Pensions Bulletin 2023/45

Our viewpoint

Laura Trott moves on upwards

Pensions minister Laura Trott was one of the beneficiaries of this week’s Cabinet reshuffle that saw David (now Lord) Cameron return to the fray as Foreign Secretary.  She becomes Chief Secretary to the Treasury after just over a year as an Under Secretary of State in the pensions role (see Pensions Bulletin 2022/24).

Former pensions minister Guy Opperman has now gone on to the Department of Transport, but moves down a rung.  Jo Churchill and Paul Maynard have joined the DWP as their replacements, with Paul Maynard being confirmed as taking on the pensions brief.

The full list of ministerial appointments is available here.


The new pensions minister will have a substantial list of initiatives to contend with and little time to make any meaningful progress on many of them before this Parliament has to come to an end.  We were expecting a number of pensions announcements to be made at the Autumn Statement and presumably many have been pretty much nailed by now.  But with a new pensions minister needing to front some of them, the curse of the revolving door could yet put back some of them.

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Rachel Reeves promises sweeping review of UK pension system

Shadow Chancellor Rachel Reeves is being reported as promising a sweeping review of the UK pension system should Labour win the forthcoming General Election.  It appears that the principle aim of this review is to unlock retirement savings for the country’s growth – something echoing the Mansion House reforms announced by the Chancellor in July 2023 (see Pensions Bulletin 2023/28).

Her specific suggestions appear to comprise the following:

  • Stronger powers for the Pensions Regulator to drive out poorer-performing pension schemes through a process of consolidation
  • Establishing a state-backed scheme for DC schemes to invest a proportion of their assets, alongside the British Business Bank, into UK growth assets


Incoming Governments of a different stripe have a habit of launching reviews into all kinds of things and so this news is not a surprise.  And any such review, should it take place, may well end up taking us on some logical next steps from where the Mansion House reforms will reach.

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Next phase launched in Bank of England’s “system-wide exploratory scenario exercise”

The Bank of England has now begun Round 1 of the scenario phase of its system-wide exploratory scenario (SWES) exercise by providing bank and non-bank participants with details of a hypothetical stress scenario, alongside response templates and guidance.  The Bank says that there are just over 50 participants, although it is yet to name them.

The Bank launched the SWES exercise in June 2023 (see Pensions Bulletin 2023/25) with its objectives being to improve understanding of the behaviours of banks and non-bank financial institutions during stressed financial market conditions and how those behaviours might interact to amplify shocks in UK financial markets that are core to UK financial stability.

The scenario takes into account feedback from the participants in the information gathering phase of the exercise and envisages severe but plausible 10-day shocks to rates and risky asset prices.  Non-bank financial institutions are asked to consider how they expect their liquidity needs to change as a result of the hypothetical scenario and the actions they may take as a consequence.  Banks and counterparty credit providers are asked to consider the role they play in both demanding liquidity from, and supplying it to, other SWES participants.

Having identified how the scenario may be affected by the collective actions of participants, the Bank intends to move on to Round 2 of the scenario phase in which an updated scenario will take into account any potential amplification effects that might lead the participants to take different actions.

Responses to Round 1 of the scenario phase are expected by January 2024.  Round 2 is anticipated to be run through 2024 with the final report being published by the end of that year.


It is good to see what could prove to be a very insightful exercise moving into its scenario phase.  We wait to see what may change in the next round of the scenario phase and the ultimate conclusions around the risks to UK financial stability.

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Treasury consults on EMIR pension exemption

Back in 2009 the G20 decided that all standardised and liquid derivative contracts should be cleared through a central counterparty (CCP) in order to reduce counterparty risk that can arise where such contracts are traded on a bilateral basis.  The EU legislated for this in 2012 by way of the European Market Infrastructure Regulation (EMIR), in force from June 2016.  EMIR was incorporated into UK law upon the UK’s exit from the EU.

Because of the particular challenges faced by pension funds when clearing contracts through a CCP, due to their not usually holding large cash reserves, EMIR has always contained an exemption to enable them to operate these contracts bilaterally if they wished.  This temporary exemption has been repeatedly rolled over, most recently in the UK this March, until 18 June 2025 (see Pensions Bulletin 2023/14).

As promised then HM Treasury has now published a call for evidence from industry stakeholders on the future of the exemption.  It asks about:

  • Hedging and current use of the exemption
  • How bilateral, or uncleared, derivatives markets operate, and their potential benefits compared to clearing
  • How pension funds can/could access clearing and in particular, how they can meet CCP requirements on ‘variation margin’ (collateral covering price movement on contracts which has to be provided in cash)
  • What the Autumn 2022 LDI crisis would have looked like had the exemption not been available
  • How pension funds and asset managers would be affected should the exemption be allowed to expire in June 2025.  For example, would cash holdings increase and could this adversely affect investment returns

The call for evidence is open until 5 January 2024.


For many DB schemes using LDI mandates the removal of the exemption may have little impact, as some LDI managers have already moved to centrally cleared contracts.  However, for some schemes the potential removal of this exemption may force them to "clean up" their LDI portfolios reducing efficiency of their mandates.  In our view, the exemption provides helpful flexibility in managing collateral, and the events of September 2022 may have been more severe if every LDI investor had to be centrally cleared.

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Government concludes on the preservation of EU-influenced employment law

Following a consultation launched in May (see Pensions Bulletin 2023/20), the Department for Business and Trade has announced that it is going ahead with the changes it had proposed on certain aspects of retained EU employment law.  The draft Employment Rights (Amendment, Revocation, and Transitional Provision) Regulations 2023 giving effect to that have also been laid before Parliament.

The Regulations make changes to the record-keeping requirements and the annual leave and holiday pay calculations set out in the Working Time Regulations 1988 and to the consultation requirements within the Transfer of Undertakings (Protection of Employment) Regulations 2006.  The consultation response has also been published.

The draft Equality Act 2010 (Amendment) Regulations 2023 have also been laid before Parliament which preserve certain interpretive effects of retained EU law in the employment field which would otherwise be lost at the end of 2023 as a consequence of EU exit.


We note with interest the changes to the TUPE regulations.  But the Government could have done more, by using the UK’s Brexit freedoms to provide certainty on the treatment of occupational pension scheme rights when there is a corporate transaction involving an asset transfer that is subject to TUPE.

For many years the extent of the occupational pension scheme exemption has been unclear thanks to the legislation copying out an aspect from an old EU Directive.  As there is no longer any need to do this, this is something that could have been examined.

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This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.

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