Pensions: DC Trustee agenda update - October 2021

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Welcome to our monthly update on current legal issues for trustees of DC 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 Joint DB/DC trustee agenda update.

Climate change-related duties (updated)

New climate change-related duties come into force from 1 October 2021, including: trustee knowledge and understanding (TKU) requirements in relation to climate-related risks and opportunities; governance, strategy and risk management activities; and reporting requirements. Visit our new information hub – Sustainability and UK pension schemes: Preparing for the new TCFD requirements.

The duties will be rolled out in phases, starting with the largest pension schemes (with £5bn+ in assets) and master trusts. Schemes with £1bn+ in assets will follow a year later. Read the regulations (here and here) and statutory guidance.

The Pensions Regulator (TPR) is due to confirm its regulatory approach: read more.

ACTION: Ensure that trustees receive training on the new duties and that appropriate TKU and governance updates are in place before the applicable date for your scheme.

Changes to DC reporting (updated)

Under regulations expected to be published shortly, trustees of relevant schemes will be required to publish their net investment returns on DC default and self-select funds as part of the chair’s statement. This will apply for the first scheme year ending after 1 October 2021: read the draft regulations.

Small schemes (under £100 million in assets) that have been operating for at least three years will have to undertake a specific DC value for members assessment, measured against three comparator schemes, and report on whether or not the scheme provides good value. This will apply for the first scheme year ending after 31 December 2021.

Statutory guidance has been published to support trustees with these new requirements. Read the guidance. Statutory guidance on reporting costs and charges has been updated to reflect changes in relation to the smoothing of performance fees and to clarify points on the illustrations used in the chair’s statement. Read the guidance.

ACTION: Review the changes and implement appropriate changes to processes and information flows to meet the new requirements.

Pension scams (updated)

TPR has urged schemes to be on high alert and to report suspected scams. Related changes to statutory transfer rights are expected shortly (the industry code of practice on scams will also be updated to reflect the changes).

ACTION: Maintain a watching brief on scam risks and upcoming changes to statutory transfer rights and the industry scams code. Ensure processes are in place to review scheme practices against the changes and update promptly, as required.

Signposting: MoneyHelper

The Money and Pensions Service has launched its new MoneyHelper brand. The pensions guidance function and Pension Wise are now accessed via the new MoneyHelper website; legacy contact details are still operational at present.

ACTION: Check the member booklet, scheme website and other communications and update signposting information (including contact details), as required.

Have your say

  • TPR and the Financial Conduct Authority have published a discussion paper on value for money in DC pensions, which proposes a common framework for disclosing information on investment performance; scheme oversight; and costs and charges. The deadline for comments is 10 December 2021. Read more.

Watch this space

  • The Pensions Dashboards Programme is expected to provide further information on the dashboards rollout in winter: visit the information hub for pension schemes. PASA has also published guidance on preparing for dashboards. Onboarding is expected from 2022 (voluntary) and 2023 (mandatory).
  • The government is planning to implement its ‘stronger nudge’ to pensions guidance; draft regulations indicate this may be introduced from April 2022: read more.
  • The government has consulted on changes to permitted charges in default arrangements in DC schemes used for auto-enrolment: read more.
  • TPR has consulted on its proposed single code of practice: watch our webinar on the proposals. Read TPR’s interim response.
  • The government has consulted on the case for greater consolidation in the DC market: read more.
  • Regulations to replace the current regime on strategic objectives for investment consultancy providers and competitive tenders for fiduciary management services are now expected in the first half of 2022.
  • The government is considering solutions to the proliferation of small, deferred DC pension pots: read more.
  • A new industry code of practice for transfers, including target timescales, is expected this year. Although aimed at DB transfers, PASA encourages the application of its best practice principles to DC transfers.
  • The government has consulted on proposed regulations for collective DC schemes: read more.

Need help with a pensions dispute? Visit allenovery.com/pensionsindispute.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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