Tram on old street
Consultation On Trustees’ Investment Duties
The government is seeking views on draft Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2018
Phil Spary
25/06/2018
Tram on old street

Proposed regulations would amend the required content of the Statement of Investment Principles (SIP), and the steps Trustees take when revising it.

The closing date for the consultation is 16 July 2018.

Proposed regulations

The proposed regulations are intended to reassure Trustees that they can and should:

  • take account of financially material risks, whether these stem from investee firms’ traditional financial reporting, or from broader risks covered in non-financial reporting or elsewhere
  • fulfil the responsibilities associated with holding the investments in members’ best interests whether directly or by others on their behalf, not just through voting but embracing the full range of stewardship activities, such as monitoring, engagement and sponsoring or co-sponsoring shareholder resolutions
  • have an agreed approach on the extent, if at all, to which they will take account of members’ concerns, not only about financially material risks such as Environmental, Social and Corporate Governance (ESG) factors including climate change, but the scheme’s investment strategy as a whole
  • use the SIP as a real, effective and regularly-reviewed guide to investment strategy and not as a generic ‘box-ticking’ document.

The duties of Trustees

The proposals would require Trustees, by 1 October 2019, to update or prepare their SIP to set out:

  • How they take account of financially material considerations, including, but not limited to, those arising from ESG considerations, including climate change.
  • Their policies in relation to the stewardship of the investments, including engagement with investee firms and the exercise of the voting rights associated with the investment.

In relation to relevant schemes (broadly DC Schemes):

  • publish their SIP on a website, and inform scheme members of its availability via the annual benefit statement
  • prepare or update their default strategy to set out how they take account of financially material considerations, including, but not limited to, those arising from ESG risks, including climate change.

From 1 October 2019, the government are proposing that when Trustees next prepare or update their SIP, they also prepare a separate ‘statement on member’s views’ setting out how they will take account of the views which, in their opinion, members hold, about matters covered in the SIP.

From 1 October 2020, the proposals would require that Trustees of relevant schemes:

  • produce an implementation report setting out how they acted on the principles set out in the SIP, and how they acted on the statement which covered how they would take account of the views which, in their opinion, members hold
  • publish that implementation report online in the same way as the SIP itself, and inform scheme members of its availability via the annual benefit statement.

How we can help

To discuss the implication of this consultation, including how the proposed regulatory changes will affect you, please contact your usual Crowe Pension Funds advisor or Phil Spary, Director in our National Pension Funds team.