Giving investors a voice: TPSVI publish recommendations on how to improve shareholder voting 

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The government-convened Taskforce on Pension Scheme Voting Implementation has set out 24 recommendations on how to increase and improve shareholder voting for occupational pension schemes.

The TPSVI report, published on Monday, contains recommendations for government, regulators and industry alike. The taskforce was set up in December 2020 by pensions and financial inclusion minister Guy Opperman, and follows a report by the Association of Member Nominated Trustees that raised the need to reform shareholder voting, to give asset owners choice and control in pooled arrangements.

Among others, it aims to facilitate more and better-quality voting by encouraging pension scheme trustees to set voting policies of their own, or explicitly accept responsibility for those policies exercised on their behalf by asset managers.

The other main recommendation is for all asset managers to offer asset owners the opportunity to set an ‘expression of wish’ as to how votes are exercised on their behalf, regardless of how they invest.

It also encourages people who invest pension savings, such as asset managers, to engage with their clients’ preferences about where their money goes, an important topic in a world of ESG.

“This is about giving pension savers a voice in how their hard-earned savings are being looked after,” said Opperman, who was reappointed on Monday amid a cabinet reshuffle. “I see no reason why trustees shouldn’t be able to determine their own high level policies – on areas such as climate risk management, diversity, or pay – and find an asset manager to implement it,” Opperman added.

Chair of the taskforce Simon Howard said that the two principal goals are both are necessary for better pension outcomes. “By boosting the owner’s voice and influence over their agents we can ensure that the whole system works to better guide investee companies,” he said. “We will let the people paying into pensions know that their views are being considered, boosting the support pensions saving will receive.”

Call for more support from regulators and action from asset managers

The recommendations cover policy development, policy implementation, reporting and monitoring, calling on the Financial Conduct Authority and the Department for Work and Pensions to act, taking into consideration comments from the consultation earlier this summer.

One concern raised in the consultation was of pension schemes not having the resources to develop a policy and, most importantly, implement and monitor it. The TPSVI’s first recommendation takes this into consideration by saying that if a scheme does not set its own policy, it should be obliged to accept responsibility for the policies carried out on its behalf.

The TPSVI expands on this in the report, saying: “We do not recommend that owners be forced to draw up their own detailed voting policy. Whilst we think their doing so would be very desirable, our hesitancy reflects the limited resources available to many schemes.”

They also recommend that DWP or TPR should provide guidance on what good quality voting policies look like.

Other recommendations include that all asset managers should offer pooled fund investors the opportunity to set an expression of wish in a fund at the cost of implementation.

The TPSVI also called on the FCA to carry out a review of manager use of easement in respect of not reporting “insignificant” votes and to also assess whether manager voting polices help or hinder scheme investment decisions.

Stewardship manager at the Investment Association, Sarah Woodfield, said the IA and its members are "committed to working closely with their pension fund clients to ensure that stewardship delivers sustainable value on behalf of pension scheme savers".

"Our joint industry steering group with the PLSA will examine TPVSI’s recommendations and take forward practical solutions to enhance the client’s voice in the stewardship process,” said Woodfield

How will this impact schemes and savers?

Until now, the vast majority of asset managers have not always been prepared to engage with their client’s voting preferences. Following the consultation, the TPSVI found that voting is of growing importance in securing value for pension savers.

Head of pensions and savings at interactive investor, Becky O’Connor, agrees that voting is of even greater importance during this time. “In a world where people care more than ever about global issues like climate change, it’s high time pension savers were able to have more of a say in where their pot of money goes,” she said.

With the potential to have a large impact on pension schemes and therefore savers, expectations are running high for what difference the recommendations will make.

“If implemented, these recommendations could, over time, transform the way people engage with their pension, from a passive relationship to an active empowering one,” said O’Connor.

The report stated that there is much to improve on, especially around action from managers in supporting schemes in the area of vote reporting and monitoring.

Taskforce member and Association of Member Nominated Trustees, Janice Turner said: “We know that one taskforce cannot solve all the issues at a stroke, and so we welcome the recommendation that if the financial services industry does not respond adequately to trustees attempting to fulfil their stewardship responsibilities that action will be taken to change the law.”

How effective will the TPSVI’s recommendations be in transforming shareholder voting and will it result in an increase in pensions saving? 

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