Lucy Bennett: 2020 will see new regulatory requirements for pension scheme trustees

lucy bennett sackers

By 1 October 2019, trustees of occupational pension schemes, with a few specific exceptions, had to update their scheme’s statement of investment principles (Sip) to cover, among other things, the trustees’ policies on environmental and other sustainable investment issues.

Further changes are coming in 2020. If an employer sponsors a scheme it is important that it and its trustees are aware of these and discuss them before the new requirements come into effect.

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By 1 October 2020, the following will be required in each scheme’s Sip: additional information on the trustees’ stewardship policy, such as setting out how the investee organisation is monitored and how conflicts of interest in relation to its engagement are managed, and a policy in relation to the scheme’s asset managers, including information on how the trustees incentivise managers to align their investment strategies with the trustees’ own.

Where trustees intend to make any changes to a scheme’s Sip, a sponsoring employer must be consulted. Although trustees are responsible for their scheme’s strategy, it is important that the employer is aware of and has been consulted on the approach being taken on investment issues.

In addition to next year’s changes to Sips, it is also worth noting that both defined benefit (DB) and defined contribution (DC) schemes have further reporting requirements from 1 October 2020.

For DB schemes, an implementation statement will need to cover how policies have been followed on exercising rights and undertaking engagement in respect of the scheme’s investments. DC schemes, meanwhile, will be required to set out how they have acted on the principles in their Sip.

Both DB and DC schemes will also have to describe voting behaviours by and on behalf of the trustees during the preceding scheme year. From a timing perspective, these statements must be included in the first annual report produced on or after 1 October 2020.

Lucy Bennett is an associate at Sackers