Pensions Bulletin 2023/21
25 May 2023
- Pensions Regulator gives more details of ESG review
- More McCloud remedy tax regulations proposed
- Pension sharing on divorce etc – new specimen Order wording released
Pensions Regulator gives more details of ESG review
In February 2023 the Pensions Regulator signalled a two-phase regulatory initiative in respect of pension schemes’ statements of investment principles (SIPs) and implementation statements (ISs) – checking on compliance with the latest ESG and climate change reporting duties (see Pensions Bulletin 2023/08).
We now have more details about this campaign via a new blog published by the Regulator. As before, the first phase will be to check that trustees have published their SIPs and ISs, as required by law. The second will be a qualitative review of a cross-section of SIPs and ISs, in relation to climate, ESG & sustainability requirements. The Regulator now intends to start this review in the autumn and will finalise the details of schemes to be included over the coming months.
The blog also says that:
- The Regulator wants to see a change to the practice of schemes producing disclosures where the wording is relatively vague and generic
- When it carries out its autumn review, the Regulator expects to focus on the extent to which trustees have adopted the DWP guidance (see our June 2022 News Alert), which applies to ISs for scheme years ending on or after 1 October 2022
- Trustees need to improve their understanding of climate, ESG and wider sustainability issues
- Trustees also need to improve the quality of their policies and disclosure, move away from boilerplate wording and ensure action follows intent
We said last year that a material step-up of standards in this area is expected, and it seems that a significant element of Regulator resource is now to be devoted to policing these standards with the attendant possibility of enforcement action.
Although most SIPs subject to the review will be the ones currently in force, ISs under scrutiny will include those being prepared now. Trustees currently in the course of preparing an IS will want to ensure that the document is substantively compliant. It seems that a dim view will be taken of tick-box approaches.
More McCloud remedy tax regulations proposed
HMRC has launched a consultation on further changes to the pensions tax rules for public service pension schemes to assist them in dealing with the McCloud remedy reforms. These latest draft regulations follow on from regulations covering similar ground that came into force on 6 April 2023 (see Pensions Bulletin 2023/05).
Highlighted in the May 2023 edition of an HMRC public service pensions remedy newsletter, the aim of the proposed regulations is to make sure that schemes can pay pension benefits as authorised payments, change how schemes work out pension input amounts in some specific circumstances, and make changes to how individuals are treated for tax purposes if they were subject to pension tax charges in the past three tax years.
Accompanying guidance on the draft regulations is promised shortly. The consultation closes on 19 June 2023.
Separately, HMRC is drafting public service pensions remedy guidance for pension schemes, which will be published in autumn 2023, and are inviting volunteers for testing whether it covers what is needed. We understand that this may include guidance for private sector schemes on specific areas of the regulations about potential knock-ons where one of their members has a remedy adjustment in a private sector scheme.
These are the regulations for niche events that were signalled with the first set of regulations. As with the first set, these are a demonstration of the complexity that arises in a fully codified system when a remedy is to be delivered on a retrospective basis.
Pension sharing on divorce etc – new specimen Order wording released
A revised suite of Standard Family Orders has been released by Mr Justice Peel, for the Family Court, which contains, at paragraph 95 of the Financial Remedy Order template (Order 2.1), new wording for the body of pension sharing orders. The annex forms remain unchanged.
This new wording may be of interest to pension scheme administrators dealing with pension sharing arrangements, as over the coming period they are likely to receive pension sharing orders in this new format, which is very different to the old wording.
This new wording addresses some shortcomings of the previous wording, codifies some good practice and will hopefully discourage parties to the Order from seeking to delay implementation once the Order is made. For further details of this new pension sharing order wording see this article by barrister Rhys Taylor.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.