Pensions Bill

My Lords, I am very grateful to my noble friend Lord Joffe for moving this amendment and to all noble Lords who have participated in this short but important debate. At the outset I say—I hope this will not come as a disappointment—that we do not feel able to accept the amendment. The purpose in seeking it to be laid was to provide an opportunity to state again the Government’s position and to outline what PADA has underway in terms of investment consultation—an upcoming event. We discussed that when we met. When I met with my noble friends Lord Joffe and Lord Judd, I fully understood the concerns driving the amendment and I was sympathetic to their intentions. In setting up a new workplace pension scheme on the scale of personal accounts, it is hugely important that responsible investment is properly considered. But, as in any other trust-based scheme, the trustees must be allowed to make investment choices that are right for their members. It would not be appropriate for the Government, or Parliament, to impose any guidelines which might restrict a trustee’s ability to act independently in carrying out the overriding duty to the members. Furthermore, as the noble Lord, Lord Skelmersdale, and others have identified in recognition of the importance of responsible investment, current law already requires the trustees of pension schemes to prepare a statement of investment principles which must be made available to members and prospective members. It sets out the guidelines which fund managers must follow in investing members’ funds. In the statement of investment principles, trustees of pension schemes must already state to what extent social, environmental or ethical considerations are taken into account. That is an obligation on trustees—not simply a right or an option. The delivery authority has already confirmed that it will consult on investment and will be holding a responsible-investment event later this year. My upcoming noble friend—Lord Myners—may not be able to say that in person, but he was at the meeting with my noble friends Lord Joffe and Lord Judd and I know that if he were able to deliver that message directly he would do so enthusiastically, as he is a great supporter of socially responsible investment. Originally, the amendment was laid to enable me to speak again on disinvestment. The proposed new clause seeks to provide the trustee corporation with the right to disinvest from investments associated with crimes against humanity, war crimes or genocide. In responding to this issue, I would like to take the opportunity to provide some clarification on the current operation of the law in this area. There is no reason in law why trustees cannot consider social and moral criteria in addition to their usual criteria of financial returns, security and diversification. This applies to the trustees of all pension schemes. Of course, disinvesting may not be the most appropriate approach for pension scheme trustees looking at the long-term sustainability of their investments. Engagement may be the right approach in any particular case. I hope that I have been able to put clearly on record the Government’s position on responsible investment by pension schemes. We take this matter seriously and it is one on which, as I have already mentioned, the delivery authority will be consulting. A component of the authority’s approach, as I have said, is to hold a specific stakeholder event on responsible investment shortly and I urge all noble Lords who have participated with passion in this debate to take the opportunity of engaging in that event. That would be an important part of the process which is undertaken in respect of recommendations to the trustees about investment policy. I am grateful to noble Lords for their insightful and thoughtful contributions to this debate. I hope that noble Lords will not press the amendment, but see that there is a very clear way forward to engage in investment policy.