7 days

7 Days is a weekly round up of developments in pensions, normally published on Monday afternoons. We collate this information from key industry sources, such as the DWP, HMRC and TPR.

In this 7 Days

• Consultation on new investment regulations
• Government strengthens its commitment on social impact investment
• Corporate governance reform: draft regulations and guidance published
• EAC launches inquiry into use of retail prices index
• PPF publishes guidance on CVAs

Consultation on new investment regulations

Under draft regulations published for consultation today, 18 June 2018, it is proposed that trustees will be required to produce a policy which includes an assessment of the sustainability of their investment decisions.

The DWP proposes that, by 1 October 2019, the draft Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2018 will require:

• trustees to update or prepare their Statement of Investment Principles (SIP) to set out how they take account of financially material considerations, including (but not limited to), those arising from ESG considerations, including climate change, and their policies in relation to the stewardship of the investments;
• trustees of “relevant schemes” (broadly, DC) to publish their SIP on a website, and use the annual benefit statement to tell members that the SIP is available. They will also need to prepare a separate statement setting out how they will take account of the views which, in their opinion, members hold in relation to matters covered in the SIP.

In addition, it is proposed that from 1 October 2020, relevant schemes will need to produce an implementation report, setting out how they acted on the statement on members’ views and publish that report online (as for the SIP itself), again informing members of its availability through the annual benefit statement.

Changes are also proposed to guidance that was first published in February 2018, to state how trustees should meet the new requirements of the regulations.

The regulations were published alongside the Government’s final response to the Law Commission’s report on pension funds and social investment. This response notes the Government’s plans to clarify the requirements for trustees of occupational pensions and IGCs of workplace personal pensions around:

• consideration of broader long-term financial risks
• pension schemes’ ability to consider members’ non-financial or ethical concerns
• the role of engagement alongside voting as an important aspect of stewardship of pension scheme assets.

The consultation closes on 16 July 2018.

Please see our forthcoming Alert for further detail.

Government strengthens its commitment on social impact investment

On 12 June 2018, the Government published its response to the November 2017 industry-led report on Growing a Culture of Social Impact Investment in the UK.

As part of the response, the Government has committed to work with the investment and savings industry to support the launch of further social impact investment funds. It has also outlined plans “to encourage more investments to flow into disadvantaged areas and to create investment opportunities that address social challenges, while also creating financial return.”

Tracey Crouch, Minister for Sport and Civil Society, said “People increasingly want to see their savings and investments to have a positive impact on society, as well as bring financial returns. By utilising the wealth of experience within the financial services industry, we can expand social impact investing to help build a society that works for everyone. Even if you have a small amount of savings, or a pension pot, you should be able to invest in the issues you care about.”

The report notes that the Government is considering changes to regulation (see above item) as well as identifying actions it can take “to help build capacity and increase transparency around social impact investment by pension schemes”.

The Government states that it will continue to work alongside the financial services industry and regulators and will provide a progress update “in winter 2018”.

Corporate governance reform: draft regulations and guidance published

On 11 June 2018, the draft Companies (Miscellaneous Reporting) Regulations 2018 were published. The regulations cover the corporate governance reforms recently confirmed by the Government.

If approved, the regulations would largely come into force on 1 January 2019, with the first pay ratio reports then due in 2020. Changes relating to small Community Interest Companies (CICs) would come into force 21 days after the day on which the Regulations are made.

On 12 June 2018, a supporting Q&A document was published. The Q&A is intended to help those affected by the Companies (Miscellaneous Reporting) Regulations 2018, by giving an overview of the draft regulations, and commentary on the type of information and level of detail required in reporting.

On 13 June 2018, the FRC issued a draft of the Wates Corporate Governance Principles for Large Private Companies and supporting guidance, for consultation. The principles, which are supported by non-exhaustive guidance, are designed to help large private companies comply with the reporting regulations, once in force. Consultation on the draft principles is open until 7 September 2018. The final principles and guidance are due to be published in December 2018.

EAC launches inquiry into use of retail prices index

The Economic Affairs Committee has launched an inquiry into the use of RPI as a measure of inflation.

The inquiry is comprised of two evidence sessions, asking witnesses whether RPI should be dropped as a measure of inflation, what reasons there are for keeping it, and what impact changing RPI would have on the people and organisations who use it. The inquiry follows comments to the EAC by the Governor of the Bank of England in January 2018.

The inquiry is expected to conclude before Parliament’s summer recess.

PPF publishes guidance on CVAs

On 12 June 2018, the PPF published guidance on Company Voluntary Arrangements (“CVA”), following what the PPF called “a marked increase in the use of CVAs” in recent months.

The updated guidance explains the approach employers and their advisers should take when presenting a CVA proposal to the PPF. It highlights the issues that should be considered so that the PPF can decide whether it is appropriate to vote in favour of the proposal or not.

Commenting on the guidance, Malcolm Weir, Director of Restructuring & Insolvency at the PPF said that “our role is to protect the 11 million people who belong to a DB pension scheme and our levy payers, therefore, as with any restructuring case, we do not agree to CVAs lightly. The guidance will help to ensure employers can address the areas of concern for the PPF at the outset and make the process more efficient. As ever we welcome early engagement when proposals are made.”