Pensions Bill

Debate between Lord Bishop of Chester and Lord German

Monday 20th January 2014 Grand Committee

[The Lord Bishop of Chester]

I am not used to being interrupted in my perorations, but I was coming to an end. Schedule 17 says that the Government,

“may impose duties on the trustees or managers of a relevant scheme”.

These amendments spell out what those duties might be, in the interests of transparency, with a view to try to encourage people to invest in these products with some certainty as to how much of their money is going to be invested. I hope that the Government will look sympathetically on the issues that have been raised.

[Lord German (LD)]

My Lords, I am grateful to the noble Lords, Lord Browne and Lord Lawson, for raising these issues, because they allow us to examine the approaches which might be taken in the regulations which may follow and to ask the Government to describe which of these approaches, or what combination of these approaches, they might take. It is quite clear, in my view, that there are two separate approaches: one based on regulation and the other based on openness, transparency and disclosure. There is no reason why you cannot have some of one and some of the other; where the balance is drawn is a matter for debate and discussion. Ultimately, this matter goes to the heart of the success of our pensions industry for savers. The saver must have trust in a system which has a long tail behind it to understand that his or her money is being invested wisely and will return on that investment to provide a pension.

Auto-enrolment will, in the long run, be a success only if the schemes into which people are enrolled are well run and invest people’s savings responsibly. This is particularly important in DC schemes because, in the end in those schemes, the saver bears the investment risk of that complex decision process, which is more often than not made entirely without the saver’s knowledge or input. I was very interested in the chain described by the noble Lord, Lord Lawson, which stretched from Manchester to Monte Carlo. I dare say that if you started to plan these chains out around the world, you would probably find that these decisions were taken in all sorts of places and the connections very wide. That helps demonstrate the length of the chain in investment decisions, particularly if you start with the saver.

Of course, auto-enrolled savers do not choose their own pension provider. Poor pension companies might not become immediately evident to the saver. The best governance of the system would ensure robust oversight of savers’ interests and, most importantly, open communication with savers. It is not always obvious that those in the investment chain place the obligation to protect the best interests of savers at the heart of their decisions, particularly if they are in Monte Carlo. Fundamentally, that means improving transparency and promoting the disclosure of clear and relevant information to savers, as well as ways in which savers can easily find out information about their own savings.

I hope that the Government will tell us a little bit today about how they propose to deal with these very important issues and which approaches they intend to take that might guide the legislation that is to follow in regulations. Could my noble friend say something about how they intend to make the application of the UK stewardship code applicable to all pension schemes into which people are auto-enrolled?