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Pensions: DC trustee agenda update - March 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 for DB and hybrid schemes.

DC illiquid assets and performance-based fees NEW

The government has published regulations and guidance aimed at encouraging DC schemes to invest in illiquid assets. Key changes include new 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 (read more). Subject to Parliamentary approval, the regulations will come into force from April 2023.

ACTION: Prepare for disclose and explain requirements; consider performance-related fees in your investment strategy.

Market volatility: regulators’ guidance

The Pensions Regulator (TPR) has published guidance on actions it expects trustees to take regarding the impact of current economic conditions on DC benefits. The guidance focuses on improving member communications and support, strengthening governance and oversight, and ensuring that investment strategies support stronger saver outcomes (read more).

A number of regulators, including TPR, have also recently 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 comments on pension scheme governance arrangements and sets out steps it expects schemes to implement.

ACTION: Read the guidance and statements and consider any scheme-specific implications and actions.

DC transfers guidance UPDATED

TPR has updated its guidance on dealing with transfer requests, with changes aimed at helping schemes ensure that members receive the right advice to satisfy legislative requirements where an ‘amber flag’ is raised in relation to a transfer (read more).

The Pensions Administration Standards Association (PASA) has released a publication on DC transfers, discussing industry-wide issues with the flag system and possible ways of addressing these (read more).

ACTION: Check your processes against TPR’s guidance and consider the PASA suggestions.

Have your say

  • The government is consulting on a framework requiring schemes to disclose, assess and compare the value for money they offer for DC benefits. The consultation closes on 27 March 2023 (read more).
  • A call for evidence has been published on possible automated solutions to the long-standing issue of the increased number of small deferred pots. Responses should be submitted by 27 March 2023 (read more).
  • The government is consulting on extending Collective Defined Contribution (CDC) provision to multi-employer schemes. This consultation also closes on 27 March 2023 (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.
  • 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.

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