Updating the myners principles a response to consultation. Updating the Myners Principles.



Updating the myners principles a response to consultation

Updating the myners principles a response to consultation

As well as working to raise the quality of working life, one of our main objectives is to promote social justice. This includes a direct interest in pensions policy and in the investment and governance of pensions. Trade unions play an invaluable role in promoting trusteeship, encouraging members to come forward to become trustees, and supporting them in their role, for instance through providing tailored training and guidance.

We provide newsletters, events, briefings and training for members of the network and act as a point of contact and advice for union trustees.

We see this as integral to the good governance of pensions. Member trustees bring an invaluable employee perspective, a range of experience and are essential to ensuring that schemes are run in the interests of the membership. Key issues Investment Governance Group 1. We agree that the Pensions Regulator is an appropriate Chair for the body and welcome the proposal to bring DWP and HM Treasury together under the auspices of the group.

This consultation must also include full consultation with the bodies that represent pension scheme members, including trade unions. The TUC would like to see a more explicit acknowledgement of the role of the IGG in promoting active and engaged ownership in line with the spirit of the original Myners principles.

The group's mandate should include the promotion of good governance practice in encouraging shareholders to use their rights and duties as investors to engage with investee companies. In addition it could usefully consider developing support tools to help trustees evaluate investment products, and link to broader work about improving levels of financial education. Remuneration of trustees 1. There are a number of concerns about the remuneration of trustees, such as the possibility that it could distort motivations and place additional cost pressures on pension schemes.

At the same time we recognise that there are arguments for remunerating trustees for what can be a time consuming and challenging role. The legal right to time off for trustee duties is in the Employments Rights Act section 58 , and these rights should be strongly emphasised in the principles and protected as with the right to time off for trade union duties for elected union representatives.

Where a trustee board does decide to pay trustees, there should be a formal and transparent policy on payment. The principles should uphold this approach, recognising that there is no 'one size fits all' model, and that for schemes of different types and sizes paying trustees may or may not be appropriate. Updated principles and best practice guidance 1. The principles as set out in the consultation demonstrate the importance of the Trustee Knowledge and Understanding regime, good training, guidance and support for all trustees in their role.

Whilst an investment sub-committee may be appropriate in larger schemes, this is unlikely to be a suitable approach for smaller schemes. In addition, where investment sub-committees are used, it is important to maintain the principle of proper member representation, constituting at least one-third of members of the group.

The emphasis on clear written mandates and the reference to members' expectations are welcome. In addition, the TUC would like to see the principles promote consideration of the methods trustees can use to encourage engagement and voting by fund managers.

In analysing the performance of investments, trustees should also be encouraged to assess the performance of fund managers and advisors in terms of their engagement activity and active ownership on behalf of the fund.

In addition, consideration should be given to the development of support and guidance for trustee self assessment in order to ensure that the process is fair.

We are pleased to see the additional reference to the importance of considering engagement in developing investment strategies, and would like to see the Investment Governance Group conduct further work to develop and promote good practice in engaged investment. Communications with 'stakeholders' should include proper communication with scheme members and their representative bodies, including trade unions.

Disclosure and reporting 1. It is not entirely clear from the consultation, however, how this strengthened approach will work in practice. We would welcome clarification of the proposals in this area, including an acknowledgement of some of the barriers to the effective implementation of a 'comply or explain' approach and consideration of how to overcome them.

In addition we believe that it would be useful to develop a central online repository for reports in order to improve transparency and information sharing about scheme activity.

Responses to consultation questions Q1: Will the proposed approach comprising an updated set of principles, best practice guidance, trustee tools, better quality reporting and greater industry ownership of the principles improve standards of investment decision-making and governance?

Taking a consolidated approach to investment governance and the Myners principles is a positive initiative and we are pleased that the government is proposing a cross-departmental approach including the Regulator and the various interest groups involved. The TUC believes that the proposed approach has the potential to improve standards of investment decision-making and governance, provided that the concerns outlined elsewhere in this response are addressed.

It is essential that the interests of pension scheme members are represented and that the focus is on developing best practice in investment governance in accordance with the interests of beneficiaries. The emphasis in the consultation on 'industry ownership' of the principles should be recalibrated to include a focus on members as the ultimate owners of pension scheme assets.

In order to avoid a 'tick box' approach, ongoing dialogue and guidance will be essential to support trustees and pension schemes to apply the principles in the most appropriate way. Do you agree with: The proposed updated principles as set out in full in Annex C?

The proposed best practice supporting guidance as set out in full in Annex C? See response above para 1. Would pension fund trustees benefit from guidance on the content of reporting against the updated principles?

Should the proposed Investment Governance Group consider the need for guidance on the location of reporting by trustees on their application of the principles? Should the proposed Investment Governance Group own the updated principles on the basis set out in Annex B? It is appropriate that the Investment Governance Group, with membership from across government and including trustees, member trustees and their representatives, owns the updated principles and has responsibility for leading on their future development and associated guidance.

Input from industry experts and advisors will also have an important role to play but it should be recognised that this is on a different basis and should not override the decision making by government, trustees and their representatives. One of the worrying aspects of the shift from DB to DC pension schemes is the undermining of the trust system and the routes for members to have an influence, especially given that in DC schemes the risk is borne by the members. The TUC therefore supports a trust-based approach to DC wherever possible in order to maintain member input into the governance of the scheme.

The DC principles should be updated and monitored by the Investment Governance Group in order to promote and develop better governance and more engaged investment in DC schemes. Should the Investment Governance Group take forward work to help small schemes in their application of the updated principles? Yes, tailored guidance and support for smaller schemes could help to address some of the difficulties faced by smaller schemes, which were identified by the NAPF in their review of the principles.

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Updating the myners principles a response to consultation

As well as working to raise the quality of working life, one of our main objectives is to promote social justice. This includes a direct interest in pensions policy and in the investment and governance of pensions. Trade unions play an invaluable role in promoting trusteeship, encouraging members to come forward to become trustees, and supporting them in their role, for instance through providing tailored training and guidance.

We provide newsletters, events, briefings and training for members of the network and act as a point of contact and advice for union trustees. We see this as integral to the good governance of pensions. Member trustees bring an invaluable employee perspective, a range of experience and are essential to ensuring that schemes are run in the interests of the membership. Key issues Investment Governance Group 1. We agree that the Pensions Regulator is an appropriate Chair for the body and welcome the proposal to bring DWP and HM Treasury together under the auspices of the group.

This consultation must also include full consultation with the bodies that represent pension scheme members, including trade unions. The TUC would like to see a more explicit acknowledgement of the role of the IGG in promoting active and engaged ownership in line with the spirit of the original Myners principles. The group's mandate should include the promotion of good governance practice in encouraging shareholders to use their rights and duties as investors to engage with investee companies.

In addition it could usefully consider developing support tools to help trustees evaluate investment products, and link to broader work about improving levels of financial education. Remuneration of trustees 1. There are a number of concerns about the remuneration of trustees, such as the possibility that it could distort motivations and place additional cost pressures on pension schemes.

At the same time we recognise that there are arguments for remunerating trustees for what can be a time consuming and challenging role. The legal right to time off for trustee duties is in the Employments Rights Act section 58 , and these rights should be strongly emphasised in the principles and protected as with the right to time off for trade union duties for elected union representatives.

Where a trustee board does decide to pay trustees, there should be a formal and transparent policy on payment. The principles should uphold this approach, recognising that there is no 'one size fits all' model, and that for schemes of different types and sizes paying trustees may or may not be appropriate.

Updated principles and best practice guidance 1. The principles as set out in the consultation demonstrate the importance of the Trustee Knowledge and Understanding regime, good training, guidance and support for all trustees in their role. Whilst an investment sub-committee may be appropriate in larger schemes, this is unlikely to be a suitable approach for smaller schemes. In addition, where investment sub-committees are used, it is important to maintain the principle of proper member representation, constituting at least one-third of members of the group.

The emphasis on clear written mandates and the reference to members' expectations are welcome. In addition, the TUC would like to see the principles promote consideration of the methods trustees can use to encourage engagement and voting by fund managers.

In analysing the performance of investments, trustees should also be encouraged to assess the performance of fund managers and advisors in terms of their engagement activity and active ownership on behalf of the fund. In addition, consideration should be given to the development of support and guidance for trustee self assessment in order to ensure that the process is fair.

We are pleased to see the additional reference to the importance of considering engagement in developing investment strategies, and would like to see the Investment Governance Group conduct further work to develop and promote good practice in engaged investment.

Communications with 'stakeholders' should include proper communication with scheme members and their representative bodies, including trade unions. Disclosure and reporting 1. It is not entirely clear from the consultation, however, how this strengthened approach will work in practice. We would welcome clarification of the proposals in this area, including an acknowledgement of some of the barriers to the effective implementation of a 'comply or explain' approach and consideration of how to overcome them.

In addition we believe that it would be useful to develop a central online repository for reports in order to improve transparency and information sharing about scheme activity. Responses to consultation questions Q1: Will the proposed approach comprising an updated set of principles, best practice guidance, trustee tools, better quality reporting and greater industry ownership of the principles improve standards of investment decision-making and governance?

Taking a consolidated approach to investment governance and the Myners principles is a positive initiative and we are pleased that the government is proposing a cross-departmental approach including the Regulator and the various interest groups involved. The TUC believes that the proposed approach has the potential to improve standards of investment decision-making and governance, provided that the concerns outlined elsewhere in this response are addressed.

It is essential that the interests of pension scheme members are represented and that the focus is on developing best practice in investment governance in accordance with the interests of beneficiaries. The emphasis in the consultation on 'industry ownership' of the principles should be recalibrated to include a focus on members as the ultimate owners of pension scheme assets.

In order to avoid a 'tick box' approach, ongoing dialogue and guidance will be essential to support trustees and pension schemes to apply the principles in the most appropriate way.

Do you agree with: The proposed updated principles as set out in full in Annex C? The proposed best practice supporting guidance as set out in full in Annex C? See response above para 1. Would pension fund trustees benefit from guidance on the content of reporting against the updated principles? Should the proposed Investment Governance Group consider the need for guidance on the location of reporting by trustees on their application of the principles?

Should the proposed Investment Governance Group own the updated principles on the basis set out in Annex B? It is appropriate that the Investment Governance Group, with membership from across government and including trustees, member trustees and their representatives, owns the updated principles and has responsibility for leading on their future development and associated guidance.

Input from industry experts and advisors will also have an important role to play but it should be recognised that this is on a different basis and should not override the decision making by government, trustees and their representatives. One of the worrying aspects of the shift from DB to DC pension schemes is the undermining of the trust system and the routes for members to have an influence, especially given that in DC schemes the risk is borne by the members.

The TUC therefore supports a trust-based approach to DC wherever possible in order to maintain member input into the governance of the scheme. The DC principles should be updated and monitored by the Investment Governance Group in order to promote and develop better governance and more engaged investment in DC schemes. Should the Investment Governance Group take forward work to help small schemes in their application of the updated principles?

Yes, tailored guidance and support for smaller schemes could help to address some of the difficulties faced by smaller schemes, which were identified by the NAPF in their review of the principles.

Updating the myners principles a response to consultation

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2 Comments

  1. One other area where the articulation of Government policy might give cause for concern is in the field of disclosure.

  2. We are pleased to see the additional reference to the importance of considering engagement in developing investment strategies, and would like to see the Investment Governance Group conduct further work to develop and promote good practice in engaged investment. There are a number of concerns about the remuneration of trustees, such as the possibility that it could distort motivations and place additional cost pressures on pension schemes.

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