New investment and disclosure obligations

New regulations have been made implementing SRD II as it applies to occupational pension schemes. They include the following provisions:

Statement of investment principles: By 1 October 2020, trustees will have to update their SIP to include a policy on their arrangements with asset managers, as well as their policies on capital structure, conflicts of interest and other stakeholders.

Implementation statement: From 1 October 2020, trustees of DB schemes will be required to produce an annual implementation statement. This will need to set out the extent to which the trustees’ policies on stewardship have been followed and describe their voting behaviour.

Disclosure requirements: By 1 October 2020, trustees of DB schemes will be required to make the SIP available free of charge on a website. By 1 October 2021, the implementation statement will also need to be made available free of charge on a website.

Future of trusteeship and governance

The Pensions Regulator is consulting on the future of trusteeship and governance. The consultation paper includes the following questions:

Trustee knowledge and understanding, skills and ongoing earning: should trustees be required to demonstrate a minimum level of TKU and a minimum level of ongoing learning?

How the Regulator will engage with the regulated community: should the Regulator focus on establishing and setting trustee standards, and rely on industry to educate trustees?

Proposals for improving governance on boards: should schemes report on steps they are taking to ensure diversity?

Professional trustees: should it be mandatory for each trustee board to engage a professional trustee?

Sole trusteeship: should the governance standards for sole trustees be strengthened?

Consolidation of DC pension schemes: the Regulator intends to identify schemes that do not meet governance standards and, if they are unable or unwilling to improve their governance standards, they will be encouraged to wind-up.

The consultation closes on 24 September.

Climate change

The Pensions Regulator (together with the Prudential Regulation Authority, the Financial Conduct Authority and the Financial Reporting Council) has published a joint statement on climate change. The statement highlights the financial risks presented by climate change, from both physical factors (such as extreme weather events) and transition risks (that can arise from the process of adjustment to a carbon-neutral economy). From a pensions perspective, it says trustees need to consider climate change when setting and implementing their investment strategy. It also notes that many schemes are supported by employers whose financial positions and prospects for growth are dependent on current and future policies and developments in relation to climate change. 

Investment consultants market investigation

The CMA has published the Investment Consultancy and Fiduciary Management Market Investigation Order 2019.

The main features of the Order are that it:


> trustees from receiving, and fiduciary managers from providing, fiduciary management services unless the trustees have carried out a competitive tender process;

> the supply of investment consultancy and fiduciary management services advice and marketing material within the same document;

> trustees from receiving investment consultancy services unless they have set strategic objectives for their investment consultant.


> fiduciary managers to report disaggregated fiduciary management fees to existing clients, and sets out minimum requirements to be met by fiduciary managers regarding disclosure of costs and charges when selling fiduciary management services;

> the use of a standardised methodology and template for reporting past performance of fiduciary management services to potential clients;

> investment consultants and fiduciary managers to adhere to basic requirements when reporting to potential clients on the past performance of their recommended asset management products and in-house investment products;

> trustees, investment consultants and fiduciary managers to produce various compliance statements and submit them to the CMA.

Box Clever case clarifies scope of the Pensions Regulator’s anti-avoidance powers

The Court of Appeal has dismissed an appeal in this long-running case about the scope of the Pensions Regulator’s anti-avoidance powers.

The Court of Appeal had to consider:

> whether the Regulator could have regard to events which occurred before the relevant legislation came into force on 6 April 2005;

> whether each of the targets was connected with or an associate of the employers at the relevant time (31 December 2009); and

> whether it was reasonable to impose an FSD on the targets.

The Court of Appeal has dismissed the appeal, concluding that:

> Retrospectivity: the Regulator could have regard to events occurring before 6 April 2005.

> Association: on the facts, the targets were associated with the employers on 31 December 2009.

> Reasonableness: the Tribunal’s decision that it was reasonable in this case to impose an FSD on the targets involved no error of law.