Of course Ian Brown is right and Mary McDougall has done well to get this published by the FT. The feeble bleating of other journalists and of those still living in a paradigm of “de-risking” have not got the message. Bell allowed articles like this to be published.
Brown was pacing the halls in Edinburgh making it clear that it’s growth that counts and here he is talking to McDougall.
“Pension funds are prepared to invest in very large so-called transition funds. but often they are investing in operational wind or solar projects . . . What we need to do is actually build this stuff,”
“People aren’t taking anywhere near enough risk . . . we need something like £30bn, £40bn or £50bn per year to be spent on the various technologies that we are trying to grow,”
Brown said. But funds
“want to take less risk and go with the safer assets which are the ones already producing cash flow”.
So Ian Brown knows, there were a number of people in those halls who were listening and nodding and I was one of them.
I’ll declare an interest in this. I work with an organisation looking to import thermal energy into the UK. Those good souls will read this article with satisfaction.
Ministers’ proposals to ease planning backlogs and shake up how clean power projects link up to the National Grid would be “vital” to attracting more investment in infrastructure schemes, Brown said, because of the number of projects that hit severe delays or were cancelled. Brown said there was a “huge range” of areas in need of money, including floating offshore wind, battery storage and carbon storage.
Of course it is assumed that Defined Benefit schemes are the target for such investments. I see defined contributions just becoming defined benefit pension schemes funded by employers and their staff at a consistent level. The duration of investment for a collective DC plan paying pensions is the same as a DB plan – it is as long as there are people alive and claiming pensions- that should be considered infinite. Infinite is the need for clean energy, endless the need for investment in growth in the infrastructure that enables our economy to grow.
The FT concludes by framing NWF’s demand in the Government’s plan.
His comments come after pensions minister Torsten Bell last week called on fund managers to re-evaluate Britain’s £2.4tn retirement savings industry, both in terms of maximising returns and ensuring the country is investing and growing after a decade of lacklustre economic growth.
We can no longer consider “risk” something pension schemes should avoid investing in. I look forward to reports from the old and new style of pension schemes which focus on the success of their investments and the capturing of risk, converting it to growth and so to bigger pensions.
I will add one plea, can we please rid the Regulator and Trustees who work with TPR of Section 58. The restrictions on trustees of old style DB plans do not allow trustees to invest in funds offering the opportunities to achieve real growth and enable clean energy (inter alia). My good friend John Hamilton is doing the right job, intervening in my meetings with Regulators, the DWP and the Treasury, demanding Government do their part.
Section 58 of the Pensions Act 2004 says
[TPR’s] right to apply under section 423 of Insolvency Act 1986
(1) In this section “section 423” means section 423 of the Insolvency Act 1986 (transactions defrauding creditors).
(2)The Regulator may apply for an order under section 423 in relation to a debtor if—
(a)the debtor is the employer in relation to an occupational pension scheme, and
(b)condition A or condition B is met in relation to the scheme.
(3) Condition A is that a determination made, or actuarial valuation obtained, in respect of the scheme by the Board of the Pension Protection Fund under section 143(2) indicates that the value of the assets of the scheme at the relevant time, as defined by section 143, was less than the amount of the protected liabilities, as defined by section 131, at that time.
(4) Condition B is that an actuarial valuation, as defined by section 224(2), obtained by the trustees or managers of the scheme indicates that the statutory funding objective in section 222 is not met.
…
TPR’s protection of the PPF is not new, although arguably this statutory objective of TPR’s could be relaxed now the PPF seems to enjoy a very healthy funding surplus and is even scaling back its annual levy on surviving DB schemes.
I think John Hamilton, however, is really drawing attention to Section 58B of the 2004 Act, added by the Pension Schemes Act 2021, as follows:
Offence of conduct risking accrued scheme benefits
(1) This section applies in relation to an occupational pension scheme other than—
(a) a money purchase scheme, or
(b) a prescribed scheme or a scheme of a prescribed description [ie a public sector scheme or specific pension schemes, such as the Armed Forces Pension Scheme, British Transport Police Force Superannuation Fund, and Firefighters’ Pension Scheme]
(2) A person commits an offence only if—
(a) the person does an act or engages in a course of conduct that detrimentally affects in a material way the likelihood of accrued scheme benefits being received (whether the benefits are to be received as benefits under the scheme or otherwise),
(b) the person knew or ought to have known that the act or course of conduct would have that effect, and
(c) the person did not have a reasonable excuse for doing the act or engaging in the course of conduct.
(3) A reference in this section to an act or a course of conduct includes a failure to act.
(4) A reference in this section to accrued scheme benefits being received is a reference to benefits the rights to which have accrued by the relevant time being received by, or in respect of, the persons who were members of the scheme before that time
…
Of course, TPR’s Criminal Offences Policy published in 2021 at https://www.thepensionsregulator.gov.uk/en/document-library/regulatory-and-enforcement-policies/criminal-offences-policy
said that “the vast majority of people do not need to be concerned – we don’t intend to prosecute behaviour which we consider to be ordinary commercial activity”.
I don’t know who you are Byron but I know you know the right stuff. Thanks for posting this, I want those demanding we invest for growth to understand the headwinds those battling for growth are suffering.
The very purpose and intent of S58B (as explained to me by those in defending its introduction) IS to but a brake on risk (and hence investment and growth) that does not accord with TPR’s worldview of investment (ie investment = risk = bad). The determination of criminality is based on TPR’s (and theirs alone) assessment of the likelihood (so not even an actual loss or eventuality) of a detriment (perceived or actual).
We can note their language that TPR don’t “intend” to prosecute (not that they ‘won’t’ prosecute) ordinary commercial activity. It’s also doubtful whether and under what gift TPR can decide not to apply the law as written.
A simple drafting amendment to clarify the section will not apply to ordinary commercial activities (or better, that the section will be limited to cases of wrongdoing malfeasance or fraud) would fix this, and provide options for growth to be considered on their merits.
I’d suggest 20 years experiencing TPR case workers might have left some scars on some corporates and trustee boards alike, and it will be the brave who continue on words of trust alone.
As the Pension Minister said at the PLSA, the case for growth and the “stakes are much higher” than just pensions.
Times change, and time for the legislation to catch up.
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