The Pensions and Lifetime Savings Association (PLSA) this morning released a 2023 update to its annual Stewardship and Voting Guidelines, which are designed to help pension fund trustees, investment managers and other institutional investors decide how to exercise their vote at annual general meetings (AGMs).

The PLSA aims to help its members engage with investee companies – either directly or working through their advisers and managers – to protect and enhance the value of savers’ capital and act as good stewards of their assets.

The guide reviews new regulations on shareholder engagements and includes dedicated sections designed to help investors challenge how investee companies are managed. It tackles issues such as board leadership and company purpose, division of responsibilities, audit, risk, climate change, the workforce, and capital structure, among others.

The new edition takes stock of recent political and economic circumstances which influence the evolving topics investors engage with when it comes to stewardship. Three themes have emerged as having particular relevance for 2023: the cost of living crisis; climate change; and the impact of company operations on its workforce and wider society.

Executive pay has consistently concerned shareholders in recent years. According to Minerva Analytics, remuneration and board-related resolutions were the largest sources of shareholder dissent in 2022, accounting for 44.33% and 29.87% of high-dissent resolutions, respectively.

The cost-of-living crisis, high inflation and energy price hikes draw particular attention to this issue in 2023, the PLSA stated, adding that it has always recognised the importance of appropriate remuneration policies as a litmus test for wider corporate governance practices.

The Voting Guidelines recommend that remuneration structures and incentives for executive directors should cascade down to all employees to allow them to share in the success of the business. They also encourage shareholders to vote against the remuneration policy where it does not match up to the standards in the guidelines.

Although the cost-of-living crisis has been particularly prominent in the headlines in recent months, there is no evidence that investors are reducing their focus on climate-change issues. The PLSA has noted an increased focus among its members to hold their investment chains accountable to their net-zero commitments, with a growing expectation of targets and transitions plans.

The pension sector is now required to produce an annual Taskforce for Climate-Related Financial Disclosures (TCFD) report, including all schemes with over a £1bn in assets. The PLSA therefore expects that companies reference the TCFD in their reports, to enable investors to fully assess the extent of their climate risk.

The COVID-19 pandemic exposed a growing sentiment of the need to improve working conditions for staff. Mental health, alongside other wellbeing practices, should be at the heart of companies’ workforce concerns, the PLSA said.

Efforts should also be made to imbed better practices to increase wider diversity and inclusion of all protected characteristics in organisations.

Joe Dabrowski, deputy director – policy at the PLSA, said: “Large shareholders have a duty to act as good stewards of the capital they manage on behalf of pension savers and other end investors. Annual general meetings are an important juncture at which they can scrutinise and influence directors to ensure investee companies are run in the best interests of pension savers and other long-term shareholders.”

LCP launches Illiquid Asset Solutions Group

Consultancy LCP has launched a new Illiquid Asset Solutions Group to help pension funds manage their illiquid assets as time horizons for schemes to fully insure shorten following dramatically improved funding levels.

These illiquid assets often have many years to run which can be a barrier to schemes taking the opportunities offered in the current market. LCP research shows that two in three of FTSE 100 UK defined benetif (DB) pension schemes have an allocation to illiquid assets with over 40% having an allocation of 5% or more, highlighting the scale of the issue.

This imbalance was created by the dramatic improvement in pension scheme buyout funding levels over the past 12 months, driven by higher Gilt yields and favourable insurer pricing, which has propelled the average scheme over five years forward on its journey plan, LCP said.

As a result, many schemes targeting buy-in are finding themselves in the enviable situation that they can afford to insure much earlier than expected, but only if they are able to design the right strategy to incorporate their illiquid asset holdings in a cost-effective way, it added.

The new Illiquid Asset Solutions Group will be a specialist group within LCP focused on helping pension schemes optimise strategy for illiquid asset holdings as part of their journey to buy-in or buyout. The group includes experts from LCP’s longevity de-risking team and experts from LCP’s investment team who specialise in insurance transactions.

PASA releases dashboards guidance

The Pensions Administration Standards Association (PASA) has today published two new pieces of guidance to support the industry in preparing to deliver pensions dashboards.

Kim Gubler, PASA chair, said: “This guidance contains reactive wording which administrators, providers and service centres can use to respond to people’s questions. The wording is not mandatory, but it’ll be helpful to savers for the industry to give consistent responses to their dashboards enquiries.”

Further advice on matching in ‘split administration’ scenarios will be published as part of PASA’s upcoming Values Guidance, and a further update on the impact of whether personal identifiers are verified or self-asserted will follow later in the year.

Both pieces of guidance – What administrators, providers and service centres should say to savers who enquire about dashboards before they become universally acceptable and An important addition to the PASA Data Matching Convention (DMC) Guidance – have been shared with the Pensions Dashboards Programme.

Karl Lidgley, client manager, third party administration at Hymans Robertson, said: “The guidance shared today from PASA is a positive step to support the industry with the challenges of matching members for dashboards and the rising number of enquiries administrators are seeing, particularly as timescales are currently uncertain.

“It is the first time we have had any unified guidance on what to say to members and it should help create consistency across the industry, as administrators and providers will be able to share the same information. It will also no doubt, help people who are nearing withdrawal stage to assess things sensibly, identify an approach that best suits them and make informed decisions in the longer term.”

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