Trustees not required to act on member investment views, Govt confirms

Written by Theo Andrew
11/09/18

The government has confirmed that trustees will not be required act on members’ views on how the pension scheme is invested, following initial confusion in its draft consultation.

Responding to the consultation on Clarifying and Strengthening Trustees’ Investment Duties published today, 11 September, the government said that while it wasn’t their intention to say pension schemes must survey or act on members views, it was “possible and appropriate” for them to do so.

The concerns were clarified as the Department for Work and Pensions outlined its plans, requiring trustees to produce a statement of investment principles (SIP) on how they account for financially material considerations, including those arising from environmental, social and governance considerations.

On the issue, Minister for Pensions Guy Opperman said: “I would also like to confirm that it was not our intention to give the impression in our original consultation proposals that trustees must survey pension scheme members or must act on members’ views about how their scheme is invested.

“Feedback on this point was helpful and we have amended the regulations to make the position clearer. Nevertheless, in line with the conclusions reached by the Law Commission, I do believe it is possible and appropriate for trustees to take account of members’ views in certain circumstances.

“I therefore wish to offer clarity to trustees that they can do so; and offer clarity to members of the circumstances in which their view might be considered.”

Despite this, respondents expressed particular concern over the conflict between members’, trustees’ and sponsors’ different investment views, with Independent Trustsee Services noting that as “sponsors bear all of the financial risk in defined benefit schemes, failing to include their views would seem to be a serious omission”.

The DWP added that while trustees or advisers many not feel comfortable taking members ethical concerns into account “it is reasonable for members to be told about the circumstances in which their views will or might be considered”.

According to the government there has been no instances of court action since the original requirements came into effect in 2005.

Sackers partner, Stuart O’Brien, said the decision was the right one.

“Such a requirement would have led to further confusion between ethical investing and ESG. We support the efforts to ensure that ESG and climate change issues are seen as financially important and not simply an ethical choice to make,” he said.

Schemes will now have to update or publish their SIP by the 1 October 2019, as well as producing an implementation statement on the SIP by October 2020.

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