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 schemeā€™s statement of investment principles (Sip) to cover, among other things, the trusteesā€™ 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.

By 1 October 2020, the following will be required in each schemeā€™s Sip: additional information on the trusteesā€™ 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 schemeā€™s asset managers, including information on how the trustees incentivise managers to align their investment strategies with the trusteesā€™ own.

Where trustees intend to make any changes to a schemeā€™s Sip, a sponsoring employer must be consulted. Although trustees are responsible for their schemeā€™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 yearā€™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 schemeā€™s investments. DC schemes, meanwhile, will be required to set out how they have acted on the principles in their Sip.

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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