How Changes In UK Law Affect Occupational Trusts

Occupational trusts play a crucial role in providing long-term financial security for employees, particularly in the form of pension schemes and other employment benefits. However, changes in UK law can significantly impact the management and operation of these trusts. At Blackstone Solicitors, we stay abreast of the evolving legal landscape to ensure that our clients are fully informed and compliant. This article explores how recent changes in UK law affect occupational trusts and what trustees and employers need to know.

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Understanding Occupational Trusts

Occupational trusts are established by employers to manage and administer benefits for their employees. These benefits can include pension schemes, healthcare plans, and other welfare benefits. Trustees are appointed to oversee the trust, ensuring that it operates in the best interests of the beneficiaries and complies with relevant laws and regulations.

Recent Changes in UK Law

Several recent legislative changes have had a significant impact on occupational trusts. Understanding these changes is essential for trustees and employers to navigate the new legal landscape effectively. Key legislative changes include:

1. Pension Schemes Act 2021

The Pension Schemes Act 2021 introduced several measures aimed at strengthening the governance and regulation of occupational pension schemes. Key provisions of the Act include:

• New Criminal Offences: The Act introduced new criminal offences for employers and trustees who fail to meet their obligations, including wilful or reckless behaviour in relation to pensions that could result in up to seven years in prison.
• Enhanced Powers for The Pensions Regulator (TPR): The Act granted TPR new powers to investigate and enforce compliance, including the ability to issue civil penalties of up to £1 million.
• Climate Change Governance: Trustees are now required to consider climate change-related risks and opportunities as part of their governance and investment strategies.

2. The Occupational Pension Schemes (Funding and Investment Strategy) Regulations 2022

These regulations introduced new requirements for occupational pension schemes regarding their funding and investment strategies. Key changes include:

• Long-Term Objective: Schemes must have a clear long-term funding objective, ensuring that they have sufficient assets to meet their liabilities.
• Statement of Funding and Investment Strategy (SFIS): Trustees are required to prepare a SFIS, outlining their funding and investment approach, and submit it to TPR.
• Funding Strategies and Recovery Plans: Trustees must regularly review and update their funding strategies and recovery plans to reflect any changes in the scheme’s financial position.

3. The Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations 2022

These regulations introduced changes aimed at improving the governance, administration, and investment practices of occupational pension schemes. Key provisions include:

• Data Quality and Accuracy: Trustees are required to maintain accurate and up-to-date records of scheme members and their benefits.
• Investment Disclosure: Trustees must disclose information about their investment strategies and performance to members, promoting greater transparency.
• Charges and Costs: The regulations introduced new limits on charges and costs for certain types of pension schemes, ensuring that members receive value for money.

Implications for Trustees and Employers

The recent changes in UK law have several important implications for trustees and employers managing occupational trusts. Understanding and addressing these implications is essential for ensuring compliance and maintaining the trust’s long-term viability.

1. Enhanced Governance and Oversight

The new legal requirements place a greater emphasis on governance and oversight, requiring trustees to adopt more robust governance frameworks and practices. This includes:

• Establishing Clear Policies and Procedures: Trustees must implement clear policies and procedures for managing the trust, including risk management, investment strategies, and member communications.
• Regular Training and Development: Trustees should undergo regular training to stay informed about legal changes and best practices in pension scheme management.
• Independent Oversight: Engaging independent advisors or auditors can provide additional oversight and ensure that the trust operates in compliance with legal requirements.

2. Increased Legal and Regulatory Compliance

With enhanced powers granted to TPR and the introduction of new criminal offences, trustees and employers must prioritise legal and regulatory compliance. This includes:

• Regular Audits and Reviews: Conducting regular audits and reviews of the trust’s operations, finances, and compliance with legal requirements.
• Documentation and Reporting: Maintaining thorough documentation of all trust-related activities and submitting required reports to TPR and other regulatory bodies.
• Legal Advice: Consulting with legal advisors to ensure that the trust’s activities align with current laws and regulations and to address any potential compliance issues promptly.

3. Focus on Climate Change and Sustainability

The requirement for trustees to consider climate change-related risks and opportunities reflects a broader shift towards sustainability in financial management. Trustees should:

• Integrate ESG Factors: Incorporate environmental, social, and governance (ESG) factors into their investment strategies and decision-making processes.
• Climate Risk Assessments: Conduct regular assessments of climate-related risks and their potential impact on the trust’s investments and financial stability.
• Reporting and Disclosure: Ensure transparent reporting and disclosure of the trust’s climate-related activities and performance to members and regulators.

4. Member Communication and Transparency

Improved communication and transparency are key components of the recent legal changes. Trustees should:

• Regular Updates: Provide members with regular updates on the trust’s performance, investment strategies, and any changes to benefits or policies.
• Accessible Information: Ensure that information is easily accessible to members, including through online portals and clear, concise documentation.
• Member Engagement: Foster engagement with members, encouraging them to provide feedback and participate in the trust’s decision-making processes.

Conclusion

Navigating the complexities of managing occupational trusts in light of recent legal changes requires careful planning, robust governance, and a proactive approach to compliance. At Blackstone Solicitors, we are committed to providing our clients with the expertise and support needed to navigate these challenges successfully. Contact us today to learn more about our services and how we can assist you in managing your occupational trust in accordance with the latest legal requirements.

How we can help

We have a proven track-record of helping clients create Trusts. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact Our Wills and Probate Solicitors

It is important for you to be well informed about the issues and possible implications of creating a Trust. However, expert legal support is crucial in terms of ensuring your wishes are met as you would want them to be.

To speak to our Wills and Probate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Blog, News Tagged as

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