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Webb blocks ‘piecemeal’ reform of fiduciary duty

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  • City of London

The UK government must take a holistic approach when reforming the fiduciary duty of pension trustees rather than amend legislation in a “piecemeal” fashion to address concerns on sustainable investing, the pensions minister has warned.

Speaking in the House of Commons, Steve Webb said that, rather than his Department for Work & Pensions (DWP) rewriting pensions legislation to address isolated concerns about fiduciary duty, it was important to work on the issue across government departments.

“We are trying to be as careful and as cross-departmental as we can, so we want to look at the whole investment chain and how corporate governance, the law of the land and pensions will be affected, to make change in an integrated and connected way,” the Liberal Democrat minister said.

His comments come after Green Party MP Caroline Lucas tabled several amendments to the current Pensions Bill – one suggesting an independent review of the impact of climate change on investments and a second asking that the Pensions Regulator be required to improve and promote understanding of long-term and sustainable investing.

Webb said he did not object to the “spirit” of the amendments, but noted that, on issues of climate change and fiduciary duty, he was required to defer to the Department of Energy & Climate Change and the Department for Business, Innovation and Skills.

The latter department was behind the recent Kay Review on long-term investing and earlier this year asked the Law Commission to review whether and how the current interpretation of fiduciary duty might hinder long-term investing.

The pensions minister said he encouraged Lucas “to keep up the pressure across government”.

“To be frank, this issue is not always at the top of the pension agenda, so I welcome the amendments for that reason,” he said.

Webb added that he would like the amendments to be withdrawn, as he would prefer “a more overarching framework affecting company law, business regulation and the duties of trustees not only in pensions but beyond”.

However, Lucas was insistent that an independent review of how climate change and natural resource constraints impact private pension savings – which her amendment suggests should be completed by the beginning of 2015 – would give “some comfort and reassurance” that Webb was serious about tackling the issue.

“The new clause is not just about fiduciary duty – it is about gathering data on the impact of climate change and natural resource constraints for the sustainability of private pensions and for a better understanding of the systemic risks posed by high levels of exposure to fossil fuels and other carbon-intensive assets,” she said.

The third reading of the Pensions Bill, legislating for the new single-tier state pension and allowing the DWP to introduce a fee cap for auto-enrolment schemes, coincided with the launch of a report by lobby group ShareAction calling on trustees to consider the financial and wider macroeconomic risks of climate change.

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