Independent Governance Committees (IGCs) currently provide independent oversight of the value for money of workplace personal pensions provided by firms such as life insurers and some self-invested personal pension (SIPP) operators. IGCs oversee workplace personal pensions in accumulation, ie before pension savings are accessed.
Governance Advisory Arrangements (GAAs) are a proportionate alternative to IGCs for firms with smaller numbers of relevant customers and less complex relevant products. Where we refer to IGCs below, we also mean GAAs, unless we state otherwise.
Find out more about our existing rules for IGCs.
We propose a new duty for IGCs to report on their firm’s policies on ESG issues, consumer concerns and stewardship, for the products that IGCs oversee. Our proposals are to help protect consumers from investments that may be unsuitable because of ESG risks including climate change, make sure that consumer concerns are taken into account, and encourage good stewardship of investments.
We also propose related guidance for providers of pension products and investment-based life insurance products. This proposed guidance sets out how these firms should consider factors such as ESG risks and opportunities that can have an impact on financial returns, and to non-financial consumer concerns, when making investment decisions on behalf of consumers.
Our proposals address recommendations made by the Law Commission in its June 2017 report on Pension Funds and Social Investment. In some respects, our proposals go further.
We propose to extend the duties of IGCs to include independent oversight of the value for money of their firm’s investment pathway solutions.
In January 2019, we proposed changes to our rules and guidance (CP19/5) to require drawdown providers to offer investment pathways to non-advised consumers entering drawdown. We said that we intended to extend the remit of IGCs to investment pathways.
In this consultation, we propose rules and guidance that will require IGCs to assess the value for money of pathway solutions. This means assessing the costs and charges of pathway solutions relative to their quality, and the appropriateness of a pathway solution for consumers invested in it. As with workplace personal pensions, IGCs will have the power to raise any concerns directly with the Boards of firms, which firms must respond to.
This consultation also discusses what we have seen in published IGC annual reports and from our engagement with IGCs. We invite views on issues relevant to our planned work with the Pensions Regulator (TPR) on value for money in pensions.
This consultation will be mainly of interest to:
This consultation will also be relevant to stakeholders with an interest in pensions and retirement issues, including:
Consumers will also be affected by the proposals in this consultation. We welcome views from consumers on all our proposals.
This consultation has now closed.
We will consider the responses and any other relevant developments before finalising our rules in Q4 2019.