Insight
Pensions: what's new this week - October 21, 2024
TPR targets continuous improvement on ESG matters
The Pensions Regulator has published a new landing page bringing together resources aimed at helping trustees to embed environmental, social and governance (ESG) matters in every area of scheme decision-making. In an accompanying blog post, TPR comments that disclosure alone is not enough and that ESG factors should be part of a scheme’s wider decision-making. In addition, ‘the ESG and climate disclosures…should also demonstrate what trustees have done to take advantage of the opportunities presented by the UK’s ambition to transition to a net zero economy by 2050’.
The new landing page brings together TPR’s existing ESG and climate material, comprising Code of Practice modules on climate change and stewardship, existing guidance on climate-related governance and reporting, and DB and DC investment guidance. The page also includes links to reports on TPR’s own ESG-related activities and a range of external resources.
Read TPR’s blog post on ESG matters.
PPF guidance on its power to disapply onerous contract terms
The Pension Protection Fund has the power, when it assumes responsibility for a scheme, to modify contracts that have been entered into by the scheme trustees in specified circumstances. One such circumstance is where the trustees have taken out an annuity in respect of a member – the contract may be amended so that the benefits are paid to the PPF instead, since it will be paying PPF-level compensation to the member. The other is where the contract contains a term or condition that the PPF considers to be onerous, in which case the PPF may disapply the term or condition, or substitute a term or condition that it considers to be reasonable
The PPF has published an updated version of its 2010 guidance on this issue, in which it states that to date, it has not identified any terms that it would wish to disapply or vary under this power. The guidance sets out broad principles which the PPF would expect to apply in determining whether and how to exercise its discretion, including (as previously) that it ‘would not ordinarily seek to disapply or substitute terms in contracts that have been negotiated at arm’s length by trustees in the ordinary course of their trustee business, even if it is felt that the trustees negotiated a poor deal’. The test that the PPF applies in exercising its powers is whether a term is ‘substantially unfair or manifestly prejudicial’ to the purposes of enabling a scheme to transfer to the PPF expeditiously, or protecting the financial interests of the PPF and levy payers. Examples of such terms might include financial charges that apply if a transfer to the PPF becomes likely, or terms triggered by insolvency events in relation to a sponsoring employer or other PPF-related events. The guidance includes approved language in relation to ‘Additional Termination Events’ for use in ISDA agreements.
Read the guidance on the PPF’s power to modify contracts.
TPO update on role of resolution team
The Pensions Ombudsman has published a factsheet for applicants and respondents setting out the role of its Resolution Team in the resolution of pensions disputes. Incoming complaints are assessed for suitability for informal resolution by agreement between the parties – these will be handled by the Resolution Team and other complaints will be directed to the more formal adjudication process.
Following an investigation by a member of the Resolution Team, the parties would be issued with an informal view and suggested solution (which could include compensation). If the parties agree, the case is closed; otherwise, a decision letter is issued. If any party disagrees with the decision letter then the matter will be escalated for a final decision.
If a complaint progresses to the adjudication route, there will be a further assessment to determine whether a complaint can be accepted for formal investigation. If so, then both parties can submit further information and arguments and the investigation will be independent. Any attempt to resolve a complaint during the resolution process (such as an offer made by one party) will not be treated as an admission by the party making the offer.
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