The government has added amendments to the Pension Schemes Bill to accelerate the delivery of its proposed “statutory guidance” in relation to fiduciary duty.
The additions involve a new clause being added to the bill – which already has 123 clauses as of the most recent draft – titled “Investment principles and choosing investments: guidance”.
Any guidance produced through this clause is subject to consultation and must be signed off by parliament, according to the amendment. Once in force, trustees and pension fund managers “must have regard” to the guidance.
Labour peer Baroness Sherlock, who is leading the Pension Schemes Bill through the House of Lords, said in an explanatory note: “This amendment would require the Secretary of State to issue guidance explaining aspects of the law contained in certain pensions regulations.
“The guidance may in particular explain the meaning of expressions in those regulations, such as ‘financially material considerations’ (including ‘environmental, social and governance considerations’) and ‘best interests of members’. ”
The first such guidance is to be issued within 12 months of the bill coming into force, according to the amendment.
David Everett, research partner at LCP, said: “The government clearly wants to move this topic along at pace. We already knew that there would be a full consultation on the draft guidance later in the spring. It now seems that it may be published in final form by around this time next year, if not sooner.”
Sapna Patel, principal in the investment team at LCP, added: “We welcome guidance on how trustees could take into account financially material considerations and the best interests of members. We hope that, when we see this guidance, it will provide trustees with more clarity and reassurance on possible actions available to them in an area that has been interpreted in different ways.”
Last week, Universities Superannuation Scheme chief executive Carol Young welcomed the government’s approach to use guidance rather than a more rigid approach to fiduciary duty.
Young argued that “a properly resourced [scheme] with trustees, capable of exercising skilled judgement and properly updated on their trustee knowledge and understanding, should be perfectly capable of using what exists today to make these types of complex decisions”.
