Mary Spencer
As an investment adviser, I’ve helped my schemes navigate various new requirements in recent years, from setting objectives to documenting policies on environmental, social and governance issues. Whilst I fully support the principles behind both of these requirements, I have sympathy for trustees facing a plethora of regulation not all of which is helpful for their particular situation. That’s why I was glad to hear Steve’s assurance that we can all help to shape regulation and I sat down with him to understand more of the ‘so what’ and ‘what next’ of engaging.
Mary
So, Steve, first LCP conference speech as part of the 'home team'! How does it compare to debates in Parliament?!
Steve
It’s great to have the chance to still be so involved in the pensions world but without having 80,000 constituents to email me at all hours of day or night on every subject under the sun!
Mary
Your key message was that schemes really can shape the future of regulation by engaging early. Could you give a recap on why this is?
Steve
I’ve often been surprised at how passive schemes can be in the face of new regulation. I think many schemes adopt a 'wait and see' approach, expecting that they can’t make a difference, or not really knowing how they would influence regulation at all. But at the early stages of consultation, often very little is set in stone. There may be some big picture decisions that won’t change, but much of the detail is still up for grabs in those early stages.
Mary
And I know many of the schemes I speak to wonder why they would need to engage with regulatory consultations. After all there are industry bodies who focus on this, as well as advisory firms engaging on their behalf.
Steve
Trade bodies have an important part to play and can be very influential, but they are less effective when each scheme has its own unique concerns and there isn’t a single ‘industry’ position. Similarly, the Government won’t necessarily appreciate how what it is proposing impacts each individual scheme. If you find you would be challenged by a proposed change, that particular impact may not yet have been considered, so it really could shape the outcome if you alert the Government to this viewpoint. But of course, the closer to the regulations being finalised, the less likely you can encourage meaningful changes. These things are often years in the making, so getting in early and often really is the best approach to being heard.
Mary
You mentioned there are certain pillars of regulation that may be fixed, but thinking about some of the regulation we have on the horizon now, in which areas do you think there’s particular wiggle room?
Steve
There are several areas where the Government has set an overall direction of travel but is still quite open on the detail. For example, it has decided there should be pensions dashboards but there is still a lot of debate to be had on what information dashboards will show, when schemes will have to participate etc. Or The Pensions Regulator is clear there will be a new funding code and seems set on a twin-track approach, but the details of what ‘fast track’ funding will mean are still to be settled and won’t even be consulted on until well into 2021.
Mary
Fast track has understandably been a key topic for schemes this year and based on conversations I’ve had, there are quite different reactions to what we know so far. For example, one group of trustees might be worried the parameters give a sponsor ammunition to extend recovery plans (but whilst staying within the 'rules'), whilst others feel it will lead to too much investment de-risking too soon; and those involved with open schemes have yet different questions and concerns. If all of those schemes responded, the data coming back could be quite a mess! So how does the Government balance responses that might be conflicting with each other?
Steve
Given the diversity of the occupational pensions world, it is to be expected that any particular legislative or regulatory change will be more important for some schemes than others. Indeed, there can sometimes be clear ‘gainers and losers’ as with the proposed change to the measurement of the RPI. Whilst these trade-offs cannot be eliminated, we do need to make sure that policy makers know what trade-offs they are making and can consider mitigations for those who might lose out. For example, the new rules might make more sense for closed schemes than open schemes, so we have joined others in pressing for a more tailored approach for open schemes.
But you cannot assume that they are fully informed – if you don’t tell them, they may not know!
Steve
Again, the key is to make sure that policy makers appreciate the complexity of the changes they are making and have a chance to consider those who might be adversely affected.
Mary
Focusing on responses, are there any more subtle techniques that you’ve seen make a difference? Does it matter how well written the response is, are there are phrases to avoid, any tips on the tone, or the length of the response?
Steve
By the time you reach the stage of formal consultation on a firm proposal, it can be very late to get things changed, so minor details of consultation responses are not worth worrying about. By far the best strategy is to engage early, instead of long after ideas have been firmed up; to engage often, by repeating your messages to all those who have influence (including media where appropriate); and to engage strategically, identifying a small number of key issues which really matter and concentrating on them.
Mary
Steve, as you said yourself, there are torrents of regulation on the horizon. How can our contacts make sure they’re aware of any which are relevant to them and prioritise those with the biggest impact?
Steve
The tidal wave of new rules and regulations shows no sign of abating as we enter 2021. At LCP we devote considerable time to engaging with policy makers and regulators to understand their agendas and to feed in the concerns of our clients. We are happy to help you to know what is on the horizon that is likely to be of most relevance to you and to advise on how best to make sure those concerns are heard in the corridors of power.
Mary
That’s great Steve – so in summary, engage early and often, think about your key issues, and ask for guidance if you need it. When it’s put like that it doesn’t sound quite so daunting!
Catch up on Steve's conference talk here.
If you would like to hear more from Mary and Steve, you can listen to their
recent episode on how the Government behaves in a crisis on our Investment Uncut Podcast series.
Keep in touch
