With the announcement of new ministers at the Department for Work and Pensions (DWP), former minister and LCP partner Steve Webb has called for a review of priorities in DWP pension policy to make sure that key issues are given the attention they deserve.
“When new ministers are appointed there is a risk that they simply roll forward everything that their predecessors had set in train. But change of leadership offers a unique opportunity to reassess priorities – something which is urgently needed,” Webb said.
As the UK has seen a new Prime Minister come to power this week, Liz Truss’s new cabinet members include Chloe Smith, the newly-appointed Secretary of State for Disabled People, Work and Health.
LCP’s Webb has predicted that a new DWP pensions minister is likely to be announced later this week.
“In my view, the low level of saving into [defined contirbution] pensions is the biggest timebomb we have in pensions, yet policy has been in limbo since the 2017 review of automatic enrolment. A top priority must be a plan to boost saving levels when cost of living pressures ease,” Webb said.
He also noted that the administration of the state pension system needs urgent attention. “The department recognises that hundreds of thousands of people have been underpaid, and has recently reported on new errors in payments to some mothers who spent time at home with children. As well as fixing these errors, DWP needs to do more to improve checking of state pension awards to get them right first time,” he explained.
On company pensions, Webb believes there is a risk that the current approach to defined benefit (DB) pension funding is “fighting the battles of years ago”, and is driven by concerns over cases like Carillion or BHS, rather than reflecting current realities.
He added: “DB pension scheme funding has been transformed in recent years and policy needs to be fit for purpose in the current era. In particular, there is a risk that some firms may be forced to put more money into their DB pension scheme than is necessary, instead of spending that money on investing for the future or paying better wages to their staff.”
FRC adds 43 new signatories to stewardship code
The Financial Reporting Council (FRC) has added 43 new signatories to the UK Stewardship Code following its spring 2022 assessment.
The new signatories added following the extensive review process, which considered organisations’ investment styles, sizes and types, now take the total number of signatories to 236, with assets under management (AUM) of £40.7trn (€47trn), up from £33.3trn.
According to the FRC, the code sets high standards of stewardship for those investing money on behalf of UK savers and pensioners, and the continued growth in the number of applicants and successful signatories shows the value that investors and their clients and beneficiaries in the UK and beyond give to the code.
This supports the findings of the FRC’s recent report on the impact of the code on the stewardship practice of asset managers and owners.
The FRC noted improvements in several areas, such as the quality of activity and outcome reporting for engagement, collaboration and escalation; contributions to addressing market wide and systemic risks and improving the functioning of the financial markets; and reporting on how signatories monitor and hold to account third parties, such as asset managers and service providers.
However, there still needs to be greater emphasis by signatories on reporting their activities and outcomes during the reporting period, using both quantitative and qualitative evidence, as the FRC will increase focus on this area in future assessment updates.
Mark Babington, executive director of regulatory standards at FRC, said it was “great to see improvements in how organisations are evidencing their stewardship each year and more tailored explanations on how they apply the code to demonstrate their stewardship activity and outcomes effectively”.
Olivia Mooney, responsible investment consultant and stewardship lead at Hymans Robertson, a signatory of the code, said: “The use of stewardship by clients and their managers is increasingly being recognised as key in the development of long-term approaches that not only deliver sustainable value but also address climate issues, and ultimately the transition towards more sustainable economic activities.”