Implementation Statements – what do trustees need to do and by when?
All occupational pension schemes must prepare an annual report and accounts within seven months of the end of each “scheme year”. However, on and from 1 October 2020, there is a new requirement that annual report and accounts must also contain an ‘implementation statement’ which is to be made publicly available.
When the requirement applies for individual schemes will depend in part on their scheme year-end date. The content of the implementation statement will also differ depending on whether the scheme offers DB or DC benefits.
When does the requirement apply to your scheme?
All schemes must prepare their implementation statement for the first annual report and accounts which is produced on or after 1 October 2020. The deadline for this is seven months after the scheme’s year-end.
For example, where a scheme’s year-end is 31 December, trustees will have until 31 July 2021 to prepare their annual report and accounts for the January to December 2020 scheme year and that report must include their first implementation statement.
However, where a scheme’s year-end is 31 March, the annual report and accounts for the 2019/2020 year will be due by 31 October 2020. This effectively gives trustees a choice.
- If they produce their annual report and accounts by 30 September 2020, they will not need to prepare an implementation statement until 2021, to be included in the 2020-2021 annual report and accounts.
- If they produce their report and accounts for 2019-2020 after 30 September 2020, an implementation statement must be prepared.
Where trustees will not be preparing an implementation statement until 2021, their key focus should be working with their managers to ensure that they have sufficient information to prepare the implementation statements. As these statements will be retrospective, trustees should not wait until the date of the first annual report on or after 1 October 2020 to act.
What needs to be included in an implementation statement?
This will depend on whether the scheme is a DB or DC scheme (or indeed, a DB scheme which also provides DC benefits).
For schemes which provide DB benefits, the statement must:
- set out how, and the extent to which, the scheme’s policies on stewardship have been followed during the scheme year
- describe the voting behaviour by, or on behalf of, the trustees (including the most significant votes cast by the trustees or on their behalf) during the scheme year, stating any use of the services of a proxy voter.
DC and hybrid schemes
For schemes which provide DC benefits (except DB schemes providing only DC AVCs), the statement must:
- set out how, and the extent to which, the SIP has been followed during the scheme year
- describe any formal review of the SIP undertaken during the year, and any other review of how the SIP has been met
- explain any change made to the SIP during the scheme year and the reason for the change
- where no formal review was undertaken during the scheme year, provide the date of the last review
- describe the voting behaviour by, or on behalf of, the trustees (including the most significant votes cast by the trustees or on their behalf) during the year, stating any use of the services of a proxy voter during that year
DWP guidance sets out that schemes need only address the policies to the extent they have been in place during the relevant scheme year. Therefore, trustees will need to be mindful that they are reporting against the right policy for relevant year. Keeping contemporaneous notes and requiring managers to provide sufficient information will be important for trustees when preparing these statements.
The PLSA has also produced guidance for trustees on producing implementation statements with input from various industry experts, including Sackers’ Stuart O’Brien.