Pensions: what's new this week - 12 June 2023
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Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.
This week we cover topics including: TPR blog post on protecting savers from economic volatility; New dashboards connection deadline announced; Other dashboards developments; and IFoA report on biodiversity and nature-related risks.
TPR blog post on protecting savers from economic volatility
The Pensions Regulator (TPR) has published a blog post building on its statement in January about the need to support DC savers – in particular, those who are close to retirement and have the least time to make up investment losses.
TPR reminds trustees to focus on outcomes, not just costs, to ensure they receive good and timely information on performance and risk for different member cohorts, and to ensure that their default strategy is fit for purpose in the current market environment.
For younger and mid-career savers, TPR notes that increases in the value of equity markets are good news but are unlikely to be fully reflected in annual benefit statements this year, so trustees may want to provide additional context and supporting materials to help members understand the implications for them. It also urges schemes to engage with members approaching retirement to consider whether they want to review and update their investment and retirement choices, and to signpost Pension Wise and MoneyHelper as appropriate.
New dashboards connection deadline announced
The Pensions Minister has announced that the pensions dashboards connection deadline will be 31 October 2026 – regulations have been laid in Parliament to make connection mandatory by this date. However, the Dashboards Available Point (DAP – this is the date when dashboards will be accessible to the public) may be earlier than this.
The DAP will be set once key criteria for the effective and secure operation of dashboards have been met and most pension schemes and providers are connected to the central digital architecture. The Ministerial Statement confirms that the staging timeline for connection is now to be set out in guidance (in collaboration with the industry) rather than legislation – there will be more information to come on this later in 2023.
Other dashboards developments
The Pensions Administration Standards Association (PASA) has published guidance for both DB and DC schemes on good practice approaches to providing value data to pensions dashboards. The guidance sets out possible approaches for dealing with a range of issues including late retirements, GMP equalisation, split normal pension ages, underpins and guarantees, partial retirements, bridging pensions and other topics. The guidance is intended to help schemes to consider the most appropriate approach for their members in areas where the regulations and standards do not provide specific detail.
One of the issues covered in the guidance is how DB schemes should manage the provision of DC AVC information where the AVC arrangements are administered separately from the main DB scheme benefits. It identifies three possible options for delivering AVC data of this type within the dashboards ecosystem – providing the DB and AVC values as together from a single source, from multiple sources but linked with an identifier, or from multiple sources but without being linked. PASA plans to carry out a survey of AVC providers to gather information on which of these options they will support, in order to streamline scheme efforts in this area.
IFoA report on biodiversity and nature-related risks
The Institute and Faculty of Actuaries (IFoA) has published a report titled ‘Biodiversity and nature related risks for actuaries: an introduction’. This looks at how nature-related risks could impact pension scheme liabilities/assets and the strength of the employer covenant, as well as scheme assumptions in relation to, for example, investment returns, inflation and mortality.
Nature-related risks are coming increasingly into focus as a result of the Taskforce for Nature-Related Financial Disclosures, which is developing a disclosure framework parallel to the TCFD (a final version is expected later this year). The Pensions Regulator recently cited biodiversity loss alongside climate change as a key aspect for trustee consideration in the ESG and wider sustainability sphere.