The Week In Pensions provides you with a digest of the most important developments in pensions law and regulation along with highlighting some of the most interesting stories from the pensions industry and national press.
In The Week In Pensions this week:
- Government issues a consultation on ESG disclosures for larger pension schemes;
- PPF “well placed” to achieve self-sufficiency target despite current market volatility due to pandemic; and
- PLSA research finds that schemes are confident that they will be ready for pension dashboards
And, in the pensions industry and national press:
- Percentage of European pension funds taking climate risks into account quadruples year-on-year; and
- Size of final salary pension transfer values soar during lockdown.
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Pensions legal and regulatory developments
Government issues a consultation on ESG disclosures for larger pension schemes
The Secretary of State for Work and Pensions gave a speech at the end of August in which she announced plans for a consultation on ESG disclosures for larger pension schemes. The consultation, titled ‘Taking action on climate risk: improving governance and reporting by occupational pension schemes’, proposes that pension schemes be required to assess and report on the financial risks relating to climate change. Under the proposals, the obligations will be phased in:
- occupational pension schemes with £5 billion or more in assets will be subject to the duties at the end of 2022; and
- occupational pension schemes with £1 billion or more in assets will be subject to the duties at the end of 2023.
Further extension of the requirements will be subject to further consultation. The consultation closes at 11:45pm on 7 October 2020.
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PPF “well placed” to achieve self-sufficiency target despite current market volatility due to pandemic
The Pension Protection Fund has announced that it is set to achieve its self-sufficiency target despite the COVID-19 pandemic. In a short news update, the PPF stated that it ‘remains confident that our sustainable funding strategy and diverse investment approach equips us well to weather the current market volatility and future challenges’.
In particular, the PPF ‘continues to regard any decision to cut member benefits as a matter for the most extreme scenarios only, and not something we foresee.’
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PLSA research finds that schemes are confident that they will be ready for pension dashboards
According to a survey carried out by the PLSA, three-quarters of DB and DC pension schemes believe they will be ready to join the Pensions Dashboards initiative provided:
- they have at least two years to prepare; and
- various challenges can be overcome.
This is based on fulfilling the government policy that schemes are to supply data that is available on annual benefits statements or on request to the initial dashboards.
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Highlights from the pensions industry and national press
Percentage of European pension funds taking climate risks into account quadruples year-on-year
The proportion of pension funds taking climate change into account, 54 per cent, has more than tripled since last year, when only 14 per cent said they did, according to Mercer’s European Asset Allocation insights report.
Mercer surveyed 927 institutional investors who, between them, control assets of around €1.1 trillion. In their report, they found that 89 per cent of schemes surveyed consider wider environmental, social and governance risks as part of their investment decisions.
This has risen from 55 per cent in 2019. The main driver of investors’ concern with ESG risk was the regulatory environment, while 51 per cent also said they were driven by the potential impact on investment returns, which has risen from 29 per cent in 2019.
Size of final salary pension transfer values soar during lockdown
The average value of a final salary pension transfer rocketed to more than half a million pounds during lockdown as falling markets spooked those with smaller pots from transferring out. Analysis by LCP showed the average value of defined benefit pension transfers reached £556,000 in the second quarter of 2020. This represents an increase of 30% compared with the previous quarter. It is also the first time in three years that the average transfer has exceeded half a million pounds.
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About the author(s)
Ian is a London-based professional support lawyer (PSL) legal director. Ian is a member of our pensions and combined human resource solutions (CHRS) teams. He works with clients to solve their employment and pensions law issues. Ian maintains a particular focus on 'crossover' issues that benefit from his understanding of both areas of law.
Ian Chapman-Curry
Ian is a London-based professional support lawyer (PSL) legal director. Ian is a member of our pensions and combined human resource solutions (CHRS) teams. He works with clients to solve their employment and pensions law issues. Ian maintains a particular focus on 'crossover' issues that benefit from his understanding of both areas of law.