The UK government has outlined what it expects of pensions trustees under the new Shareholder Rights Directive II (SRD II), in an announcement made this month.

SRD II was
introduced to improve transparency and stewardship of occupational pensions
schemes so members and stakeholders could better understand their investments.

The schemes are
required to document and disclose online their policy on engaging with investee
companies, their investment strategy and their arrangements with asset managers.

For both DC and
DB schemes, trustees must update their Statement of Investment Principle (SIP) relating
to policies on financially material considerations, non-financial matters, and
stewardship by 1 October 2019.

Trustees must
also be transparent about the scheme’s arrangements with asset managers, including
how it incentivises the manager to act in accordance with trustee policies. Trustees
must also provide information about their engagement policy concerning capital
structure, management of actual and potential conflicts of interest and another
stakeholder. These details should be in the SIP from 1 October 2020.

For DC schemes,
the SIP should be published free of charge online from 1 October 2019, while
the asset manager and engagement policy should be up online from 1 October 2020.

In addition, DC
scheme trustees should publish an implementation statement, reporting against
the policies in the SIP, from 1 October 2020, while a statement regarding
implementation of the asset manager policy should be published from 1 October
2021.

For DB schemes,
the deadline to publish the SIP online is 1 October 2020, while information
relating to implementation of the engagement policy, including voting
behaviour, should be published by 1 October 2021.

Trustees should
prepare their annual report for the previous year within seven months of the
end of the scheme year.

In a scenario
where the implementation statement would cover a period before the new SIP
requirements come in to force - and the scheme did not voluntarily have a
stewardship policy in place - the implementation statement would only be
required to report against the stewardship policy in place from 1 October 2019
to the end of the scheme year.

“Trustees
should begin preparations now to meet these new requirements, including
revisions to the statement of investment principles by 1 October 2019. Trustees
should ensure they take appropriate written advice from a suitably qualified
person when preparing and reviewing their SIP,” the Department for Work and
Pensions stated.