Pensions: what's new this week - 22 May 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 ESG initiative; TPR cyber security statement; Transfers template letter - update; Call for evidence on auto-enrolment alternative tests; Brexit Bill – update.
TPR ESG initiative
The Pensions Regulator (TPR) has published a blog post on its regulatory initiative to ensure that trustees properly consider Environmental, Social and Governance (ESG) issues. The blog post echoes a post published in April (read more), announcing that TPR will be checking that relevant schemes have published a statement of investment principles (SIP), an implementation statement (IS) and an annual climate change (TCFD) report containing required ESG disclosures.
The blog post gives more detail on the proposed second phase of this regulatory initiative: starting this autumn, TPR will undertake a qualitative review of the climate, ESG and wider sustainability-related provisions in a cross-section of SIPs and ISs. ISs for scheme years ending on or after 1 October 2022 should reflect the guidance published by the DWP in June 2022 (read more) and TPR’s review will focus on the extent to which that guidance has been adopted.
The blog post warns against vague and generic statements, noting that where TPR believes schemes have not made a reasonable effort to define their policies in the SIP and report on how those policies have been implemented in the IS, it can take enforcement action. TPR will look to identify and publish examples of good practice to help other schemes to improve their future disclosures.
TPR recognises that there are valid concerns around the availability and quality of data, the effective modelling of outcomes and impacts, the implementation risks of greenwashing and the potential for green hushing (where firms keep quiet about their emissions reduction targets to avoid scrutiny). However, it states that these shouldn’t be a barrier to trustees meeting their legal duties or an excuse to put things in the ‘too-difficult-to-do’ box.
TPR cyber security statement
TPR has published a statement on a recent cyber security incident in which pension scheme data has been exfiltrated from a service provider’s servers. The statement gives guidance on steps that schemes affected by the incident should be taking, for example communicating with the provider and with members.
The statement also reminds trustees that they are ultimately responsible for their scheme’s data and gives some general guidance on handling data breaches. TPR also highlights the need for robust cyber security and business continuity plans, encouraging schemes to read its cyber security guidance and check that their processes are up to date.
Transfers template letter - update
Last week we reported that TPR had removed from its guidance on distressed employers a reference to trustees sending a template letter on scams produced by TPR, the FCA and the Money and Pensions Service to members requesting a transfer value quote. However, TPR’s ‘warn members about pension scams’ web page still refers to the requirement to send this letter. TPR has now confirmed, in response to our query, that sending the template letter is still a requirement, so schemes should continue to provide it.
Call for evidence on auto-enrolment alternative tests
The government has published a call for evidence on the alternative quality requirements used for auto-enrolment. The requirements provide alternative tests that defined benefit (DB) and hybrid schemes can use to demonstrate that they are of sufficient quality to be used by employers to fulfil their auto-enrolment duties. The government is required to review these provisions every three years and the call for evidence is part of this review; it asks for input on whether the alternative tests continue to deliver the intended simplifications and flexibility, and whether there are any unforeseen issues. It is also looking at the suitability of the alternative quality test introduced for collective money purchase schemes. The call for evidence closes on 19 June 2023.
Brexit Bill – update
The government has taken a change in approach in relation to the Retained EU Law (Revocation and Reform) Bill – the Bill that seeks to revoke retained EU laws (REUL) from UK legislation after the UK’s departure from the EU. Previously, the Bill had been drafted to repeal almost all REUL automatically at the end of 2023, subject to specific pieces of legislation being preserved by statutory instruments. The government has now tabled amendments to the Bill, which would mean that a specified list of REUL (set out in a schedule) would be revoked by 31 December 2023, with the remainder being retained. There is currently no pensions legislation included in the schedule of REUL to be revoked.