Pension Schemes Bill [HL] — House of Lords, 2016-12-19
Topic: Labor
William David McKenzie (Labour, Centre-left): My Lords, this revisits an amendment debated in Committee and requires the scheme’s member-engagement strategy to be one of the pieces of information that must be submitted to the Pensions Regulator as part of the application for authorisation. As such, it would then sit alongside the scheme and the scheme funder’s latest accounts—incidentally, that assumes there are some. In a start-up situation there may not be. Perhaps the Minister will comment on that—the business plan and the continuity strategy. The latter, of course, addresses how the interests of members are to be protected if a triggering event occurs As was argued in Committee, understanding members’ views and needs is essential to designing investment strategies and to the assessment of value for members. Such engagement ought to be an essential component of designing a pension scheme and an integral part of its creation and continuance The DC guide sets out that good member communications provided at the right time and in the right format are vital if members are to engage and make decisions that lead to good outcomes for them in retirement. As the code reminds us, there are a number of ways in which the views and needs of members can be determined. It recommends choosing methods that are appropriate and proportionate depending on the size of the scheme and available resources. Included in the techniques which might be employed are member surveys, running workshops, holding member AGMs—although we left that degree of flexibility out of this amendment—focus groups and forums, and regular member panels In Committee, my noble friend Lord Monks referred to the challenges of encouraging the member voice to be at the top of the agenda. He was speaking of his experience of a master trust with some 1 million members and 20,000 employers—a different proposition from engaging with perhaps just a few thousand members and a handful of employers. As the noble Lord, Lord Stoneham, has reminded us, we are dealing with schemes where the risk is with the members—the employees—which therefore necessitates their effective engagement On Second Reading, and repeated in Committee, the noble Lord, Lord Young—the Minister—expressed his support for the principle of member engagement. At col. 1758 of Hansard of 21 November, he expressed "a lot of sympathy" with the rationale behind the amendment then tabled. We hope that, on reflection, he might be moved a little further and is now able to accept it. The thrust of the noble Lord’s reason for rejecting the proposition appeared to be that there are comprehensive statutory requirements covering communications with members as well as guidance from the regulator and the Bill is not about stipulating how trustees should run an excellent scheme, and that they should have discretion about how they go about member engagement, provided, that is, that communications requirements which already apply are met This amendment does not seek to impose any particular approach to engagement on trustees, but it would mean that they would have the opportunity to lay out for the regulator how it is proposed to go about the task, and to demonstrate an understanding of the requirements and how in fact they are to be met in the particular circumstances of each master trust. It would be wrong to see engagement and communication as just a routine matter, especially given the scale of some of the existing master trust operations and given developing technologies. It seems a little odd that the regulator is required under the Bill to assess whether a range of persons are fit and proper; to take a view on whether any particular master trust scheme is financially sustainable and receive a business plan for this purpose; to decide on whether the systems and processes to be used are sufficient to be run effectively; and to determine whether a scheme has an adequate continuity strategy to address the interests of members in the event of a triggering event. However, it can look aside from whether a scheme has an effective member engagement strategy, as it can assume that statutory requirements and regulator guidance will be followed. Frankly, this seems a bit thin To accept this amendment would be a very clear demonstration to the sector of the importance placed upon member engagement. At the end of the day, the members are the very people the schemes are supposed to support. What is the downside in accepting this amendment? I beg to move.