My Lords, I thank noble Lords who participated in the debate on the amendment and my noble friend Lord German for moving the amendment so ably. The Government are committed to improving transparency in pension schemes and have a robust and thorough work programme during 2015 and 2016 to do so.
My noble friend Lord German has raised a very important issue that this House has long recognised: the need for transparency in pension schemes. I assure noble Lords that this is an issue that the Government take very seriously. Indeed, in their publication Better Workplace Pensions: Putting Savers’ Interests First on 17 October 2014, the Government committed to improving the governance of workplace pensions and transparency surrounding the costs and charges which members are faced with, including better information about transaction costs related to buying and selling investments. I know that this amendment goes much beyond that but it indicates the direction of travel.
Noble Lords will also be aware that this Government have recently consulted on draft legislation which, subject to parliamentary approval, will introduce from April this year new requirements on trustees to improve the governance of trust-based schemes. Trustees will be required to demonstrate that they have complied with new standards of governance by completing a statement, signed off by the chair of trustees, annually. Similar rules are to be introduced by the Financial Conduct Authority to require the newly formed independent governance committees to demonstrate that they have complied with such rules for the contract-based side of the workplace pensions market on a similar timescale. The Government intend to build on this first phase of transparency work. We are committed to consulting further, later this year, on how we propose to introduce transparency on additional costs and charges. The Financial Conduct Authority will also be consulting on similar new requirements in relation to workplace pensions.
Regulations and rules made as a result of the Pensions Act 2014 will significantly improve the transparency of costs and charges in pension schemes and lead to members receiving better value for money. However, I recognise that the proposed amendment would go much further than this. It seeks to place requirements on trustees and managers of occupational and all other personal schemes to provide members with detailed additional information relating to their schemes’ investment functions, over and above what is already required, and additional to the improved transparency of costs and charges information that we intend to introduce from April. The amendment, were it to be accepted, would require trustees and managers to provide investment-related information to members on request where that is reasonable—and there is a rebuttable presumption that it is—which would be
additional to existing requirements and would do so before we have consulted with the industry, savers and other interested stakeholders, as we announced we would in our Better Workplace Pensions consultation last October.
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We believe that there is merit in examining and considering further the requirements contained in this amendment. However, we consider that greater transparency in relation to costs and charges, as well as about how schemes manage their investments, go hand in hand. As such, they would be better considered together as part of the same well established transparency work programme, which is already under way and which we are committed to consult on later this year. To introduce additional but closely related disclosure requirements regarding investments into primary legislation in advance of the anticipated coming into force of the first phase of costs and charges disclosure in April, and to pre-empt the planned consultation on a further phase of transparency, risks introducing transparency in a piecemeal and unco-ordinated way, without the relevant guidance and optimal regulatory frameworks being in place to cope with such requirements.
Existing primary legislation already provides the powers for making regulations along the lines suggested by the amendment. Those powers should not be duplicated in further primary legislation. Further, the Government are sympathetic to the need for greater transparency in this area, but this can be better achieved through secondary legislation under existing powers. Introducing these requirements through the amendment would remove the opportunity to consult all relevant stakeholders. Secondary legislation would, of course, require consultation. There is overlap and duplication between the suggested amendment and existing provision already contained in secondary legislation. To mitigate the risk of overlap and avoid unnecessary duplication of provision, we would wish fully to examine the suggested requirements in the proposed amendment against the full range of existing provision.
As I have already mentioned, this could be more fully and carefully assessed by way of a consultation, involving both industry and stakeholders, which my right honourable friend the Minister for Pensions has already committed to hold later in 2015 in relation to trust-based pensions. This would allow the Government the opportunity to make the best assessment of what additional disclosure is needed with reference to a full range of views and evidence and to do this in conjunction with work for a further phase of enhanced charges and costs transparency. Any new requirements could then be introduced by way of amending or adding to existing provisions in secondary legislation.
As I said, the Government have already committed to consulting on potential investment disclosure requirements for trust-based schemes. My right honourable friend the Minister for Pensions, when asked by an interested stakeholder about introducing further requirements, committed the Government to this approach. I restate that commitment, which the Government consider a vital part of our pensions reform. I therefore ask my noble friend Lord German to withdraw the amendment.