Pension scheme voting taskforce outlines recommended changes

The Taskforce on Pension Scheme Voting Implementation has published a report outlining its recommended changes to help tackle issues faced by trustees implementing their own voting policies.

The group was set up by Pensions Minister, Guy Opperman, in December 2020 to address problems in the voting of equity shares by trustees.

It found that voting was of growing importance in securing value for pension savers, but that there was “enormous complexity” in pension and investment structures that made it hard for schemes to exercise control over voting.

Furthermore, it noted that the way voting was delivered was too complicated, and there were “significant problems” with some stakeholder attitudes and the asymmetry of power between schemes and their agents.

However, it also found that although it was told there were issues with splitting votes in pooled funds, “none appears material or insuperable”.

To help address the issues, the Department of Work and Pensions (DWP), in conjunction with industry bodies, was urged to promote a vote disclosure reporting template and encourage trustees, especially of larger schemes, to report more effectively on how votes relating to their investments were cast.

The taskforce added that trustees should either set their own voting policy or acknowledge responsibility for the voting policies asset managers implement on their behalf, and the DWP should encourage trustees, through legislation is necessary, to take more account of voting and engagement policies in their appointments and monitoring of investment managers.

The DWP or The Pensions Regulator (TPR) should provide guidance on what good quality voting policies look like, according to the taskforce, while the Financial Conduct Authority (FCA) should give guidance on a key set of aggregate data that asset manages should be required to support.

“The DWP, FCA, and TPR should closely monitor delivery of vote reporting at fund or mandate level,” the report added. “If managers do not deliver by the end of 2022 the FCA should legislate or issue handbook guidance to deliver fund and mandate level-reporting.”

It also recommended that the FCA brings forward handbook guidance to set the expectation that all asset managers explain their rationale for all voting decisions on request.

The Occupational Pension Scheme Stewardship Council was encouraged to help pension schemes in the stewardship of service providers, and the Department for Business, Energy and Industrial Strategy was urged to bring forward proposals to lower the thresholds for filing shareholder resolutions, as recommended by the Asset Management Taskforce.

Fund managers of pooled funds should voluntarily offer investors the opportunity to set expressions of wishes, the taskforce stated, while the FCA was asked to confirm the legality of aspects of that process.

Commenting on the report, Taskforce on Pension Scheme Voting Implementation chair, Simon Howard, said: “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.”

Pensions Minister, Guy Opperman, added: “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.

“I congratulate the taskforce for delivering a compelling and well-argued report. I will study the findings closely and respond at the earliest possible opportunity.”

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