Pension Schemes Bill — Committee (1st Day)

Part of the debate – in the House of Lords at 6:30 pm on 7th January 2015.

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Photo of Lord McAvoy Lord McAvoy Opposition Whip (Lords), Shadow Spokesperson (Northern Ireland), Shadow Spokesperson (Scotland) 6:30 pm, 7th January 2015

My Lords, I shall also speak to Amendment 9. I do not have the reputation of having an unlimited supply of charm, so I shall use what I have left to try to work the oracle on these two amendments.

Clause 14 allows for regulations to be made requiring scheme trustees or managers to prepare an investment strategy. Specifically, the regulations may include requirements on the content of the statement and on the reviewing and revising of the statement. Clause 15 allows for regulations to be made requiring the trustees or managers of a pension scheme to prepare a report about the performance of collective benefit investments. The regulations may include how often these reports need to be obtained and who the reports should be obtained from.

The amendments to each of the clauses simply change the stipulation that the regulations “may” require this to a stipulation that the regulations “must” require this. In doing this, we inevitably return to the nature of the delegated powers in Part 2. The question is whether the Government can imagine leaving some of these powers unused when they come to issue regulations under this part of the Bill and, if so, which ones.

The investment strategy for collective benefits is obviously a crucial part of these schemes. We have already discussed the fact that collective defined contribution schemes have the potential to offer investment strategies that perform better than individual defined contribution schemes. It is also important because research on the subject by the Institute for Public Policy Research showed that the feeling that contributions might be invested badly on savers’ behalf, leaving savers with relatively smaller rewards than they were expecting, can serve to disincentivise savers. As with other aspects of governance, trust in investment strategies is essential.

Will the Minister say, first, whether the Government can imagine a circumstance under which they would not issue regulations requiring a statement of investment strategy to be prepared? Will he provide the Committee with any more detail on what the trustees or managers are likely to be required to do with the statement of investment strategy? Will it need to be made available to scheme members, for instance? The amendment to Clause 15 is in a similar vein. Can the Government imagine any reason why the regulations issued under this clause would not require an investment performance report to be produced by a trustee or scheme manager?

There is also considerable concern about the wider question of what kind of information is made available in investment reports. For instance, the Minister in the other place was usefully able to say that information was likely to be available on transaction costs, but, less usefully, was unable to give any details as to which transaction costs would be laid out in an investment report. Ideally, we would like trustees to have access to enough information to be able to judge whether the investment is being managed as efficiently as it should be. I hope the Minister is able to shed a bit more light on that aspect of the clause. I beg to move.