UK pension scheme voting taskforce outlines recommended changes

The UK's Taskforce on Pension Scheme Voting Implementation has published a report outlining its recommended changes to help tackle issues faced by trustees implementing their own voting policies.

The group was set up by Pensions Minister, Guy Opperman, in December 2020 to address problems in the voting of equity shares by trustees.

As reported by our sister publication, Pensions Age, it found that voting was of growing importance in securing value for pension savers, but that there was “enormous complexity” in pension and investment structures that made it hard for schemes to exercise control over voting.

Furthermore, it noted that the way voting was delivered was too complicated, and there were “significant problems” with some stakeholder attitudes and the asymmetry of power between schemes and their agents.

However, it also found that although it was told there were issues with splitting votes in pooled funds, “none appears material or insuperable”.

To help address the issues, the Department of Work and Pensions (DWP), in conjunction with industry bodies, was urged to promote a vote disclosure reporting template and encourage trustees, especially of larger schemes, to report more effectively on how votes relating to their investments were cast.

The taskforce added that trustees should either set their own voting policy or acknowledge responsibility for the voting policies asset managers implement on their behalf, and the DWP should encourage trustees, through legislation is necessary, to take more account of voting and engagement policies in their appointments and monitoring of investment managers.

The DWP or The Pensions Regulator (TPR) should provide guidance on what good quality voting policies look like, according to the taskforce, while the Financial Conduct Authority (FCA) should give guidance on a key set of aggregate data that asset manages should be required to support.

“The DWP, FCA, and TPR should closely monitor delivery of vote reporting at fund or mandate level,” the report added. “If managers do not deliver by the end of 2022 the FCA should legislate or issue handbook guidance to deliver fund and mandate level-reporting.”

It also recommended that the FCA brings forward handbook guidance to set the expectation that all asset managers explain their rationale for all voting decisions on request.

The Occupational Pension Scheme Stewardship Council was encouraged to help pension schemes in the stewardship of service providers, and the Department for Business, Energy and Industrial Strategy was urged to bring forward proposals to lower the thresholds for filing shareholder resolutions, as recommended by the Asset Management Taskforce.

Fund managers of pooled funds should voluntarily offer investors the opportunity to set expressions of wishes, the taskforce stated, while the FCA was asked to confirm the legality of aspects of that process.

Commenting within the foreword of the report, Taskforce on Pension Scheme Voting Implementation chair, Simon Howard, said: “I would like to thank the many stakeholders - too many to name individually - who generously lent their time and their insights to the taskforce in the course of many conversations and email exchanges. Covid prevented any face-to-face work.

“The UK responsible investment sector will be directly affected by our recommendations; our engagement with it confirmed that the knowledge and potential to adopt and develop them is huge.”

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