Pensions experts have forecast a hectic 2020 for the industry, with the expected Pension Schemes Bill and increased calls for responsible investment in the spotlight.

Although Brexit negotiations could delay the bill, collective defined contribution scheme legislation, increased powers for The Pensions Regulator (TPR) and the introduction of the pensions dashboard are likely to feature in the coming year when the bill is introduced.

Climate-friendly investment strategy regulation is reportedly likely to increase, with pension schemes’ best practice expected to face further scrutiny.

“This year is set to be a turning point for pension schemes getting to grips with environmental, social and governance (ESG) issues,” began Columbia Threadneedle Investments head of pensions and investment education, Chris Wagstaff.

“With issues like climate change dominating the public conversation, it is no longer possible to relegate ESG to the ‘too difficult’ category.

“Regulators will continue to demand action with trustees being required to make additional disclosures on their stewardship and management of material ESG risk factors within their Statements of Investment Principles by 1 October 2020.”

MJ Hudson senior adviser, Karen Shackleton, added: “We expect there will be a revision and tightening-up of best practice regarding pension funds embedding climate action into investment strategies.

“It is not enough to simply create frameworks such as sustainable development goals – pension funds will have to look at them through an investment lens in order to map their portfolios and align themselves without impacting the expected risk adjusted returns.”

There are also three changes that are confirmed to be occurring in 2020 – the state pension age will rise to 66, the state pension will increase by 3.9 per cent to £175 a week and the lifetime allowance will increase to £1.073m, in line with the consumer price index.

Shackleton warned that there may be “unanticipated consequences” from the Local Government Pension Scheme (LGPS) improved funding ratios in 2020.

“Most funds will look to de-risk equities, but some may look to reduce contribution rates,” she said.

“That will impact cashflow. Many LGPS funds are already heading towards a cashflow negative environment, i.e. where contributions are less than pension payments, but reducing contributions would exacerbate that further.”

Wagstaff concluded: “Several other regulatory reviews look set to improve outcomes for pension savers. Regulators are pressing for schemes to consolidate, leading to better governance and economies of scale.

“Much needed clarity around DC schemes’ ability to invest in illiquid asset classes should also be forthcoming.

“All in all, 2020 is set to be yet another busy year for the pensions industry.”

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