions of default fund assets allocated to different asset classes at various specified member ages (read more). Subject to Parliamentary approval, the regulations will come into force from April 2023.

ACTION: Prepare for disclose and explain requirements; consider performance-related fees in your investment strategy.

DC transfers guidance UPDATED

The Pensions Regulator (TPR) has updated its guidance on transfer requests, aiming to ensure that members receive the right advice to satisfy legislative requirements where an ‘amber flag’ is raised in relation to a transfer (read more). The Pensions Administration Standards Association (PASA) has released a publication on DC transfers, discussing industry-wide issues with the flag system and ways of addressing these (read more).

ACTION: Check your processes against TPR’s guidance and consider the PASA suggestions.

DB funding Code

TPR is consulting on its revised DB funding Code of Practice and an accompanying document explaining TPR’s Fast Track approach. The consultation ends on 24 March 2023 (read more).

The draft Code sets out TPR’s expectations on the new funding and investment strategy and statement of strategy requirements; more detail on covenant assessment; and in-depth content for schemes on long-term planning, including how the new low dependency requirements (asset allocation and funding basis) should operate. It also sets out how the new ‘twin track’ approach to valuations will operate; in a change from the original proposals, the Fast Track parameters will be used as a filter to assess which schemes may require further regulatory intervention.

The Code is due to come into force on 1 October 2023 (applying to valuations with an effective date after that point).

ACTION: Review/arrange training on the Code; consider the impact on your funding approach and whether to respond to the consultation.

Market volatility: regulators’ guidance

TPR has published guidance on how trustees should address the impact of recent economic conditions on DC benefits (read more). It focuses on member communications and support, governance and oversight, and ensuring that investment strategies support stronger saver outcomes. This follows statements by a number of regulators, including TPR, in relation to liability-driven investments (LDI) (read more).

ACTION: Read the guidance and statements and consider any scheme-specific implications.

PPF levy rules finalised

The Pension Protection Fund (PPF) has finalised its 2023/24 levy rules and related documents, including those for certifying contingent assets/asset-backed contribution arrangements (ABCs) (read more).

ACTION: Consider whether your scheme needs to recertify any contingent assets/ABCs before the 31 March 2023 deadline.

Have your say

• The government is consulting on a framework requiring schemes to disclose, assess and compare the value for money they offer for DC benefits. The consultation closes on 27 March 2023 (read more).
• A call for evidence has been published on possible automated solutions to the long-standing issue of the increased number of small deferred pots. Responses should be submitted by 27 March 2023 (read more).
• The government is consulting on extending Collective Defined Contribution (CDC) provision to multi-employer schemes. This consultation also closes on 27 March 2023 (read more).

Watch this space

• The government has consulted on changes to the notifiable events regime. There is currently no revised date for the delayed regulations (read more).
• TPR has consulted on its proposed single code of practice: watch our webinar on the proposals and read TPR’s interim response. Publication of the revised version of the code is expected soon.
• A revised code on transfers, and other materials from the Pension Scams Industry Group, are also awaited.
• The Chancellor announced in the Autumn Statement that the results of a review of the current timetable to increase the state pension age will be published in early 2023.

Need help with a pensions dispute? Visit allenovery.com/pensionsindispute for practical help with pensions problems, including our case tracker.

Need help managing DB pension risk? Visit allenovery.com/pensionrisk.