Guidance on Implementation Statements published by Pensions and Lifetime Savings Association
The Pensions and Lifetime Savings Association (PLSA) has provided guidance for trustees on the preparation of Implementation Statements. In this statement trustees will be required to disclose their investment and responsible investment activity over the previous year.
It is noted that policymakers, the public and scheme members will be paying close attention to the Implementation Statements. As such, it is vital that trustees provide meaningful statements which clearly outline how key activities and decisions have helped trustees achieve their investment objectives.
How the legislation applies, and the timing of the requirements, will vary depending on the nature of the scheme, when its year-end falls, and when the trustees finalise their report and accounts for the scheme. However the guidance provides a helpful decision tree that can be followed by each scheme to determine this.
It is recognized that the steps trustees will require to take on their investment implementation journey will differ, but key considerations that are identified are as follows:
- Investment governance
- Approach to non-financial matters
- Strategic asset allocation
- Mandate parameters
- Manager selection, review and monitoring
The PLSA believes that every Implementation Statement should follow certain key rules:
- It follows directly from the SIP
- It is based around actions and decisions taken during the year
- It focuses on those activities and decisions which have most "moved the dial"
- The level of detail is appropriate to the audience
- It clearly articulates how trustees have sought to hold their service providers to account
- It provides a clear rationale for where implementation departed from the SIP
In terms of voting disclosures in the Implementation Statement, trustees of both relevant schemes and DB-only schemes must disclose their approach to voting. This should not only explain how their policies have been amended and followed during the year, but also provide a description of the voting behavior undertaken either directly or on their behalf.
The PLSA acknowledges that what constitutes best practice on the Implementation Statement will rapidly change as the market develops. However it states that it welcomes "the commitment of schemes to producing documents which are not just compliant, but also provide useful and engaging information to members.
Pensions scams on the rise as Work and Pensions Committee inquiry begins
The Work and Pensions Committee is undertaking an inquiry into the impact of pensions freedoms on the protection of pensions savers. The first part of this claim is an investigation of pensions scams.
The Committee has asked that the industry submit views on trends of scams that they have witnessed. They are also looking to ascertain the prevalence of such scams, and how enforcement tools are currently being used. Their views are sought on what they think can be done to prevent such scams from being perpetrated, and what role the pensions industry can play in this.
The approach of HMRC will be considered as part of the investigation. The Committee will be requesting views on whether the tax treatment of the victims of pension scams is fair.
Chairman of the Work and Pensions Committee, Stephen Timms, stated "we know reported frauds could be just the tip of the iceberg, so the committee is keen to better understand the scale of the pension scam problem, as well as the types in operation, and the role of the pensions industry and public bodies in using current powers against fraudsters". The All-Party Parliamentary Group on Pension Scams in March stated that more than £10bn may have been lost to pension scammers in the UK.
Pension scams have increased in prevalence in the past months due to the Covid-19 pandemic, due to savers being increasingly targeted by scammers attempting to lure them to 'safe havens'.
The deadline for submissions to be made to the Work and Pensions Committee inquiry is 9 September 2020.
Guidance for communicating complexities of GMP equalisation to members published
The cross-industry GMP Equalisation Working Group has now published guidance in order to support trustees in communicating the complexities of the GMP equalisation scheme to members.
Chair of the working group stated "communicating GMP equalisation is a complex subject – something that members aren’t expecting but need to know about, and something as an industry we should help them to understand". The guidance provided includes details of the broad principles of GMP equalisation; a question and answer section for schemes to use; a checklist of communications to members which may need to be reviewed and a jargon buster for schemes to use as a guide.
The guidance notes that unless it is being implemented, there is no requirement to mention GMP equalisation to members yet. In order to avoid confusion, the communication should be started by making it clear which members it applies to.
It is strongly encouraged that all schemes use the definitions provided in the 'jargon buster' section of the guidance, so that individuals have a consistent experience. The question and answer section provides practical, succinct answers to questions that members are likely to have.
The current guidance covers communication in the Early Planning Stage, but the Working Group is now starting to produce the next piece of guidance which will cover the Implementation Stage. A survey has been provided for schemes to complete in order to allow them to assist with the drafting of this next stage of the guidance by sharing learning and experience.
If you have any queries about any of the issues covered, or you require advice on a pensions related matter, please do not hesitate to get in touch with your usual DWF contact, or reach out to one of the contacts mentioned below.