Report criticises pension providers over responsible investment

A survey of the UK’s ten largest contract-based pension providers has found that the majority don’t accept responsibility when it comes to monitoring the sustainability of investments.

The report by FairPensions reveals the “governance gap” between trust-based and contract-based pension schemes.

Louise Rouse, director of engagement at FairPensions and author of the report, said, “All pension savers want the same thing: security in retirement.

“It follows that those savers who have a contract-based pension should be able to expect the same standard of oversight from their pension providers as offered by trust-based schemes.”

The ten firms included in the research were Aegon, Aviva, Friends Life Group, Legal & General Group, Prudential, Scottish Life, Scottish Widows, Skandia Group, Standard Life and Zurich Insurance.

FairPensions found that only one from that group—Aviva—had signed the UK Stewardship Code, which was published in July 2010 to improve the relationship between investors and companies.

A lack of engagement between the five companies that completed FairPensions’ survey and their external fund management teams was something that emerged as a key theme from the report.

Rouse added, “The unwillingness of insurance companies to regularly monitor external fund managers leaves contract-based pension holders ill-served and poorly protected compared to fund members in the best governed trust-based schemes.

“Ultimately it is savers who suffer when a pension provider fails to monitor their asset managers.

“As millions of people enter the pensions market for the first time, they will want to know that their pension provider, whether trust-based or contract-based, is protecting their best interests.”

Underlying the report is a broad acceptance of the need for sustainable investment strategies. Our recent Guide to Sustainable Investment explains why individuals and companies should invest more responsibly.

Security in retirement is a big thing, and not something anyone should relinquish; ensuring that providers are taking into account wider global issues increases that security and ensures a better future for your children and grandchildren.

YourEthicalMoney.org notes that: “As a member of a pension scheme, whether as a contributor or as a beneficiary, you have the right to question the scheme’s trustees about the decisions they make on your behalf”.

YourEthicalMoney.org also offers a list of pensions, and more information about them.

If you want to know more, you can also seek independent advice. Fill in our online form and we’ll connect you with a specialist adviser who can help.

Further reading:

Council tobacco investments: incongruous and unethical

Invest ethically, reap prosperity

The Guide to Sustainable Investment