Perspectives

Sustainability is dominating Trustees’ agenda with climate change squarely at the top. But the other side of the climate change coin is biodiversity loss, a topic that deserves Trustees’ attention in its own right, with many experts considering it a threat more serious than climate change. Read the article by Will Martindale which appeared in the Pensions Management Institute’s Environmental, Social & Governance Report 2022.

Pension scheme trustee boards have never had such a tough job to do. Increasing demands are coming from all directions; whether that be from regulatory scrutiny, enhanced ESG reporting, volatile investment markets or, as the economic environment becomes more challenging, from covenant risk.

In the UK pensions risk transfer market, 2022 has been a year characterised by the increasing
affordability of insurer buy-ins and buy-outs.

Next year we will hopefully see the Department for Work & Pensions’ (DWP) eagerly anticipated Collective Defined Contribution (CDC) consultation paper. There has already been a lot of debate this year around the benefits and challenges.

2022 has been the year where the global bond markets have finally woken up to the reality of central banks’ stimulus being removed from the bond markets.

The events of Q4 2022 have been a timely reminder that, no matter how well funded their defined benefit (DB) pension scheme, pensions risk is still very much a risk to the business (the sponsoring employer) that sits behind it.

Engagement: Human rights in the supply chain. With climate and emissions reductions high on the agenda, companies in the renewable space are prospering. Unfortunately, this can have big human rights implications.

Sustainability: Emissions are rising – and will continue to rise. Globally, we will emit more this year, than last year, and more next year than this year.

Covenant: Don’t get caught out by regulatory changes. 2023 is likely to be the biggest year for regulatory change in the defined benefit (DB) world since 2014 (the implementation of the Funding Code of Practice 03), or even since the Pensions Act 2004.

Macroeconomics: Patience will be required in 2023. Global investment markets start the New Year at a pivotal stage within the economic cycle. Many economies are transitioning from slowdown towards inevitable recession.

Investment solutions: Keep calm and carry on…just not like 2022. 2022 has been another year of surprises that tested pension schemes in new and varied ways.