Minutes of the Productive Finance Working Group - 16 July 2021

Agenda

1. Competition law reminder

2. Chairs’ opening remarks

3. Discussion of the draft executive summary of the report

4. Discussion of the draft recommendations of the report

5. Next steps and closing remarks

Minutes

Item 1 – competition law reminder

1. One of the co-chairs^{footnote [1]} reminded members of the Working Group of their legal obligations relating to competition law.^{footnote [2]} They reminded members that it is their responsibility to meet their legal obligations and to take their own legal advice.

Item 2 – chairs’ opening remarks

2. The TEG co-Chairs thanked members for their work to date and set the objectives for the meeting: in particular, to discuss the draft executive summary and recommendations of the report ahead of the Steering Committee’s meeting on 28 July.

Item 3 – draft executive summary

3. One of the co-chairs gave an overview of the executive summary and opened for comments and questions.

4. Comments included:

• Reframing the narrative to set out the case for investment in less liquid assets,
• Reframing the narrative so that it puts the benefits for pension scheme members’ interests first, before setting out the benefits for the broader economy,
• Reframing the summary around some key themes, which could also apply to the grouping of the recommendations,
• Highlighting that there are other products that can provide access to less liquid assets, not just the LTAF,
• Bringing out the need for a collaborative approach between different parts of the industry in order to overcome the barriers that have been identified,
• Whether a regulatory nudge should feature in the executive summary, given that it is not a recommendation,
• A need to be clear on next steps following the publication of the report, as well as a general consistency between what is in the executive summary and the recommendations.

5. One of the co-chairs asked for any further comments on the executive summary to be shared in writing.

Agenda item 4 – draft recommendations

6. One of the co-chairs gave an overview of the recommendations and opened for comments and questions.

7. Comments included:

• There was broad support for the recommendations.
• DWP confirmed that they were broadly happy with the recommendations the group intends to make to them.
• TPR confirmed that they were broadly happy with the recommendations the group intends to make to them.
• The FCA confirmed that they were broadly happy with the recommendations the group intends to make to them. Reordering the recommendations with the more important at the top, and adding some context to each one, so that the recommendations can be read as a standalone section.
• The potential for dropping or consolidating some of the recommendations.
• Rewording the recommendation on performance fees to ensure it appropriately reflects the balance of input that is being requested from industry and regulators.
• Rewording the recommendation on industry guidance so that it is clear this is referring to maturity profile of assets rather than the mechanics of liquidity management.
• Rewording one of the recommendations on the classification of investment costs and administration costs to make it clearer that this is in relation to regulatory treatment of those costs.
• A range of views were expressed relating to the ISA eligibility of the LTAF. Tax is outside the scope of the Working Group’s objectives, so it was agreed a recommendation on this would not be included.

Item 5 – next steps and closing remarks

8. The co-chairs set out the next steps on the report, including how comments would be incorporated into a draft of the report to be discussed by the SC at its meeting on 28 July.

9. One of the members of the Secretariat talked through a timeline of next steps.