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Mona Patel: Pension scheme governance should be higher up the agenda

Mona Patel MM blog

Select committee appearances are like men and buses – as the saying goes, you go for ages without one and then they all come along at once.

So it was for the IMA last week with two appearances in front of parliamentary committees. The first, the work and pensions committee to talk about pension scheme governance and the second, the business, innovations and skills committee to talk about women in the workplace.

First, pension scheme governance and an inquiry which had been postponed from last year. No one can argue that pensions are becoming increasingly important. Given this rise in importance, the focus on pension scheme governance should be an equal to, if not higher than, that given to investment processes and outcomes, especially given the shift to DC pensions and the associated transfer of risk to the individual. Investment processes can be different for different people but governance should apply across all types of scheme no matter what.

IMA associate director Jonathan Lipkin told the select committee that it is possible to put clear processes in place so that you know who is accountable and responsible, what the objectives are and how they have delivered against their objectives. All of this should, of course, be documented.

These are the practical issues which individuals want to see addressed and allows DC schemes to be delivered with an auditable governance trail for employers and scheme members. Taking your starting point as the interests of the individuals whose money you are investing and whose future you are trying to secure ought to be a given.

And of course, tied into this is the whole issue of charges. While it is important for individuals to know what they are paying, it is equally, if not more, important to convey what is being paid for. The IMA and others in the pensions industry are focusing much more on this and how the industry communicates with employers and consumers about what they are paying for and why.

There is a lot to think about, but it is in all of our interests that we get this right and individuals regain their faith in pension saving.

On to the Business, Innovation and Skills Committee session on women in the workplace. The IMA’s interest in this is from the perspective of wanting to see well-run companies in which money can be invested.

Companies with diverse boards which are the best fit for a company are an attractive investment. Although the committee’s inquiry was limited to women in the workplace that’s not to say that gender balance alone is enough in terms of ensuring board diversity. It goes further than this as boards require a wide range of skills and experience. Diverse boards may also be more open to new ideas and to challenging what could be termed “group-think”.

It is staggering that in the 21stcentury we are still having conversations about needing more diverse boards and debating the role of women in the workplace. That said, we are opposed to quotas for women on boards. Appointments should be on merit and not to fill quotas.

The experience in Norway when quotas were introduced was that the women in question became known as the “golden skirts”. Not helpful and not clever.

Mona Patel is head of communications at the Investment Management Association

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