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

• TPR updates guidance for DC schemes on illiquid assets disclosures
• TPR publishes blog on climate scenario analysis

TPR updates guidance for DC schemes on illiquid assets disclosures

On 24 August 2023, TPR updated its guidance on DC investment governance and communicating and reporting for DC schemes, to reflect regulations and statutory guidance intended to broaden DC investment opportunities in illiquid assets (see our Alert for details). Updates were also made to TPR’s quick guide to the chair’s statement and technical appendix, and the notes to the web version of the DC code of practice.

From 6 April 2023, the regulations give trustees the option to remove certain performance-based fees from the DC charge cap. In addition, certain information about performance-based fees must be disclosed in the chair’s statement for scheme years ending after 6 April 2023.

The regulations also require most occupational schemes providing DC benefits to:

• disclose and explain their policies on illiquid investments in the default SIP (or the main SIP for CDC schemes) from the first time it is revised after 1 October 2023, or by 1 October 2024 at the latest, and
• publicly disclose and explain in the chair’s statement the percentage of assets in the default fund(s) (or the scheme as a whole for CDC schemes) that are allocated to certain asset classes, from the first scheme year which ends after 1 October 2023.

The web version of the DC code states that TPR “will be closely monitoring the impact of these changes and the approach trustees are taking to investment to deliver the best retirement outcomes for savers”.

TPR publishes blog on climate scenario analysis

On 29 August 2023, TPR published a blog on how trustees can help make climate scenario analysis “decision-useful”. This follows TPR’s review of climate-related disclosures and campaign to make sure trustees are meeting their ESG duties, and some recent wider industry reports highlighting the current limitations of climate scenario analysis.

TPR’s view is that the climate reporting requirements provide “a consistent framework to disclose against” but climate scenario analysis has “tended to downplay the full scope of the risks and uncertainties”. The blog lists TPR’s expectations of trustees, including that they should:

• have an appropriate level of knowledge and understanding of climate issues and undertake regular training
• be able to understand the narratives underlying their climate scenarios, the limitations of those scenarios and the assumptions made in their construction, and
• consider undertaking more scenario analysis in years where they are not formally required to do so.

TPR looks “to encourage more debate” ahead of the DWP’s upcoming review of the climate change governance regulations this year.