This year might have felt hard, but it is entirely possible that next year will be just as varied and challenging. A look at the pensions calendar of 2021 shows what to prepare for – and those are just the events we already know about. 

 

The next year will be full to the brim with new requirements for pension schemes, not to speak of inquiries and taskforces that could lead to more rules further down the line. 

 

 

Climate change risk disclosures must be the key thing to prepare for, having been catapulted up the agenda by government, from a niche concern for trustees just a few years ago. But trustees who thought the latest rules on climate change will bring the topic to a close will have to think again. 

 

Pensions minister Guy Opperman has said the Department for Work and Pensions will consult on aligning pension funds with the UN’s Paris Agreement to keep global warming below 2 degrees Celsius, and preferably to 1.5 degrees, indicating that asset owners are expected to play a key role in the government’s strategy to reach net zero in 2050. 

 

In the meantime, the DWP is due to issue guidance for occupational pension schemes on reporting in line with the Task Force on Climate-related Financial Disclosures. Pension funds with £5bn or more, master trusts and collective DC schemes will have to publish a TCFD report within seven months of their first scheme year-end after 1 October, or by the end of 2022, whichever is first. Those with £1bn or more will have to follow a year later. 

 

Part of the new climate requirements for schemes are contained in the pension schemes bill, which still hasn’t reached the ping pong stage, where the bill rapidly moves between the two parliamentary Houses – we will also see this happen next year, followed by Royal Assent. 

 

Stewardship will also become much more prominent in 2021; both DB and DC trustees will be required to publish their voting behaviour on the internet from October, and the DWP has this month set up a taskforce to look into the obstacles for voting in pooled arrangements, which is due to report back next year, meaning asset managers could potentially be forced to accept split voting. 

 

 

Elsewhere, the first stone to a new type of pension is being laid. Collective defined contribution, contained within the pension schemes bill, could go live next year as Royal Mail says it is ready to go as soon as the bill receives Royal Assent. This would see Royal Mail members transferred into the CDC scheme from the current DC plan. Whether this will be a paradigm shift for pensions or simply another option among many remains to be seen. 

 

 

The Financial Conduct Authority, overlooking financial services firms, will consult on TCFD reporting requirements for contract-based DC schemes and, further down the investment chain, for asset managers in the first half of 2021. 

 

Following the FCA’s new rules on investment pathways for non-advised drawdown customers, these will go live in February, and members holding large amounts of cash will receive prompts about this as well. 

 

Meanwhile, LIBOR is set to be replaced by SONIA and could affect the investment benchmarks and portfolios of pension schemes. 

 

The FCA is also still due to publish a paper about the consumer pensions journey together with the Pensions Regulator. 

 

 

The regulator itself, apart from dealing with schemes affected by the Covid-19 crisis like Arcadia Group’s, will be busy giving various codes a makeover. A second consultation on the DB funding code is due next year, which should contain more details on the fast track parameters, and it is also planning to update its trustee knowledge and understanding code. Then there is of course the project to bring 15 codes into a single one. 

 

It might also authorise the first superfund transaction next year, which could be Arcadia. The two schemes are expected to enter Pension Protection Fund Assessment shortly, but the outcome will only be clear later; there could, for example, be a PPF+ deal with a superfund if the regulator agrees. 

 

Up in Westminster, the Work and Pensions Committee will continue its inquiry into the pension freedoms, having started this in 2020, five years after the freedoms came into force, and taking evidence from scam experts and victims, including some harrowing accounts and accusations of failure by TPR and HMRC, which gave scam schemes an aura of respectability by registering them. 

 

HMRC has shown little interest in becoming involved in this so far. Next year it could however come into the pensions industry’s focus as it said it would decide which tax reliefs to evaluate and publish data on pensions tax relief to show who is benefitting - by income, protected characteristics (age, gender, ethnicity) DB, DC and public and private sector. 

 

 

Covenant strength will be even more important than it is now, as a new strain of the virus and Brexit combine to form a perfect storm for companies relying on face-to-face contact or trade. Some covenant experts predict that while companies managed to keep their heads above water by cutting costs for now, the cash crunch will come on the rebound, when they see themselves forced to invest for growth. When that rebound will be is, of course, uncertain. 

 

 

There are however a few things that will not happen in 2021: we will not have a pensions dashboard in 2021 or 2022, as was clear to many in the industry early on, even though schemes continue to be urged to get their data into shape. The date for dashboards has now been pushed back until 2023. 

 

We also won’t see the reforms of the Automatic Enrolment Review 2017 implemented; this was kicked into the “mid-2020s” three years ago by the then government. The review recommended lowering the age and earnings thresholds but shied away from proposing higher minimum contributions. However, pensions minister Guy Opperman has said about a contributions increase that “those are debates to be had in 2021”. 

 

Will there be a social care green paper? The much delayed green paper on adult social care, promised by Theresa May’s government back in March 2017, could be abandoned altogether it was rumoured, even as the sector is under the spotlight during the pandemic. However, it is in dire need of reform, with privately owned care homes backed by private equity having been saddled with debt. One policy adviser has moved from pensions to social care to develop thinking in this area, but whether during Covid and Brexit the government will find the time and the will to deal with an issue as complex and thorny as that is questionable, even as care home residents have paid the heaviest price during the pandemic. 
 

This year has certainly been marked by Covid-19, but also by a fresh focus on what is important and preparing for the future with climate disclosure rules. Next year can offer an opportunity to take this further, tackling issues that could set the direction for pensions for decades to come.