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Pensions Insights - April 2023

25 April 2023

In our monthly e-alert, Pensions Insights, we give you our take on the latest highlights in the world of pensions law and policy.

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 contact your usual contact.

Case Law 

CMG Pension Trustees Limited v CGI IT UK Limited – Appeal hearing expected in October

It is understood that permission to appeal the High Court decision of CMG Pension Trustees Limited v CGI IT UK Limited has been granted and that a hearing is expected in October 2023.

In the case which we reported on in our August Pensions Insights 2022 the High Court determined that payments made to members to remedy underpayments of benefits were subject to a six-year limitation period under the Scheme's forfeiture rule. 

New Law  

Finance (No 2) Bill 2023

The second reading of the Finance (No. 2) Bill 2023 which contains provisions to enact changes announced in the most recent budget had its second reading in the House of Commons on the 29 March 2023.  The Committee stage for the Bill commenced on 18 April. 


Trustees must be ready to step up on ESG and climate reporting

In a recent blog highlighting its emphasis on compliance with environmental social governance and climate reporting duties in 2023, TPR has stated that it will check trustees of schemes with 100 or more members have published a statement of investment principles (SIP), which details the policies for how a scheme invests, including consideration of financially material ESG factors.  These trustees must also publish an implementation statement (IS) – which shows how the principles in the SIP have been implemented.

TPR has requested that trustees provide a web address to their SIP and IS, where relevant, via their scheme returns since 2022.  It now reports that of the 220 DC schemes that should have provided web addresses for their SIP and IS through last year’s scheme return, only 180 provided the information as required.

The blog confirms that TPR are monitoring the situation and expect to see compliance improve and warns trustees of schemes in scope that enforcement action may be taken against them if they fail to publish their SIPs and/or IS with a reminder that enforcement powers include a fine of up to £50,000 (where the trustee is a corporate body).

In addition for trustees of all schemes in scope to publish an annual climate change report in accordance with the requirements in the Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 there is a requirement to provide the web address for that report in the scheme return.

TPR notes that from October 2022, it expects trustees to have regard to the DWP guidance, which was updated in June 2022, and report on a new portfolio alignment metric and, where trustees are reporting for the second time, consider scope 3 emissions.  Where trustees fail to comply with the publication requirement, TPR have to impose a mandatory penalty. The minimum is £2,500 and the maximum is £50,000 (where the trustee is a corporate body).

TPR guidance to help improve pension schemes' equality diversity and inclusion

TPR has issued equality, diversity and inclusion (EDI) guidance for pension scheme governing bodies and employers which it hopes will be used to improve the EDI of their scheme's board. A separate version of the guidance is available for employers in recognition of the important role employers play in ensuring EDI is considered by their scheme and their duty to support employees who are nominated to their scheme’s governing body.

The guidance makes various suggestions for steps that can and should be taken to improve schemes’ EDI now including:

  • Putting in place an EDI policy for the Scheme which covers an agreed definition of EDI, the EDI aims of the governing body and an EDI training plan.
  • That EDI goals and objectives, including ways to achieve a diverse and inclusive governing body, should be agreed at the start of the scheme year.  
  • Governing bodies should regularly review and assess their body’s diversity of life experiences, expertise and skills and sponsoring employers are encouraged to consider widening the pool of candidates for governing bodies beyond senior management positions.
  • Governing bodies may wish to consider fixed terms, usually between three to five years, for member-nominated trustee positions to encourage a scheduled change to the trustee board bringing new perspectives to the group’s decision making. 
  • Where there is a professional trustee, it is possible for governing bodies to change the individual representative from the firm over time to support their board’s diversity. 
  • Governing bodies finding it challenging to address diversity gaps through member-nominated/employer-nominated trustee positions could consider an independent or professional trustee position. 
  • Any employer or governing body considering replacing the governing body with a sole trustee, should make sure that EDI is considered as part of that decision-making process.

PLSA revises Stewardship and Voting Guidelines.

These guidelines, which are designed to help pension fund trustees, investment managers and other institutional investors decide how to exercise their vote at annual general meetings have been updated to take stock of recent political and economic circumstances.  The PLSA state that three themes have emerged as having particular relevance for 2023: the cost-of-living crisis, climate change, and the impact of company operations on its workforce and wider society.

The Voting Guidelines recommend remuneration structures and incentives for executive directors should cascade down to all employees in order to allow employees to share in the success of the business. They also encourage shareholders to vote against the remuneration policy where it doesn’t match up to the standards in the guidelines.

The PLSA also specifically recommends investors consider voting against companies’ annual report and accounts where “operations are highly carbon intensive and there has been no disclosure of the climate-related assumptions which underlie their financial calculations, or where those assumptions are not consistent with the Paris Agreement.”.


Further Reading