Clause 23 - Statement of investment strategy

Part of Pension Schemes Bill – in a Public Bill Committee at 12:15 pm on 30th October 2014.

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Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 12:15 pm, 30th October 2014

We now move on to a group of clauses on the general theme of investment. Clause 23 deals with the statement of investment strategy. Clauses 23 to 25 set out a number of powers that will allow requirements to be placed on the trustees and managers of schemes in relation to investments held for the purpose of providing collective benefits. Clause 23 will provide a power to require the trustees or managers of a pension scheme to prepare a statement of their investment strategy. Powers can also be used to specify the content of that statement and how frequently it will be reviewed.

Regulations under the power may make corresponding or similar provision to that made under section 35 of the Pensions Act 1995 on investment principles for occupational trust-based schemes and may also disapply that section in relation to any investments covered by regulations made under this clause. That will allow corresponding or similar provision to be made to that  which currently applies in relation to occupational trust-based schemes but tailored, where appropriate, to investment strategies relating to collective benefits.

I have a few key points to make on clause 23 for clarification. Schemes that provide collective benefits need to be well run and have member confidence. There needs to be clarity about the principles governing decisions on how the collective fund is invested. It is envisaged that the regulations will set out the form that the statement of investment strategy must take, together with requirements about the content. For example, regulations might require the trustees or managers to ensure that the statement of investment strategy includes their policies in relation to the kinds of investment to be held, the balance between different kinds of investment and the expected returns on those investments.

The regulations need to be appropriate to schemes that provide collective benefits. In practice, it is likely that regulations made under the clause will resemble those from the 1995 Act, but we must be able to make appropriate provision for schemes to the extent that they provide collective benefits. Despite the potential similarities with existing legislation, there are some important differences. For example, because there is no employer standing behind the collective benefits, it may be appropriate for the investment strategy for collective benefits to be revisited more regularly than an investment strategy relating to the provision of other types of benefit.

Finally, we must ensure that regulations are up to date and respond to the development of scheme benefits and designs. The detail involved in the provisions is most appropriately dealt with in delegated legislation. In addition, we must be able to ensure that the requirements can be readily adapted and remain fit for purpose as schemes providing collective benefits evolve. I hope that that is helpful in setting out what we mean by the term “statement of investment strategy” in the context of a collective scheme. It is similar to the context of other schemes but may have tailored features for collectives. I commend clause 23 to the Committee.