Trustees must ensure they get the advice they need from appropriately skilled and competent advisers, The Pensions Regulator (TPR) has warned.
Today (Thursday 16 December), TPR published the final version of its guidance to help trustees of certain schemes meet tougher standards of governance and reporting in relation to climate-related risks and opportunities. As this is a new and developing area, not all advisers will have the right capabilities to support trustees implementing these requirements for the first time.
In a consultation response, published alongside the guidance, TPR tells trustees they must ensure the advice they get from external experts is relevant and helpful.
David Fairs, TPR’s Executive Director of Regulatory Policy, Analysis and Advice, said: “Trustees make use of external expertise in a variety of areas. However, we recognise that the governance and reporting of climate-related risk is relatively new, so trustees may be more reliant on external experts while they build their scheme’s capability in this area.
“Trustees must take responsibility for ensuring their advisers have the appropriate skills and expertise and the advice they offer is relevant, helpful and represents value for money. After all, ultimately it's trustees who are responsible for any decisions.”
The new rules initially apply to authorised schemes and those with relevant assets of £5 billion or more. However, it will also apply to schemes with relevant assets of £1 billion or more in assets from 1 October 2022.
The Department for Work and Pensions has said it will consider rolling the rules out to smaller schemes in 2023.
TPR will also contact trustees of schemes that may have moved into scope of the rules since the last valuation to ensure they are aware of their duties.
Mr Fairs added: “While this guidance is aimed at trustees in the initial group of schemes within scope of the rules, it offers an opportunity for all trustees to improve their scheme’s structures and governance in relation to climate-related risk and opportunities in preparation for any expansion.”
Final guidance
The guidance describes what trustees need to do and report on in a scheme's annual climate change report – Task Force on Climate-related Financial Disclosures report - to comply with regulations.
The guidance gives practical examples of ways trustees can comply with the regulations and an appendix to TPR’s monetary penalty policy, published at the same time as the guidance, highlights the enforcement approach that may be taken to breaches.
The final version follows an eight-week consultation, between 5 July and 31 August, including eight engagement events, joined by more than 550 industry attendees who helped shape the guidance.
TPR explained it also received 37 responses from trustees, advisers, industry associations , actuaries and academics.
It said respondents praised the guidance’s clarity, the helpfulness of the examples and that it struck the right balance between encouraging ambition and acknowledging the challenges trustees face.
Notes for editors
- TPR published its climate change strategy in April 2021.
- The Pensions Regulator is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).
Out of hours
This is for journalists only with a media enquiry. The below number will divert to our on call media officer.pressoffice@tpr.gov.uk
01273 648496
