We’ve all seen the news by now: the Pension Schemes Bill has once again changed form, and perhaps for the better. Yesterday’s reading at Parliament sent a clear signal: by amending fiduciary investment duties at a statutory level, ministers are looking to empower trustees to consider investment decisions based on their real-world impact, both on a local economy and global basis. On the face of it, this is good news. The UK’s pension schemes are rich with capital, some of which could be diverted into investments that help deliver a stronger economy or a more resilient planet.
But scratch beneath the surface, and the move raises some important questions about how the government will reconcile the amendment with the Pension Schemes Bill in its current form.
Right now, the government maintains that the proposed amendment will give trustees greater ability to make domestic investments without making it compulsory to do so. Is this at odds with, or a complement to, the Pension Schemes Bill which is still proposing to grant the government a backstop power to require defined contribution master trusts into investing in certain areas?
The proposed backstop power has long been a source of unease for trustees, and understandably so. If enforced, it would allow the government to overrule the long-established tenet that trustees should act independently and solely in members’ best interests.
The terrain is shifting, and fast.
As the Bill moves through Parliament, trustees must continue to monitor how their investment powers might change. However, the impact of these changes will not be known for certain until any corresponding statutory regulations and guidance are made by the government, which could be up to 12 months after the Pension Schemes Bill receives royal assent.