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

The Financial Guidance and Claims Act 2018 (Commencement No 8) Regulations 2021

The Financial Guidance and Claims Act 2018 (Commencement No 8) Regulations 2021 were made on 25 June 2021. These regulations bring into force provisions of the Financial Guidance and Claims Act 2018 which will in turn allow regulations to be made relating to requirements to refer individuals to pensions guidance.

Chancellor announces Green Financing Framework and Sustainability Disclosure Requirements

On 1 July 2021, the Chancellor, Rishi Sunak, delivered his Mansion House speech, announcing plans to require companies, pension schemes and financial services firms to report on the impact they are having on the climate and environment, as well as risks and opportunities facing their business. These new “Sustainability Disclosure Requirements” are intended to “bring together and streamline existing climate reporting requirements and go further to ensure consumers and investors have the information they need to make informed investment decisions and drive positive environmental impact”.

The Government will legislate to deliver this and expects to set out its approach to green finance regulation ahead of the COP26 conference in November. It plans to work with the FCA to create a “new sustainable investment label which will enable consumers to compare the impacts and sustainability of their investments”.

HMT published a policy paper alongside this speech, setting out the Government’s vision for an “open, green, and technologically advanced” financial services sector.

HMT and the Debt Management Office have also published the UK Government Green Financing Framework. PLSA Director of Policy & Advocacy, Nigel Peaple, noted that this framework addresses many of the recommendations in the PLSA’s report on climate change (see 7 Days).

DWP response to consultation on draft regulations concerning TPR’s CN and information-gathering powers

On 29 June 2021, the DWP published a response to its consultation on the proposed drafting of two sets of regulations concerning the powers of TPR. These cover its new powers to issue CNs and to gather information, following changes introduced by the PSA21 (see 7 Days):

These new regulations, together with TPR’s corresponding new powers under the PSA21, are expected to come into force on 1 October 2021. The DWP plans to consult on changes to the notifiable events framework later this year.

In its response, the DWP confirmed that it “remain[s] of the view as set out by ministerial statements, that the new jurisdiction tests are not retrospective and that the new employer resources and insolvency tests will only apply to acts (or failures to act) from 1 October 2021. The planned commencement regulations will clarify this position.”

TPR is considering whether to produce further guidance on the new tests and its CN power more generally, and may in the future also produce a single document on its experience of considering and using its CN powers, setting out its views and expectations.

In addition, it will produce policy guidance on how and when it will use its information-gathering powers, including its powers to investigate criminal offences.

MoneyHelper launches

On 30 June 2021, MoneyHelper, the new consumer service replacing the three legacy brands of MAS, TPAS and Pension Wise (see 7 Days), went live. From that date anyone trying to access the legacy websites will be automatically redirected to the relevant MoneyHelper page. MoneyHelper is asking stakeholders to start the process of updating their material and signposting in line with the new brand. However, the legislation is not yet clear as to whether updates to scheme documentation are required. We will provide any relevant updates in due course.

PASA publishes guidance on countering fraud

On 1 July 2021, PASA published its counter fraud guidance, after industry research revealed that fraud is costing the pensions industry £6.2bn per year. The guidance outlines the types of fraud which affect the sector and the range of tactics needed to counter them, including proactive steps schemes can take to minimise the extent and cost of fraud. The guidance is aimed at UK pension schemes, trustees and providers.

PLSA consultation on responsible investment standards

On 30 June 2021, the PLSA launched a consultation on a new Responsible Investment Quality Mark (“RIQM”), which is intended to recognise pension schemes that meet the highest standards for incorporating ESG factors across their operations. The aim is to offer:

  • a “new standard to which schemes can aspire”
  • the “opportunity to share best practice among schemes”
  • a “scheme member-focussed way to demonstrate activities in this area”.

The assessment approach is designed to be flexible to the scale and resources of the relevant scheme.

The consultation closes on 3 September 2021.

PLSA publishes blog on pensions dashboards

On 29 June 2021, the PLSA published a blog post outlining how pensions dashboards are intended to “transform the experience of pension saving by enabling savers to see the overall value of all their different pension entitlements”. The post considers the likely challenges and the next steps for the PDP.

PPF announces changes to actuarial factors

The PPF has announced changes to the actuarial factors it uses. These are regularly reviewed, to “take into account external influences, such as movements in financial markets and changes to life expectancy”.

These changes will affect members who retire on or after 1 October 2021 and who choose to take some of their compensation earlier or later than the applicable pension age, and also those who choose to convert their compensation into a cash lump sum.

Pensioner and FAS members will not be affected. For anyone retiring before 1 October 2021, the old factors will be used.

TPR calls on DB schemes to act on climate change preparations

On 2 July 2021, TPR published the results of its DB survey, which involved quantitative interviews with 250 individuals (primarily lay and professional trustees) involved in managing DB pension schemes . According to TPR, too few trustee boards are:

  • allocating enough time or resources to assessing financial risks or opportunities associated with climate change
  • assessing the risks/opportunities from particular climate-related scenarios
  • giving significant consideration to climate change in their investment and funding strategies
  • devoting significant consideration to climate-related opportunities
  • aware of the work of the TCFD.

Only 49% of schemes reported allocating time or resources to assessing financial risks or opportunities associated with climate change; the likelihood of doing so increased with scheme size, with engagement ranging from 19% of micro schemes to 70% of large schemes.

TPR’s Executive Director of Regulatory Policy and Advice, David Fairs, commented: “For DB trustees, it’s time to get to grips with the way climate-related risks and opportunities affect the employer’s covenant and include climate change in your integrated risk management framework. Climate-related risks threaten pension savings and affect funding strategies across the DB landscape. This means trustees should build their capacity in this area now, so they can understand what climate change will mean for their scheme and their employer’s covenant, and so be better placed to make decisions contributing towards good outcomes for savers.”

TPR published its climate change strategy in April (see 7 Days). Further climate change guidance for schemes is due to be published in the Autumn.

TPR launches consultation on climate change governance

On 5 July 2021, TPR published a consultation seeking views on two documents that outline its approach to new requirements for the governance and reporting of climate-related risks and opportunities:

  • Guidance on governance and reporting of climate-related risks and opportunities – this guidance “describes what trustees will need to do and report on in order to comply with the new legislation”, and is intended to “complement” and “be used alongside” the DWP’s statutory guidance. TPR states that trustees not subject to the new requirements may also wish to follow the guidance in order to “improve the governance and resilience of their schemes in relation to climate change risks and opportunities”. It sets out non-exhaustive “example steps” TPR expects schemes to take and report on, and discusses climate-change risk related TKU requirements.
  • new appendix to TPR’s monetary penalties policy: Breaches of the climate change governance and reporting regulations – this appendix outlines TPR’s approach to imposing penalties for non-compliance (the penalty for a breach of the publication requirement is from £2,500 up to a maximum penalty of £5,000 for individuals or £50,000 for corporate bodies). Amongst other things, the appendix touches on TPR’s approach to the DWP’s requirement that trustees must take certain steps “as far as they are able”. TPR states that this “recognises there may be some hurdles that, at least initially, prevent trustees from full compliance”, and sets out its expectations of them.

The consultation closes on 31 August 2021.