Labour MPs to demand greater pensions scrutiny

http://www.theguardian.com/business/2014/oct/06/labour-mps-pensions-savers-retirement-funds

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Britain’s £3tn pensions industry should be opened up to greater scrutiny to give savers a chance to influence investment decisions, according to a group of Labour MPs.

They plan to argue at the Co-operative party’s annual conference in London this weekend that pension savers must be given powers to question retirement fund managers and to elect trustees to occupational schemes that operate as private funds.

The new rules would allow workers to oversee insurers which run private occupational schemes and force them to match the transparency and accountability observed by trust-based schemes.

Gareth Thomas, chair of the Co-operative party said: “We need to make the pensions and savings industry more accountable to those who invest their funds over the long term.”

He said that many employers had adopted schemes that regularly published information and allowed workers to sit on advisory boards, but pension schemes run by City firms failed to provide information or allow savers to influence investment decisions.“Too many of the institutional investors who manage and control the bulk of the private pensions and savings industry do not do enough to consult, inform and listen to the priorities of their customers,” he said.

The demand follows a string of critical reports on the pension fund industry, including a study by the European Federation of Financial Services Users last week that revealed how savers in Belgium, Britain, France, Italy and Spain have suffered negative returns this century once inflation was taken into account. In Britain, pension schemes lost 0.7% a year between 2000 and 2012, according to the report.

An earlier report sponsored by the Royal Society for the Encouragement of Arts, Manufacturers and Commerce (RSA) found that high charges and poor fund management cost UK pension investors 40% of their retirement income.

The London mayor, Boris Johnson, called at the weekend for the merger of public sector pension schemes to cut costs and increase investment in infrastructure projects. He said 39,000 public sector funds should be merged to create a “citizen’s wealth fund” which could invest in major infrastructure to help stimulate Britain’s economy.

Gregg McClymont, the shadow pensions minister, has already committed Labour to requiring pension funds to disclose how they vote at company AGMs as part of a move towards collective schemes currently used in Holland and Denmark and recommended by the RSA.

Thomas said rules bringing greater transparency were an easy first step to giving savers more control over their funds.

“Markets work best when companies have the information they need to make informed choices. A more transparent pension fund industry will increase confidence in saving for the long term,” he said.

The move follows a survey of the largest occupational schemes showing transparency and member engagement was very poor.

Four new rights would be created – a right to know where money is being invested, a right to question the pension and savings fund managers who make investments, a right to be consulted on how the pension or savings fund will use its power in corporate boardrooms and a right to elect representatives to the board of the pension or savings fund.

Thomas pointed out that last month Legal & General became the first insurance company to hold an AGM for one of its prominent schemes.