This insight covers the Chancellor’s plans to encourage more UK investment, an update on the Government’s pension review, TPR’s latest blogs on ESG and its new risk-based regulatory approach, new TPO factsheets and PASA’s new AVC dashboards toolkit.
Chancellor’s plans to increase investment in the UK
The Chancellor’s closing speech at Labour’s International Investment Summit outlined permanent plans to encourage institutional investment (including from pension funds) in the UK, progressing the Mansion House reforms in this regard.
The plans involve the UK Infrastructure Bank now operating as the National Wealth Fund (NWF). The NWF will have £27.8bn of funds to “work with key industry partners” to “maximise the mobilisation of private investment” and will be able to test new blended finance solutions with government departments which can absorb more risk. Legislation will be introduced so that the NWF can have a wider mandate than infrastructure and include clean energy and growth sectors such as green hydrogen, carbon capture and gigafactories.
There will also be a new British Growth Partnership associated with the British Business Bank (BBB) aimed at encouraging institutional investment and “more UK pension fund investment into the UK’s fastest growing, most innovative companies.” The BBB’s £7.9bn of capital will be put on a ‘permanent footing’ through financial framework reforms which will permit re-investment of returns over the long-term.
As part of the investment initiative, the Chancellor has also launched a British Infrastructure Taskforce under which the Government will work with business on policy designed to ‘unlock private investment’ in the UK. Its first regular meeting has already been held – non-government attendees included representatives from major UK banks, insurance companies (including pension providers) and investment managers. This announcement follows another recent one confirming the setting up of a new National Infrastructure and Service Transformation Authority which will oversee both a ten-year infrastructure strategy and its delivery.
Government’s pensions review update
At the October 2024 PLSA conference, Pensions Minister, Emma Reynolds, provided an update on the Government’s defined contribution and local government pension scheme pensions review. Ms Reynolds noted that the Government must look at pension adequacy and what can be done to improve retirement outcomes including auto-enrolment contribution levels and ‘traditionally under-provided’ for cohorts such as women and the self-employed. Initial findings from the first phase of the Government’s pensions review will be published in the autumn with final recommendations coming out in 2025. Auto-enrolment will be considered during the review’s second phase.
TPR round-up
Blog on ESG
The Pensions Regulator’s (TPR) 14 October 2024 blog reports on its new landing page for ESG and climate change which pulls together in one place all of TPR’s ESG and climate materials. The blog also includes some key messaging on ESG which develops its thinking from its recent review of schemes’ compliance with ESG reporting and disclosure requirements:
- Only achieving minimum compliance (which many schemes are doing) will be insufficient to improve portfolio resilience and saver outcomes.
- ESG factors can be financially material (from an investment perspective) and, where this is the case, need to be considered by trustees when making investment decisions. Taking account of ESG factors when making decisions is needed to ‘protect savers’ pensions.
- TPR will be reviewing ESG investment governance practice and decision-making and will be ‘challenging’ decision-making where appropriate – no further details are given as to how this initiative will be carried out.
- ESG is included in the Trustee Toolkit and, generally, the Toolkit is going to be ‘refreshed’ before spring 2025.
Trustees should, together with their investment advisers, consider if there are areas on ESG and the statement of investment principles/ implementation statement which need to be or can be improved. Even schemes that do not have such obligations, must still consider ESG matters in relation to investments – TPR’s general code makes clear that part of having an effective system of governance is considering ESG and stewardship matters in relation to scheme investments.
Blog on risk-based regulation approach – two new initiatives announced
In its 18 October 2024 blog, TPR confirms two new initiatives as part of its evolved approach to regulating key risks:
- Materially expanded approach to professional trustee engagement: In response to the significant increase in the appointment of professional trustees to defined benefit schemes, TPR will be materially expanding its regulatory approach to such firms. This will include liaising with the ten largest professional trustee firms before Christmas. TPR’s liaison is to help it understand the trustee’s business and its structure with a focus on direct engagement. It wishes to identify both good practice and risk areas in matters such as ownership structure, skills and experience, equality, diversity and inclusion, conflicts, and costs. Insights from the initiative will be shared including where issues are identified.
- Innovation hub: TPR is launching an innovation hub which together with a new innovation design team will consider ideas from the industry on new models and regulatory approaches.
TPO new factsheets
The Pensions Ombudsman (TPO) has produced three updated/ new factsheets for complainants which follow on from the changes that were recently announced as part of its Operating Model Review:
- TPO: Who we are and what we do?;
- Complaining to the parties at fault which, amongst other things, explains that a complaint can be submitted to TPO if a complainant is not happy with the response from the party or parties they are complaining about or has not received a response within relevant time limits; and
- A Resolution Team factsheet which explains that upon receiving an eligible complaint, TPO will decide whether it believes that it can be resolved informally, and if so, it will be dealt with by the Resolution Team rather than go through the formal Adjudication process. The factsheet goes on to detail the Resolution Team process which involves the assigned Resolution Specialist issuing an informal decision which if agreed to will end matters. If not agreed, a Decision Letter will be issued – again, if any party does not agree, then the matter will be passed onto TPO for a final Determination by an Adjudicator or Ombudsman which will be reached independently from the view of the Resolution Team.
PASA AVC dashboards toolkit
On 14 October 2024, PASA published an AVC (additional voluntary contributions) dashboards toolkit which provides practical assistance for administrators and trustees regarding connecting AVCs to dashboards. Included is a questionnaire that trustees could send to their AVC providers about connecting, a checklist and activity list for administrators and a list of AVC providers and their methods of connection. The toolkit and list of AVC providers will be updated as appropriate.