The Parliamentary Under-Secretary of State for Work and Pensions
()
I beg to move,
That the Cttee has considered the draft Occupational Pension
Schemes (Governance and Registration) (Amendment) Regulations
2022.
It is an honour to appear before you again, Sir Graham. The
regulations continue the Government’s agenda of ensuring that the
best possible value is obtained from the supply side of
occupational pension schemes, allowing savers to achieve the best
possible outcome in retirement. They bring into law various
duties on trustees in defined-benefit and defined-contribution
occupational pension schemes. The duties relate to the
appointment of fiduciary managers and the use and performance
review of investment consultants. The regulations replace the
rules that are currently enforced by the Competition and Markets
Authority; compliance will now be run by the Pensions
Regulator.
The regulations will require trustees of occupational pension
schemes to set objectives for persons who provide them with
investment consultancy services, to review those objectives at
intervals of no more than three years, and to review annually the
performance of providers against the objectives. Setting
objectives will enable trustees to monitor the performance of
their advisers and, quite simply, get better value for money in
the long term. The regulations also require trustees to carry out
a qualifying tender process. Additionally, through the
regulations, the Government have defined “investment consultancy
providers”, “investment consultancy services”, “fiduciary
management providers”, and “fiduciary management services” for
the first time in pensions legislation.
We believe that the duties will encourage trustees to become more
engaged with the ways in which services are bought, monitored and
evaluated, and to consider more efficient consolidation options,
which is also a priority for the Government. That will in turn
lead to better outcomes for scheme members and employer sponsors
of schemes. We believe that good investment is a key element of
any well-run pension scheme. Trustees are responsible for
investment governance and are accountable for any investment
decisions. They also have a duty to consider proper advice and to
act in the best financial interests of the beneficiaries. The
regulator will take over the monitoring of compliance with the
duties. I commend the regulations to the Committee.
6.02pm
(Reading East) (Lab)
It is a pleasure to serve under your chairmanship, Sir Graham. I
thank the Minister for outlining the regulations, and I offer my
support for and thanks to trustees, and to those who provide
advice, for the important work that they do in our pensions
system. The official Opposition support the measures—it is
important that we collectively support and encourage people to
save for their retirement—but I have a modest number of questions
about matters on which I would like the Minister to go
further.
First, the CMA’s December 2018 investigation, which sparked this
process and led to the changes, picked up on what it described as
the
“low level of engagement by trustees”.
It noted that a further reason was
“a lack of clear and comparable information to assess value for
money”.
Will the Minister set out how he intends to increase engagement?
I appreciate that the regulations go some way towards that, but I
would like further reassurance from him. Furthermore, can he
assure us that he will monitor the situation and make sure that
the rules are working as intended? As I said, it is important
that we protect the pensions system and encourage saving.
I understand that the recent pandemic has, sadly, had an impact
on all Departments, including the Department for Work and
Pensions, but there is clearly a growing trend of pensions
legislation and pledges by Ministers being delivered later than
originally intended. Will the Minister reassure the Committee
that he is on top of the situation and is working closely with
his Department to ensure that there is no slippage in other,
similar measures? I look forward to his response.
6.04pm
(East Kilbride, Strathaven
and Lesmahagow) (SNP)
It is a pleasure to serve under your chairmanship, Sir Graham. I
thank the Minister and the shadow Minister. The Committee will
know that this is not my usual remit, which is traditionally
mental health, but I have stepped in to support the SNP Treasury
spokesperson—although I am sure that many people’s mental health
is affected by bad pension advice.
I am happy to support and encourage the improved trustee
engagement and transparency in governance that these important
regulations will allow. It is helpful that trustees of in-scope
occupational pension schemes will set objectives for investment
consultants and carry out a tender process in certain
circumstances before appointing the fiduciary manager.
The regulations will also enable the Pensions Regulator to
oversee the remedies that apply to such trustees and to ensure
compliance. I am aware that questions were raised on that very
issue by the Work and Pensions Committee in 2019, and, as has
been mentioned, in the 2018 CMA investigation. I am glad that
those matters are being addressed—for which I thank the
Minister—and that we can work collectively to ensure the best
outcomes for pensioners and those across the United Kingdom who
contribute to pensions.
6.06pm
I thank colleagues for their speeches and support. I will not
necessarily respond to any of the hon. Lady’s comments, because
she supports the regulations and I entirely accept that the Work
and Pensions Committee did look at the matter. We think that we
have acted having done all the due consultation required by the
Government.
I think it a good thing that the monitoring of compliance is
being passed from the CMA to the Pensions Regulator. I meet the
TPR regularly—indeed, I met its chair, Sarah Smart, only today.
That will bring monitoring much more within the ambit of the DWP.
We have an independent regulator for a reason, but it is
important that the Government, through a Work and Pensions
Minister, hold it to account. That is why I think monitoring will
be way better.
I refute the idea of slippage entirely. Everything that the
Government do is perfect, as we know, and we are moving forward
at a serene pace. I am certain that these things are all going in
a perfect way. The serious point is about levels of engagement by
trustees, which are not good enough at present. We are doing a
huge amount on this, including these regulations and the enhanced
chair’s statement, for example. The hon. Gentleman follows my
every pronouncement with great glee, so he will be aware that on
1 November, we will do a detailed value-for-money assessment
consultation, which will genuinely bring together a host of
different obligations on trustees to ensure that they evaluate
outcomes for members in a way that, at present, is not done to
the degree that I and the Government would like. That is what we
are trying to achieve.
There are other bits and bobs. I am sure that the hon. Gentleman
engaged in Pension Credit Awareness Day on 15 June, and he will
be aware that the pension engagement season starts in September
and October. Their aim is to get trustees much more behind
engagement with members, but that is a constant struggle.
Can the Minister offer some additional assurances on the question
of small pension funds? The scale of such funds can cause
particular difficulties for trustees.
The hon. Gentleman is aware of all the consultations that we have
done, so he will know that following the regulations that we
passed previously, smaller pension funds—those of up to £100
million—are now judged on value-for-money outcomes. My strong
view is that there should unquestionably be greater
consolidation. It is only through size that we can get greater
expertise, greater monitoring of performance and greater response
to members. That is a work in progress.
We are dramatically reducing the number of pension schemes
through more and more consolidation. I encourage trustees to
consider it, particularly if they are in any doubt about whether
they are getting value for money for their members. We are asking
the Pensions Regulator to apply that pressure to trustees to
ensure that members ultimately get better outcomes, which is what
we all want. That is dependent on trustees performing their job,
but that is difficult in small schemes, which is why we are
encouraging them to merge, to put it bluntly.
Question put and agreed to.
