Interested to see this article setting out feedback from leading pensions law firms (from which we were pleased to be listed as top 5 nationally in terms of client numbers and joint top 5 in terms of team size, based on partner numbers).
The quote below sets out main themes raised by lawyers for the year ahead. The key issues I have in mind is how will these themes impact schemes and employers and how can lawyers do more than set out the law - how can we make a real difference to help?
The topics included:
- Derisking including buy ins and but outs and longevity transactions: On this watch words are efficiency and experience. There are too many cases where the same contractual provisions go through rounds of negotiation where there is little or no sorting of the wheat from the chaff- by identifying those clauses that are likely to be subject to change and those that are not. Our experience from our work on buy outs including panel work for providers is that there is a clear pattern as to which terms can be subject to meaningful negotiation. That pattern can vary from insurer to insurer and depending on key criteria such as scheme size and benefit structure. We promote clarity and frank conversations from the outset- so that time, effort and resource can be saved and focused on the provisions that matter.
- ESG, Governance and Climate Change: We recognise the central importance of addressing ESG, Governance and Climate Change. The clear and present danger is that policies are just words on paper but do not actually make a difference and move the dial to improve outcomes in any of these areas. In the past risk registers have tended to be reviewed at the end of meetings, just before the AOB. Those registers are at risk of either being too generic or too high level or alternatively they can run to tens of pages where the wood cannot be seen for the trees.
There is a clear argument for ESG, Governance and Climate Change to be brought up the agenda as a matter of substance and focus - with the fundamental question - what difference is each policy making- how does it serve the ESG goals and also the scheme and employers?
Often ESG including Governance and Climate Change will support better outcomes for the scheme and employers. However there is a latent risk that some investment opportunities which are less aligned with these goals could provide higher returns. This raises a dilemma for trustees of return v environmental and governance goals. The case law at the moment can potentially add to this dilemma including the well-known case of Scargill and the importance of acting in the best financial interests of members. With this in mind new legislation may be needed to assist trustees and protect them from claims that they should have sought returns alone rather than take into account ESG issues
So what keeps all the lawyers busy? For 2021, respondents cite advising clients on the impact of the new Pension Schemes Act, especially around the regulator’s new powers, as one of their main tasks. Work on derisking projects including buy-ins, buyouts and longevity transactions, environmental, social and governance and climate change reporting, and defined benefit and DC consolidation is expected to continue. Lawyers are also expecting to continue to tackle GMP equalisation, helping their clients in the preparation for the pensions dashboards, not to mention an increasing input needed on cyber security issues, covenant and funding.