New data launched today (26 03 2024) by responsible investment organisations ShareAction, Make My Money Matter and Finance Innovation Lab shows high levels of public concern over insecurity in retirement caused by climate change and inadequate pension savings, with over two thirds saying they want the government to intervene to tackle issues. Three quarters of people surveyed also believe the government should be doing more to ensure pensions invest in activities that boost the UK economy. These actions were found to have significant bipartisan support, with both Labour and Conservative voters in favour of action.
To deliver on this agenda, the responsible investment groups are launching a new pensions reform strategy ‘Better pensions for all and a sustainable, productive, economy’, aimed at preventing a national crisis in UK pensions.
The new reform agenda is designed to lead to a step-change in long-term and green investments, deliver adequate and secure pensions for all UK citizens and boost the productivity and sustainability of the UK economy. It was developed in consultation with experts from across the pension industry and reflects examples of best practice from around the world.
Commenting on the report, Jesse Griffiths, CEO of Finance Innovation Lab, said:
“With over £3 trillion in assets, UK pension funds are major investors. But right now, the pensions system is in a shocking state. People are right to be worried that their retirements will be ruined by climate change and inadequate pension savings. It’s time for the government to act and adopt a bold but sensible reform agenda that can make the pensions system work for savers, the environment, and the economy.”
The proposals provides five key areas of policy action for the government. These are designed to avert damaging impacts on pension holders and the planet and instead ensure our pensions tackle the climate crisis, improve retirement security for millions and grow the economy. These are:
- Boosting pension savings and the state pension by increasing the mandatory minimum level of pension savings to 12% or more, with a 5% contribution from the employee and 7% from the employer
- Ensuring that default pension options focus on long-term investments.
- Supporting pension funds to drive green investment in the UK by expanding institutions like the UK Infrastructure Bank and developing initiatives that accelerate the take-up of new technologies and aggregate fragmented opportunities.
- Cleaning up pension funds and phasing out fossil fuel investments with science-based 1.5C aligned transition plans, mandatory deforestation due diligence and by supporting trustees to better integrate climate and nature risks.
- Improving transparency and accountability by ensuring that schemes have a duty to ascertain the views of members and provide standardised information on their climate, nature-related and social impacts.
Full detailed policy proposals can be found here.
Commenting on the report, Tony Burdon, CEO of Make My Money Matter, said: “Our pensions exist to protect our futures, but right now they’re jeopardising them. Today, just 4% of our pension assets are invested in climate solutions – but it’s estimated that the UK pensions industry could invest up to £1.2 trillion by 2035. This new data shows that the public want change. 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.”
Commenting on the report, Catherine Howarth, at ShareAction, 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.”
