7 days

7 Days is a weekly round up of developments in pensions, normally published on Monday afternoons. We collate this information from key industry sources, such as the DWP, HMRC and TPR.

In this 7 Days

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Act 2021

On 20 October 2021, the Compensation (London Capital & Finance plc and Fraud Compensation Fund) Act 2021 (see 7 Days) received Royal Assent. Among other things, the Act gives the Secretary of State the power to make a loan to the PPF which will enable the payment of compensation to eligible occupational pension schemes from the Fraud Compensation Fund following the High Court ruling in PPF v Dalriada Trustees (see 7 Days). On 12 October 2021, the House of Lords Library published a briefing paper summarising the background and content of the Act.

Climate change and investment – new consultation

On 21 October 2021, the DWP published a consultation seeking views on proposals to require trustees of larger occupational pension schemes (schemes with £1bn or more in relevant assets), authorised master trusts and authorised collective money purchase schemes to measure and report on the alignment of their investment portfolios with Paris Agreement targets. It also consults on new guidance in relation to SIPs and implementation statements.

Under the proposals, with effect from 1 October 2022, trustees of these schemes would be required to calculate and disclose a portfolio alignment metric describing the extent to which their investments are aligned with the goal of limiting the increase in the global average temperature to 1.5°C above pre-industrial levels. The consultation also seeks to address “deficiencies in scheme governance” by proposing new draft statutory and non-statutory guidance which sets out voting, stewardship and ESG best practice in relation to SIPs and implementation statements.

The consultation closes on 6 January 2022. For more detail, see our forthcoming Alert.

DWP roadmap setting out Sustainability Disclosure Requirements

On 18 October 2021, HMT, along with the DWP and BEIS, published a roadmap to sustainable investment setting out details of new Sustainability Disclosure Requirements (“SDR”) that, in addition to applying to certain large businesses, will also apply to pension schemes (both occupational and personal), investment products and asset managers and other asset owners. SDR were first announced in July (see 7 Days) and are intended to ensure investors have the information they need to make informed decisions about where to put their money. The reporting standards are due to be consulted on in “early 2022”.

DWP response on simpler annual benefit statements

On 19 October 2021, the DWP published its response to the consultation on proposed regulations and statutory guidance to introduce simpler annual statements for members of DC AE schemes. Alongside the response, the DWP published statutory guidance for trustees and scheme managers which explains how the statement should be structured and the information be presented, and includes an illustrative template. Final regulations were laid before Parliament on the same day.

The new requirements come into force from October 2022, six months later than was initially proposed following concerns raised in the consultation feedback. See our consultation response and Alert for further detail.

FCA finalises rules on long-term asset fund

On 25 October 2021, the FCA confirmed that it will take forward its proposals to create a Long-Term Asset Fund (“LTAF”) regime, a new FCA-regulated fund that is designed specifically to help DC schemes invest in assets including venture capital, private equity, private debt, real estate and infrastructure (see 7 Days).

The FCA noted that investment in these assets has “the potential to generate better returns for investors, including those saving for retirement in DC pension schemes and appropriately managed, can also benefit the wider economy by supporting the economic recovery from COVID-19 and supporting financial stability”.

The LTAF regime is one of the FCA’s priorities as set out in its Business Plan 2021-22 (see 7 Days) and its operation formed part of the recommendations of the Productive Finance Working Group’s roadmap, published in September 2021 (see 7 Days).

PPF publishes annual report and accounts

On 19 October 2021, the PPF published its 2020/21 annual report and announced that it has made £1bn in payments to members over the 2020/21 financial year, compensating 179,500 of 288,000 members who have either retired or receive survivor benefits. This is the first time in the PPF’s history that member compensation has reached the £1bn figure.

The PPF also reported an increase in its funding position of 13.9%, as well as an increase in its reserves to £9bn, up from £5.1bn in 2019/20. PPF CFO and Chief Actuary Lisa McCrory said: “Our exceptional investment performance over the past financial year has not only allowed us to improve our funding position and grow our reserves, but has put us in a very strong position to take on future claims that could materialise as a result of the pandemic.”

The annual report also provides an update on the PPF’s progress against its strategic objectives for 2019/22.

TPR to request more information on asset allocation

On 21 October 2021, TPR announced that from 2023 it will ask trustees of DB schemes, via the annual scheme return, to provide more information about how they allocate their assets. This information will assist TPR in assessing the investment risk of schemes and support the PPF in its levy calculation.

To take a proportionate approach, information will be requested at three levels of detail depending on the scheme’s size. A basic level will be required for smaller schemes (liabilities of up to £30m), with more granular information requested for schemes with liabilities between £30m and £1.5bn. Schemes with liabilities of £1.5bn or more will be expected to provide information on the sensitivity of portfolios to investment stresses. TPR is now developing the necessary IT to enable the implementation of a new scheme return from 2023.

This announcement was published alongside the outcome of the joint TPR / PPF consultation on proposed changes to the asset class information to be provided by DB schemes via the scheme return (see 7 Days).