The Government should introduce new rules to increase pension fund transparency, according to a senior Labour MP.
Speaking last night in a House of Common’s debate on transparency in pension funds, John Cruddas said he welcomed the Financial Reporting Council’s stewardship code for institutional investors, published earlier this year, which had a strong focus on transparency. But he argued that it is aimed at the wrong people.
The MP for Dagenham and Redbridge said the shift to defined contribution schemes and the introduction of auto-enrolment in 2012 will mean more people’s savings will be invested in the stock market.
He said: “If ordinary savers are bearing the risk of their investments, it is only right they should be in a position to scrutinise how their agents manage those risks.”
He added: “The code is largely aimed at asset managers. Ordinary people cannot be expected to know which asset managers their pension uses and proactively seek out that manager’s disclosures.”
Pensions minister Steve Webb (pictured) said one of the challenges in delivering transparency was the number of links in the investment chain.
He said: “We have the individual investor who puts the money into a pension fund, along with their employer. Then we have the pension fund trustee, the investment managers and the business in which money is invested. At each stage there are issues of transparency and reporting that need to be addressed.”
Cruddas said a “growing movement” of people are interested in how their money is being invested and whether it is being invested ethically was being held back by a “pervasive lack of transparency and a culture of hostility to the people whose money is a stake having the impertinence to ask questions”.
He called on the Government to make voting disclosure by asset managers in relation to fund shareholder decisions mandatory, using the Companies Act 2006.
Cruddas said: “If [pension fund] asset managers are already required to report on the exercise of their voting rights, it should be sufficient in most cases for pension funds to provide a link to that information on their website.”
He also said the Government should urge The Pensions Regulator to issue guidance so pension funds go beyond “boilerplate” positions in relation to current regulation about disclosing the extent to which funds take into consideration environmental, social and governance issues. Responding, Webb said he understood people want more specific information on how schemes approach such policies.