By Penny Cogher, Pensions partner at Irwin MItchell.

From October 2020, pension trustees are required to provide further information about how they have considered ESG, stewardship, and what engagement they have had with their asset managers on investment matters. These requirements build on the initial changes to pension scheme disclosures pension schemes had to implement in October 2019 on ESG matters. As a reminder in October 2019, trustees had to set out their approach to ESG matters in their statement of investment principles (SIP) and the trustees of DC schemes had to publish their revised SIP online.

From October 2020, trustees of DC schemes have to publish their ‘implementation statements’ to explain how they have implemented their SIP policies, including on ESG and stewardship. They also have to provide further information in their SIPs on their asset manager arrangements including investor engagement.

Additionally, the trustees of DB schemes have to publish their SIPs online by 1 October 2020 and report annually on the implementation of their policies around voting and stewardship behaviour from 1 October 2021.

These requirements have been brought in by the Government updating the Occupational Pension Schemes (Investment) Regulations 2005.

Trustees will need their own expert advice in satisfying these new disclosure obligations but the PLSA has formed a new working group to help trustees satisfy and comply with these new requirements. Their aim is to ensure that trustees get both clear and consistent information from asset managers on their voting behaviour, as well as provide guidance on communicating how they have implemented their responsible investment and stewardship approaches.

So from October 2020 onwards, trustees will need to design their strategy for how they work with their asset managers (including how their arrangements incentivise the asset managers to align their investment strategies with the trustees' policies) so the trustees can satisfy their new disclosure obligations.  

But by 1 October 2020, trustees of money purchase schemes with more than one hundred members will be required to produce an implementation statement setting out:

  • how they have acted on their policies in relation to financially material factors, non-financial factors (if they have one) and stewardship, and
  • The trustees’ voting behaviour during the past year, including the most significant votes cast by the trustees or on their behalf.

Trustees will be required to publish this online in the same way as their SIP and to inform scheme members of its availability via the annual benefit statement (although the information on trustees’ voting behaviour does not need to be published online until 1 October 2021) .

The implementation statements for both DB and DC schemes will need to be ready for the first annual report prepared after 1 October 2020. Trustees need to act now to ensure they are ready to report their engagement and voting activities. A key focus for trustees will be working with their managers to ensure that they have sufficient information to prepare the implementation statements. As these statements will be retrospective, trustees cannot wait until the date of the first annual report after 1 October 2020 to act.

Trustees should speak to their managers now to ensure that they will receive the information they need relevant to their own specific reporting period and their own specific mandates.

For further information contact Penny.Cogher@irwinmitchell.com  or 07889 811057