UK markets watchdog bolsters protection of pension scheme members

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By Huw Jones

LONDON, April 15 (Reuters) - Committees that check if employees get a good deal from their work pension should also consider how retirement schemes examine the impact of climate change on investments, Britain's markets watchdog proposed on Monday.

Firms that have workplace pension schemes already have to set up an independent governance committee, or IGC, to check that members are not being ripped off by unfair transaction costs.

The Financial Conduct Authority (FCA) is proposing to widen this remit to include a duty to report on environmental, social and governance (ESG) issues, consumer concerns, and how pension scheme providers select stocks and bonds to invest in, known as stewardship.

"We want to help make sure that these consumers do not lose money as a result of unsuitable investments, for example due to ESG risks including climate change," the FCA said in its consultation paper.

"And we want these consumers to benefit from good stewardship of their investments, to create sustainable value as well as benefiting the economy and society."

Investment funds supermarket Hargreaves Lansdown said the proposal was a potentially a very significant shift in how pensions and personal finances are policed.

"Currently, a narrow remit allows IGCs to be effective tyre kickers. It’s not certain the same will be true with more on their plate," said Nathan Long, senior analyst at Hargreaves Lansdown.

The proposals are part of the watchdog's efforts to improve value for money in the investment sector by cracking down on unfair fees and charges.

Separate new rules has meant automatic enrolment of about 10 million employees into pension schemes.

But the FCA is worried that too many scheme members are not engaged enough in their pensions and it therefore want stronger IGCs to act on their behalf and improve competition among pension providers.

IGCs can raise any concern with the boards of insurers and other providers of pensions, and can escalate concerns to the FCA if it feels they have not been dealt with properly.

The FCA will publish final rule changes in the fourth quarter of 2019. (Reporting by Huw Jones; Editing by Toby Chopra)