Pension Scheme Savers to be Given Greater Say on How Funds Are Invested

September 21, 2021

Pension scheme managers may be given significantly more control over how savers’ money is spent, it has been announced.

Publishing its recommendations, the Taskforce on Pension Scheme Voting Implementation (TPSVI) said the move will see “significant strides towards safer, better and greener pension schemes”.

It comes after the independent group, chaired by Simon Howard, the former CEO of the UK Sustainable Investment and Finance Association, was asked to assist with voting system issues.

Under existing regulations, pension scheme managers surrender their voting rights to vote at the Annual General Meetings (AGMs) of the companies they invest in when pension funds are invested in pooled funds.

It means the majority of asset managers “have not always been prepared to engage with their clients’ voting preferences”, such as climate risk management, diversity, or pay.

But the recommendations, if accepted, would give greater powers to asset managers, potentially leading to more ethical and greener pension schemes.

The three main recommendations are:

  1. That pension scheme trustees should either set a voting policy of their own, or explicitly accept responsibility for those policies exercised on their behalf by their asset managers
  2. All asset managers are to offer asset owners the opportunity to set an “expression of wish” as to how votes are exercised on their behalf, regardless of how they invest
  1. The Financial Conduct Authority (FCA) should clarify that there is no breach of fund rules in acting on an expression of wish; and set expectations of asset managers for better disclosure of voting policies, more granular and comparable reporting of how votes are cast, and more comprehensive explanations for those votes.

Commenting on the report, Minister for Pensions and Financial Inclusion Guy Opperman said: “This is about giving pension savers a voice in how their hard-earned savings are being looked after.

“I see no reason why trustees shouldn’t be able to determine their own high-level policies – on areas such as climate risk management, diversity, or pay – and find an asset manager to implement it.”

Mr Howard added: “Our recommendations will give asset owners – such as pension schemes – a louder say in voting in pensions.

“There are two principal goals. First; by boosting the owner’s voice and influence over their agents we can ensure that the whole system works to better guide investee companies.

“Second; we will let the people paying into pensions know that their views are being considered, boosting the support pensions saving will receive. Both are necessary for better pension outcomes.”

Click here to access the TPSVI report.

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