As the government prepares to consult on new guidance relating to fiduciary duty, the chair of its advisory board on the subject has called for “constructive” engagement from the industry to continue.
Sir Robin Knowles, the High Court judge who is chairing the Department for Work and Pensions’ (DWP) fiduciary duty technical working group, told a Society of Pensions Professionals (SPP) conference this week that “trustees are the guardians of the long term in an environment with many short-term pressures… they should have the confidence that their work will survive challenge”.
The new fiduciary duty guidance should enable trustees to “make the best decision, not the decision that’s least likely to be open to challenge”, Sir Robin continued.
A public consultation on the guidance is expected later this year. The DWP appointed the technical working group in March to inform its plans to issue “statutory guidance”, first announced earlier this year during parliamentary debates about the Pension Schemes Bill.
However, according to the SPP, it now appears that the guidance will be “non-statutory” in nature. Sir Robin said it would still carry weight “because it has come from the sector as a whole so it will have the attention and respect of regulators and, to be frank, the courts too”.
“As fiduciary duty continues to evolve… the breadth of what we recognise as financially material is widening – encouraging trustees to move beyond only numbers to evaluate complex, long-term risks through a robust decision-making framework.”
The guidance will not replace or alter the underlying principles of trustees’ fiduciary duty – to act in the best interests of pension scheme members – but will instead give trustees more clarity on what they can take into account when making investment decisions.
Speaking in March, pensions minister Torsten Bell said: “Pension trustees steward billions of pounds on behalf of millions of savers, and they deserve clear, practical guidance to help them do that job well.
“That’s why we are acting now – to ensure they have the clarity they need to fulfil those duties effectively and make sure they get the best outcomes for millions of savers.”
Andy Cork, a partner at law firm A&O Shearman and member of the SPP who chaired the discussion, said: “As fiduciary duty continues to evolve, it was clear from this panel discussion that the breadth of what we recognise as financially material is widening – encouraging trustees to move beyond only numbers to evaluate complex, long-term risks through a robust decision-making framework.
“As Sir Robin highlighted, the guidance may have been facilitated by government, but it has been led by industry, so we are hopeful it will achieve the right balance of clarity and flexibility. The SPP will continue to engage on the issue, including responding to the forthcoming consultation, as it seeks to ensure the final guidance provides the certainty trustees need to navigate today’s systemic challenges.”
