The Department for Work and Pensions (DWP) recently undertook a consultation on regulations regarding investment and disclosure. Whilst their response is now awaited, the intention of the regulations is to amend what an SIP must include, and how it is prepared and revised. The regulations also require trustees of money purchase schemes, with limited exceptions, to publish the SIP, publish an annual report on how it has been implemented and inform members via their annual benefit statement of its availability.
Proposed to come into force on 1 October 2019, the effect on schemes is summarised in the table below.
|Less than 100 members||100+ members|
|Pure DB (no money purchase)||No new requirements||1 and 3|
|DB with only AVCs||No new requirements||1 and 3|
|DB and DC (not just AVCs)||2b only||1, 2, 3 and 4|
|Pure DC||2b only||1, 2, 3 and 4|
1.By 1 October 2019, where a SIP is required, trustees will be required to update or prepare their SIP to set out the following points:
a) How they take account of financially material considerations, including (but not limited to) those arising from Environmental, Social and Governance (ESG) considerations, including climate change.
b) Their policies in relation to the stewardship of the investments, including engagement with investee firms and the exercise of the voting rights associated with the investment.
2. By 1 October 2019, trustees of relevant schemes (generally those offering money purchase benefits with a few exceptions) will be required to:
a) Publish their SIP on a website so that it can be found and read by both scheme members and interested members of the public, and inform scheme members of its availability via the annual benefit statement.
a) Prepare or update their default strategy to set out how they take account of financially material considerations, including (but not limited to) those arising from ESG risks, including climate change.
3. From 1 October 2019, where a SIP is required, trustees, when they next prepare or update their SIP, will be required to prepare a separate “statement on member’s views” setting out how they will take account of the views which, in their opinion, members hold, in relation to the matters covered in the SIP.
4. From 1 October 2020, trustees of relevant schemes which are required to produce a SIP will be required to do the following:
a) Produce an implementation report setting out how they acted on the principles set out in the SIP, and how they acted on the statement which covered how they would take account of the views which, in their opinion, members hold.
b) Publish that implementation report online in the same way as the SIP itself and inform scheme members of its availability via the annual benefit statement.
If the regulations are made, The Pensions Regulator (TPR) are intending to update existing codes and guidance, and may provide further guidance to assist trustees to understand their duties.
If the regulations are not laid before Parliament until early next year, the proposals would not come into force until 6 April 2020 (with 4 above being from 6 April 2021).
In the meantime, trustees should consider their existing SIP in line with these new proposals.