Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.

This week we cover topics including: TPR updates guidance with new DC investment requirements; PPF publishes climate change report.

TPR updates guidance with new DC investment requirements

The Pensions Regulator (TPR) has updated various pieces of guidance to reflect new requirements in relation to DC scheme investment.

TPR has updated its DC code of practice, DC investment governance guidance, and guidance on communicating and reporting for DC schemes to include sections on the following changes, which were introduced in regulations made in March 2023:

• Relevant DC schemes will be required to disclose and explain their policies on illiquid investment in their default fund statement of investment principles (or main SIP for collective money purchase (CMP) schemes). This will apply on the first occasion when the SIP is updated after 1 October 2023, and by 1 October 2024 at the latest.
• Relevant DC schemes will be required to disclose in their Chair’s Statement the proportions of default fund assets allocated to different asset classes. Disclosure will be required in the Chair’s Statement for the first scheme year that ends after 1 October 2023.
• Trustees have been able to exclude specified performance-based fees from the default fund charge cap since 6 April 2023, where they feel this is in members’ interests. Any exempted fees need to be disclosed in the Chair’s Statement as a percentage of the average default fund assets during the scheme year, and assessed for value to members.

The updates include some other changes, including references to related guidance in the DC code of practice; more detail on the requirements for preparing and reviewing default arrangement SIPs in the DC investment governance guidance; and a warning in relation to the impact of cost of living increases and how to help members with this in the guidance on communicating and reporting.

Read the updated DC code of practice, DC investment governance guidance, and guidance on communicating and reporting for DC schemes.

PPF publishes climate change report

The Pension Protection Fund (PPF) has published its annual climate change report, disclosing the climate-related risks and opportunities in its investment approach. The report discusses the PPF’s efforts to obtain more high-quality disclosure from issuers, deepen climate management beyond listed equities and drive better alignment with the goals of the Paris Agreement. Key statistics from the report include a 7% increase in the amount of the Fund categorised as ‘aligned’ with Net Zero (measured from its 2020 baseline), and an increase in the percentage of equities allocated to companies that have set or committed to a science-based target to 43% (up by a third from the previous year).

Read the report.