Hogan Lovells

Key Dates

Draft guidance and draft monetary penalty appendix issued on 5 July 2021.  Consultation ends on 31 August 2021.

The  draft Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 and the draft Occupational Pension Schemes (Climate Change Governance and Reporting)(Miscellaneous Provisions and Amendments) Regulations 2021 both expected in force on 1 October 2021.


Summary

The Pensions Regulator (tPR) is consulting on draft guidance aimed at helping trustees comply with the new climate change governance and reporting requirements which will apply from 1 October 2021 to authorised master trusts and to occupational pension schemes with assets of £5bn or more.  The requirements will be extended to occupational schemes with at least £1bn of assets from 1 October 2022.

tPR suggests that trustees who are not subject to the new governance and reporting requirements may wish to follow the guidance to improve their schemes’ governance and resilience in relation to climate change. 

tPR’s guidance is intended to be used alongside the DWP’s statutory guidance “Governance and reporting of climate change risk”.

tPR intends to publish further guidance on considering climate risks and opportunities as part of assessing the employer covenant for defined benefit (DB) schemes.  The publication date has not yet been confirmed. 

Monetary penalties policy

At the same time as issuing the draft guidance, tPR is also consulting on a draft appendix to its Monetary penalties policy (MPP) which outlines its approach to imposing penalties for non-compliance by schemes within the scope of the climate change.  Broadly:

tPR will follow the approach in section 9 of the MPP when calculating the amount of a discretionary penalty in relation to the climate change requirements. 

tPR intends to treat failure to comply with the new governance requirements more seriously than failure to make a required disclosure.  However, it will also consider the impact of a failure to make a disclosure as required.  For example, failure to disclose scheme resilience in different temperature scenarios (which would make it harder for a member to understand the implications of different temperatures for their pension savings) may be treated more seriously than failure to disclose a description of the role of someone helping the trustees with scheme governance. 

The new appendix also recognises that trustees may not have all the information they need to comply with every new requirement.  In such a case, trustees are expected to give a full explanation including: efforts made to obtain the data; any gaps in data; and trustees’ plans for overcoming obstacles to obtaining data. 

The legislation requires trustees to meet some obligations “as far as they are able”.  tPR considers that the interpretation of “as far as they are able” will be scheme specific, and it will consider whether the legislative requirements have been met on a case by case basis. 



Date Accessed: 03/12/2021