New survey reveals widespread concern over pensions ability to deliver retirement income and respond to escalating climate risks
A majority of the public want to see the government do more to ensure pensions deliver an adequate retirement income and the pensions industry is doing enough to tackle the climate crisis.
That is headline finding from new research from ShareAction, Make My Money Matter, and Finance Innovation Lab finds, which polled 2,000 UK adults this month. It found over three quarters of the public were concerned about pensions adequacy - the ability of pensions to provide an adequate retirement income - while just under two thirds wanted the pensions industry to do more to address climate change.
The coalition of campaign groups has put forward a set of proposals - dubbed Better Pensions for All - which it argues would boost the economy, enhance pension savings, and accelerate climate efforts.
The medium-term proposals include boosting the minimum level of pension savings to 12 per cent or more, including a five per cent employee and seven per cent employer contribution, "with decreased mandatory employer contributions for earnings above a certain level".
The group also called for the government to ensure default funds take a longer-term view on investments rather than focusing on liquid assets only, while arguing open defined benefit schemes should be encouraged to remain open, and collective defined contribution schemes should be expanded.
It said the government should also support pension funds efforts to invest in the green economy through an "economy wide just transition strategy" and "sector-by-sector plans", as well as through green assets, bonds, risk-sharing mechanisms, and initiatives to "accelerate the take-up of new technologies".
Pension funds should also adopt "science-based 1.5C aligned mandatory transition plans", phase out fossil fuel investments, ensure trustees understand their stewardship role for both climate and member interests, and improve their climate and nature risk assessments.
The recommendations on fiduciary duties following the Financial Markets and Law Commission's report should also be codified in law, while a "legal redefinition of beneficiaries' ‘best interests'" should take into account social and environmental factors, the report argues.
The government should also ensure pension funds do "mandatory due diligence" on deforestation and deliver on the recommendations of the Taskforce for Nature-related Financial Disclosures, while regulators should have "statutory mandates to embed climate and nature" in their operations, it added.
Pension funds should also "have a duty to ascertain the views of members" in order to fulfil their legal fiduciary duties and make transparent "standardised information… on the impact of pension funds" on climate, nature-related and social impacts.
And schemes should consider their boards' DEI and record diversity data, which would improve governance, while a review on "transparency and accountability… [of] asset managers, consultants lawyers and other actors" should be considered.
Make My Money Matter chief executive Tony Burdon said with only four per cent of pension assets invested in climate solutions, pensions are "jeopardising" futures, pointing out the potential for the industry to "invest up to £1.2tr by 2035".
"This new data shows that the public want change," he added. "We are calling on all political parties to put our pension reform agenda at the heart of their manifestos ahead of the upcoming election, and ensure action is prioritised in the first term of the next Parliament."
ShareAction chief executive Catherine Howarth said: "Enormous challenges lie ahead for pensions policy makers, from ensuring people have enough income to live well in later life to ensuring pension investments don't undermine people's future security by exacerbating climate change. This report sets out a host of practical reforms that would set the pensions sector up for long term success. These include clarifying the legal duties of pension schemes to allow them to address social and environmental considerations in their investment decisions when these are relevant to the long-term best interests of scheme members."
A version of this article first appeared at Professional Pensions.
