What can we expect in 2022?

Pardon the Interruption

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The changes set in motion last year will likely also shape 2022. They include a wide range of areas across DB, DC, governance and of course – how could we not mention it – that pesky virus! 

Climate disclosure 

Pension funds with £5bn or more, master trusts and collective DC schemes already have to publish a TCFD report within seven months of their first scheme year-end after 1 October 2021, or by the end of 2022, whichever is first. Those with £1bn or more will have to follow from October 2022 – and the DWP has already got its eyes on smaller schemes. 

The UK is also in the process of coming up with its own green taxonomy, which investors will be interested in.

DC, caps and illiquids 

The Treasury is seeking to tighten its grip on pensions with a multi-pronged approach – from a new long-term assets fund to letters to the industry signed by the chancellor and PM – to get DC schemes interested in illiquid assets like private equity and infrastructure, in the hope this will aid the recovery from the pandemic and help finance the green transition.  

Pressure on DC schemes by the DWP to demonstrate value for money and of course the recent dilution of the charge cap – which is set to exclude performance fees – can also be seen as part of this picture.
As daily pricing practice has been cited by many in the industry to be the bigger barrier to illiquid investment than the charge cap, it can only be a matter of time before this topic will be taken up by Whitehall’s most powerful department.

Meanwhile, rules on collective defined contribution will come into force next summer, giving Royal Mail the possibility to start its CDC scheme. Discussions on extending CDC to multi-employer schemes have started, so there could also be some news about that.

A DB regime change 

The second – more detailed consultation on the new DB funding code, with its fast track and bespoke routes, has been delayed until 2022, perhaps not surprisingly given the disruption caused by Covid-19. It will no doubt keep DB trustees and advisers on their toes next year.  

Similarly, new governance requirements to show an effective system of governance and carry out own risk assessments are being brought in as part of the Pensions Regulator’s new single code, again creating considerable work for trustees.
Diversity is another topic that is set to take up some room next year as the regulator’s working groups come up with recommendations. Whether, without any regulatory stick, this can ever be more than a well meant attempt remains to be seen.
On the DB side, battles over provision are likely to continue – academics at some universities are set to strike again over changes to the Universities Superannuation Scheme, and transport workers could go on strike in London over TfL’s potential pension reforms.
In the public sector, local authority schemes will have to start thinking about TCFD rules, and Michael Gove’s Department for Levelling Up, Housing and Communities is also due to consult on a new pooling framework.

What will not happen in 2022? 

With such a packed agenda, it’s no wonder that some things won’t be done next year, though time constraints are unlikely to be the only reason. 
The government has to date shown no interest in addressing the gaping gender pensions gap. Perhaps it thinks that the gap will close on its own as the labour market patterns of today, with more women working, come through in the pensions of tomorrow; unfortunately, this pattern also shows that women are still the ones to give birth (who would have thought) and take time out of paid, though not unpaid, work, with all the consequences for their pensions.  
GPP members are also unlikley to be a priority for policymakers and regulators in 2022. Members in such schemes will continue to accrue pensions and approach retirement in a governance and engagement no man’s land, where regulators’ key goal is to cover their metaphorical backs, over and above enabling good outcomes, by insisting that the financial promotions regime prohibits employers from having any meaningful engagement on pensions with their staff.   
The small pots conundrum will be discussed but is unlikely to be resolved next year. The DC world is still busy fixing the fallout from not introducing pot-follows-member, finding itself with millions of small deferred pension accounts. The industry’s small pots working group published a first progress report this year and said it hopes mass-scale consolidation can be implemented from 2025/26 onwards. Some have warned that administration would need a fundamental overhaul for any of the consolidation options to work. 
Lastly, wouldn't it be nice to say that Covid-19 will not be a significant force in 2022! Sadly, it looks like the virus wants to keep us in its grip a while longer, but with some luck and a lot of science it won't be for too long. Let’s see what we will say in a year’s time! 

What are your top predictions for 2022? Share them here! 

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