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Pensions: DC trustee agenda update - January 2023

Welcome to our monthly update on current legal issues for trustees of DC pension schemes, designed to help you stay up-to-date with key developments between trustee meetings, and to support the legal update item on your next trustee agenda. We also have a separate briefing that covers both DB and DC issues.

Market volatility: regulators’ guidance UPDATED

A number of regulators, including the Pensions Regulator (TPR), have released statements in relation to liability-driven investments (LDI) (read more). The statements set out expectations in relation to levels of resilience to future market movements. TPR’s statement also focuses on pension scheme governance arrangements being sufficient to react quickly in stress situations, and sets out steps it expects schemes to carry out. This follows on from TPR’s October statement for trustees on managing investment and liquidity risk (read more).

ACTION: Read the statements and consider any scheme-specific implications, including which actions may apply to your scheme.

Dashboards developments UPDATED

Regulations setting out the requirements for dashboards and schemes interacting with them, including the staging deadlines for connection to the dashboards ecosystem, have been approved (read more), following a response to the second consultation on those regulations (read more). The Pensions Dashboards Programme has published a revised suite of standards (read more), along with responses to consultation on those standards (read more); a new consultation on design standards (read more); and an at-a-glance guide to the staging timetable (read more). In addition, sections of the Pension Schemes Act 2021 relating to dashboards have now been brought into force (read more); the government has finalised guidance for schemes considering applying for deferral of their connection deadline (read more); and TPR has published a draft dashboards compliance and enforcement policy for consultation (read more).

ACTION: Ensure your scheme is taking steps to meet the requirements in the regulations.

Illiquid investments and performance fees UPDATED

The government has published draft regulations and guidance intended to broaden the investment opportunities of DC schemes, alongside a response to part of the March 2022 consultation on facilitating investment in illiquid assets (read more). The regulations are expected to be laid before Parliament early in 2023.

Key proposals include flexibility to exclude specified performance-based fees from the default fund charge cap, and requirements for relevant DC schemes to disclose and explain: (i) their policies on illiquid investments; and (ii) the proportions of default fund assets allocated to different asset classes at various specified member ages.

ACTION: Keep a watching brief and consider the proposals as part of investment discussions.

DC transfers guidance

The Pensions Administration Standards Association (PASA) has published good practice guidance on DC transfer processes. While the guidance is voluntary, PASA anticipates that the Pensions Ombudsman will use it as a reference point when reviewing complaints. The guidance includes example member communications, checklists and a transfer template (read more).

ACTION: Check your processes against the guidance to ensure best practice.

Have your say

  • A consultation has been launched on the VAT treatment of fund management. The proposals will set out criteria for funds that benefit from a VAT exemption. They are intended to codify existing policy, not make changes to the status quo (read more).

Watch this space

  • The government has consulted on changes to the notifiable events regime. There is currently no revised date for the delayed regulations (read more).
  • TPR has consulted on its proposed single code of practice: watch our webinar on the proposals and read TPR’s interim response. Publication of the revised version of the code is expected soon.
  • A revised code on transfers, and other materials from the Pension Scams Industry Group, are also awaited.
  • TPR will be launching a joint consultation with the Financial Conduct Authority (FCA) and DWP on a Value for Money Framework in 2023.
  • The Chancellor announced in the Autumn Statement that the results of a review of the current timetable to increase the state pension age will be published in early 2023.

Need help with a pensions dispute? Visit allenovery.com/pensionsindispute.

Need help managing DB pension risk? Visit allenovery.com/pensionrisk.

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