TPR criticised for year-long delay in collection of ESG statements

Baroness Ros Altmann told Pensions Expert that the regulator has had ample time to begin collecting and checking web addresses of SIPs via scheme returns.

Pension plans have been required to publish their SIPs, including their stance on environmental, social and governance issues, since October 2019.

After pensions and financial inclusion minister Guy Opperman was revealed to be “very concerned” at widespread flouting of the rules, TPR revealed in February 2020 that planning had begun for a directory of scheme returns. A year later, pension professionals have reported that returns still do not require a URL to be provided.

The delay has certainly had pension professionals scratching their head as to why it wasn’t being captured, especially as all the schemes with a SIP have had to publish it on their website

David Brooks, Broadstone

More rules to come with new ESG legislation

A regulatory spokesperson pointed to a January consultation from the Department for Work and Pensions on regulations to accompany the Pension Schemes Act, which include an expanded proposal to collect SIPs, implementation statements and Task Force on Climate-related Disclosures reports.

They argued that work on necessary updates to technology platforms is taking place even ahead of these proposals being formally carried.

However, Altmann was unimpressed by this explanation. “We know that action’s going to be taken and we know that we are going to be needing schemes to show what they’re doing, so there’s no reason to wait just for the extra requirements,” she said.

In response to the criticisms, a TPR spokesperson said: “Regulations in The Pension Schemes Act 2021 requiring TPR to collect the web addresses of schemes’ SIPs via the annual scheme return are due to come into force on October 1. 

“TPR will begin to publish the SIP web addresses when they are collected in subsequent scheme returns and we will be working on the creation of an index of SIPs based on those returns, which will help us check for breaches of compliance with disclosure regulations.”

People familiar with the government’s requirements said that the DWP will expect any scheme returns issued after October this year to be monitored for inclusion of ESG statements.

Others have suggested that an index of web addresses alone does not lend itself to effective scrutiny of the content of SIPs.

James Alexander, chief executive of the UK Sustainable Investment and Finance Association, said TPR has a tough job handling both sophisticated behemoths like Nest and tiny defined contribution schemes, but added that he would be disappointed if the regulator simply published a list of URLs.

“It’s got to be usable and user-friendly, and not just be for specialists,” he urged, calling for a repository that “allows for a bit of cross-comparison between one and another”.

Members must be easily able to find and scrutinise SIPs at a central location to give bite to these regulations, Alexander suggested.

“I think that’s the fundamental of how the regulatory system should operate. This is a requirement that funds need to do this — this should be open and available for public access,” he added.

Reminding schemes and others of the need for action now, Alexander said: “This is where the world is going. A lot of people that are currently saving a lot of money for their pensions will be retiring around the time that the UK needs to hit its net-zero targets.”

Altmann said legislative efforts in the House of Lords had been focused on compelling the regulator to host SIPs itself, in an easy-to-use dashboard, rather than simply presenting a list of web addresses that could easily evade scrutiny. Although the law requires the statements to be published online, this may be impractical for many schemes.

“A lot of the small schemes don’t have websites anyway, so there isn’t a URL, but there is a document,” she said.

“Members could just know where to go, and everyone could compare as well. It should be a public record, and unfortunately the government wouldn’t accept the amendment… if members want to know about their particular scheme then having a list of URLs doesn’t help.”

Delay poses opportunity for TPR

David Brooks, technical director at Broadstone, commented: “The delay has certainly had pension professionals scratching their head as to why it wasn’t being captured, especially as all the schemes with a SIP have had to publish it on their website.

“I would suggest TPR and the government use this delay as an opportunity to take stock and then launch the data collection with a little more fanfare, and some further details of the aims of the directory and how it will work and benefit members,” he added.

“The perception of a central list of SIPs currently seems underwhelming.”

While the regulator does not have a method of tracking every scheme’s compliance with the requirement to publish SIPs, it has already expressed its disappointment with the governance quality of many small DC plans.

The proportion of DC schemes whose trustees are considering climate change in their investment strategies stands at just 43 per cent, although this has doubled since 2019.

TPR’s annual survey found that 19 per cent of schemes currently not tackling climate change were planning to review this, “while a concerning 21 per cent felt climate change was not relevant to their scheme”.

Executive director of regulatory policy, analysis and advice David Fairs said in a statement: “Climate change risks will threaten pension savings right across the industry. This means trustees should build their capacity in this area now, so they can understand what climate change will mean for their scheme and so be better placed to make decisions contributing towards good outcomes for savers.”