Pensions - key issues for your trustee agenda

Cyber risk 

With major cyber breaches hitting the headlines in recent weeks, schemes should ensure their systems, procedures and documentation in this area are up to date and kept under review. Schemes immediately affected by any breach should take advice on their notification obligations and mitigation actions.

As TPR has noted, it is a question of not ‘if,’ but ‘when’ an attack might be made, with pensions being a particularly lucrative area for cybercriminals. In the case of a recent breach, TPR wrote to affected schemes, asking what steps they had taken to ensure that their obligations as data controllers had been met, with a short turnaround time. Schemes must ensure their cyber security policies, service level agreements with third parties, and business continuity and incident response plans are robust, tested, and well-documented.

ACTION: Take regular training on this fast-moving area, and make cyber risk a standing agenda item. TPR’s current guidance on cyber security principles is also due to be updated and strengthened in the forthcoming General Code.

TPR campaigns

TPR has launched a number of key campaigns over recent weeks, including on:

• LDI: TPR has published a new guidance statement on the LDI crisis, replacing its November statement with immediate effect. It sets out practical steps trustees should take to manage risks when using leveraged LDI, and calls on schemes to have the right governance and controls in place to reduce risk and to be able to react to events quickly. (The FCA has also published a statement for FCA-authorised firms involved in the management of schemes’ funds.)

• ESG: TPR is putting extra emphasis on schemes’ compliance with ESG and climate change reporting duties in 2023. Among other points, TPR warns trustees of schemes in scope (those with over 100 members) that it can take enforcement action (including significant fines) if they fail to publish the required documents.

• EDI: TPR has published equality, diversity and inclusion (EDI) guidance for trustees and employers. While acknowledging different scheme types, sizes and sectors face different challenges, TPR recommends some steps that should be taken now. These include putting an EDI policy in place, reviewing board diversity, and ensuring communications are inclusive.

ACTION: Schemes should make sure they are aware of their obligations and TPR’s recommendations and expectations in the above areas, and work with their advisers to ensure they are up to scratch. TPR’s publications contain useful reminders — and clear warnings.

DB funding

TPR has now confirmed that its DB funding code and regulatory framework won’t be launched until April 2024 (and will apply to valuations falling from that date). Watch out for publication of the final code, and finalised DWP regulations – with changes likely from the draft versions. Schemes may still wish to consider how the general direction of travel would impact their current funding approach.

Its new Annual Funding Statement encourages trustees to consider their funding and investment strategies, and to lock in any gains they may have made over recent months. Where a scheme has seen less improvement, trustees need to understand why and review their strategy accordingly. On 10 May, TPR also published refreshed guidance for trustees dealing with sponsoring employer distress, urging them to remain vigilant to economic challenges, undertake appropriate covenant monitoring, and engage with the Regulator where necessary.

ACTION: Schemes and providers should familiarise themselves with TPR’s Statement and guidance with appropriate support from third parties, and watch out for further DB developments.

• Transfers: The Pension Scams Industry Group’s new interim practitioner guide helps schemes apply the 2021 regulations on protecting members from scams. PSIG’s code itself will be updated once the regulations have been, following the DWP’s imminent review. Make sure you are aware of our recommended actions in light of the new publication.

• The Spring Budget gave schemes plenty to think about: our Insight reviews the key action points.

• Dashboard: While the DWP has announced a ‘reset’ of the Pensions Dashboards timeline, TPR continues to urge schemes to make sure they’re ready for connection, with its guidance providing useful ‘preparing to connect’ checklists. The PDP has produced FAQs on the revised timeline, and PASA has issued new advice, including on ‘what to say to savers’. An update is due from the government before summer recess.

• TPR’s new “General code”, with the final version expected imminently. Speak to us about the steps you need to take and how we can help.

• New and updated notifiable events, which will need to be factored into corporate plans – these are still awaited despite having been expected to come into force in April 2022…