New stewardship guidance for DB schemes

30 March 2017

Editor

EU regulation

The UK's Pensions Regulator, TPR, has issued new investment guidance for defined benefit pension schemes including  expanded duties on stewardship, sustainability, ESG and voting issues.

The guidance follows the common principles set out in TPR’s DC investment guidance together with some specific considerations relevant to defined benefit schemes.

Investment guidance on ESG

Commenting on the new guidance, Sarah Wilson Manifest  chief executive said: "The Pensions Regulator’s guidance on stewardship and responsible investment for Defined Benefit pensions is extremely timely and welcome. Since the Kay Review and the Law Commission’s report on fiduciary duties, there has been a need for clarity about the role of trustees on governance, sustainability and stewardship in general. TPR has brought together a very accessible and manageable framework for DB and DC schemes which we hope will foster and encourage greater understanding between asset owners and managers."

"It is clear that the sustainability of pension funds over the long-term is inextricably connected with the sustainability of their investments. The new guidance goes a long way to bringing the connections between the two ever closer. It’s now up to all of us in the industry to help bring this about and we are ready for the challenge."

The TPR stated that pension trustees are responsible for their scheme’s investment governance arrangements, including determining its investment strategy. The regulator indicated that a good investment strategy is likely to involve effective governance, delegation and monitoring; form part of an integrated risk management process; be consistent with the scheme’s objectives and any long-term plans; have an overall amount of risk consistent with risk appetite; involve risk-taking that is understood and balanced and allow for the scheme’s future cash flow and liquidity requirements.

The new guidance emphasises the importance of focused, timely monitoring and outlines how trustees may find it helpful to put together an investment monitoring dashboard. The TPR said this can provide an at-a-glance financial position of how a scheme is meeting its objectives and highlight potential risks and issues.

Manifest: Supporting DB Stewardship

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