Under the new investment and disclosure requirements, by 1 October 2019, Trustees needed to have updated their Statement of Investment Principles (SIPs) in relation to their policies regarding the following.
Further updates will be required to SIPs from 1 October 2020, for example, extending policies in respect of engagement activities to include other stakeholders, the capital structures and any conflicts of interest. In addition, updates to SIPs setting out policies in relation to how Trustees incentivise, evaluate and monitor fund manager costs over the duration of the arrangement. For schemes with defined contribution (DC) arrangements, all policies are also required to be covered in respect of the default arrangement from 1 October 2020.
The regulations are complex and do differ depending on scheme arrangements and the number of members (e.g. less than 100 members). The DC requirements also apply to relevant schemes, which includes hybrid schemes but not defined benefit (DB) schemes with AVCs.
From 1 October 2020, Trustees will need to produce an annual implementation statement, which will set out how they have acted on the principles set out in their SIP. The remit of this statement will depend on whether the scheme is a DC or DB arrangement.
Additional disclosures are also required in the Annual Report, reflecting the increased policy requirements in SIPs from 1 October 2019 and then again from 1 October 2020, and also reflecting the implementation statements from 1 October 2020.
SIPs for schemes with DC arrangements, including hybrid schemes, needed to be published on a publicly available website by 1 October 2019. From 1 October 2020 the DC implementation statement will also need to be on a publicly available website.
DB schemes will be required to publish their SIPs on a publicly available website by the later date of 1 October 2020 and a statement similar to the DC implementation statement, but with a narrower remit, from 1 October 2021.
The impact of these requirements depends on the manner in which Trustees have implemented their policies, which could be straight forward or complex. Trustees need to refer to the regulations to understand how the changes will apply to their scheme, taking advice to ensure they are compliant.
We have put together a summary below broadly outlining the key changes and when they come into effect.
The Trustees’ policies in relation to:
Where the scheme is a relevant scheme within the meaning of the Occupational Pension Schemes (Scheme Administration) Regulations 1996, a statement must be included which must:
If you would like to discuss the new investment requirements and disclosures, please contact your usual Crowe contact.