Queen’s Speech 2022: A chance for personalised guidance, and doubled boycotts legislation
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The Queen’s Speech, delivered by the Prince of Wales, announced 38 bills. A few of these will affect the pensions sector, including new bills on financial services and another on boycotts and divestments. Here are some reactions to the speech.
With the Queen notably absent, Tuesday’s State Opening of Parliament nonetheless delivered on tradition, with the usual excess of gold trimmings, shouting of orders and commentators trying to spot signs of, well, anything really between the prime minister and the leader of the opposition. But looking past the show, what are the changes that are being planned over the next 12 months?
Industry calls for personalised guidance
A new financial services and markets bill will replace EU laws about financial services, including the Solvency II regime that has defined insurance company reserves and investments so far. In addition, the government wants to reform capital market rules “to promote investment”.
Industry is calling for the bill to introduce greater freedom for firms around guidance and advice, so that a form of personalised guidance can be given.
Controversially, the bill also creates a new objective for the Financial Conduct Authority to support the growth and international competitiveness of the UK financial sector, which some have said risks compromising its other objectives. The Pensions Regulator was handed a similarly contradictory objective in 2014, when it was told not to hinder the sustainable growth of companies.
“What is required are clearer boundaries around what is deemed as guidance and what is deemed as advice,” said James Jones-Tinsley, self-invested technical specialist at consulting firm Barnett Waddingham.
Steven Cameron, pensions director at provider Aegon, said the inclusion of the financial services bill in the speech paved the way for changes to how financial services are regulated and in turn the services firms can offer to customers.
“Current rules make it very difficult for firms to offer anything between generic information and full regulated advice. As we adjust to a UK outside of the EU, there’s an opportunity to move away from EU regulations and open up new forms of support, allowing the financial services industry to help more people,” said Cameron.
Aegon is strongly in favour of regulated firms being able to offer a more personalised form of guidance, he said, which would nudge people in a positive direction without recommending any specific product, noting that this could form part of supporting customers during the cost of living crisis.
The introduction of the Consumer Duty has the potential to transform UK financial services for the better, said Tom Selby, who heads up retirement policy at investment platform AJ Bell.
“By moving from rules-based to outcomes-based regulation, firms should be able to focus more on introducing interventions and prompts that help customers make better financial decisions. However, the effectiveness of this regulatory shift risks being undermined by the lack of clarity over the advice/guidance boundary,” he said, meaning millions make financial decisions without advice.
The new bill provides a legislative platform to rethink that paradigm, and would fit neatly into the government’s flagship ‘levelling-up’ agenda, he argued.
New boycotts bill wider in scope than amendment to PSPJO Act
For public sector pension schemes, the boycotts, divestment and sanctions bill could have implications but also muddies the legislative waters. This is the government implementing its intention – having been defeated in court in 2020 – to change investment legislation so that public bodies are forbidden from putting investment boycotts in place if this is not in line with UK foreign and defence policy. The issue is primarily about whether the Local Government Pension Scheme should be permitted to boycott the UK defence industry or companies whose products are produced in the occupied Palestinian territories.
The new bill is separate from an amendment introduced to a different bill. The Public Service Pensions and Judicial Offices Act 2022 includes a clause on boycotts, divestments and sanctions that was introduced at the last moment during its parliamentary stages by Robert Jenrick MP with the government’s support. This gives the Department for Levelling Up, Housing and Communities the power to issue directions or guidance on investment decisions which it is “not proper” for the scheme manager, including LGPS administering authorities, to make in light of UK foreign and defence policy.
“This is quite separate from the BDS Bill that was announced in the Queen’s Speech this week. This Bill will be wider in scope than the current clause in the PSPJO Act and will go wider than just investment decisions to include things like procurement decisions,” explained Bob Holloway, secretary to the LGP Scheme Advisory Board.
“And whereas the clause in the PSPJO Act is limited to government departments with responsibilities for public service pension schemes, the BDS Bill announced this week will be wider in scope to include, we believe, all public service bodies.”
The decision to bring in a boycotts bill has drawn the ire of groups like the Palestine Solidarity Campaign, the government’s former adversary in court, which said the plans come amid a broader “government assault on human rights and the right to protest". The government said it wants to make certain protest tactics like protesters superglueing themselves to roads, mainly used by climate protesters in recent years, illegal. It is also planning to replace the Human Rights Act.
PSC is planning a protest against the boycotts bill this Saturday. Last month, 49 charities and unions signed a ‘right to boycott’ statement.
Silence on auto-enrolment is deafening
The continued silence by government around legislation for reforming auto-enrolment – something it said it would do in the mid-2020s – is a thorn in the side of the pensions industry. The reforms the government has committed to include reducing the minimum enrolment age to 18 and scrapping the lower band earnings threshold so contributions are made from
The Pensions and Lifetime Savings Association said it as understandable that the government’s focus was not on making people save during a cost of living crisis.
However, its director of policy and advocacy, Nigel Peaple, said that “as employers need time to prepare, it would be good to put this on the statute book now with a gradual and clear timetable for the introduction of the measures”.
He repeated the PLSA’s belief that pension contributions should be increased, “but not before the end of this decade, and for automatic enrolment pensions to be ‘levelled up' so that employers pay the same as employees.”
What stands out for you from among the legislative programme?