Template SIP will assist trustees with new investment reporting requirements

Out-Law Analysis | 06 Aug 2020 | 11:45 am | 1 min. read

Trustees of defined benefit (DB) and defined contribution (DC) pension schemes have until 1 October 2020 to revise their statement of investment principles (SIP), setting them up to comply more easily with new investment reporting requirements.

Pinsent Masons, the law firm behind Out-Law, has produced a template SIP (15-page / 3.37MB PDF) to assist trustees of both DB and DC schemes in navigating the prescriptive statutory requirements for the format and content of SIPs. The template SIP will assist trustees in implementing the crucial building block to their first implementation statement.

The pensions industry has focussed heavily on upcoming new requirements for trustees to publish an 'implementation statement' setting out how they have complied with their SIP.

New guidance from industry body the Pensions and Long-term Savings Association (PLSA), to which Pinsent Masons contributed as part of the advisory group, will provide much-needed assistance for trustees when the time comes to prepare the first implementation statement. But first, trustees need to ensure they allocate sufficient resources to developing their SIP and evidencing a robust investment governance framework. Only then will they be in a position to produce a robust implementation statement and avoid a tick box exercise.

Implementation statements must be included in the scheme's annual report and accounts from 1 October 2020 onwards. Trustees who prepare the scheme's annual report and accounts for 2020 early, so that they are signed before this date, will not need to prepare their first implementation statement until 2021. Revising the SIP now, in line with the updated requirements, will put trustees in the strongest possible position from which to produce the implementation statement.

Trustees have been required to disclose financially material environmental, social and governance (ESG) considerations and stewardship of voting rights in their SIPs since 1 October 2019.

Significant new SIP requirements come into force on 1 October 2020. From this date, trustees will need to disclose their policies with all asset managers, encompassing all aspects of the relationship beyond simply stewardship. Additional stewardship matters will also need to be disclosed in the SIP, including information on how the trustees monitor the capital structure of the companies that they invest in and how they engage with other shareholders.

Co-written by Michael Jones and Jack Gillions of Pinsent Masons, the law firm behind Out-Law.