Responsible investment charity ShareAction has launched its Manifesto for Responsible Investment, which calls for legal change to ensure that private pension providers are accountable and transparent to savers.
Issues around the responsible investment of pensions are becoming more prominent as auto-enrolment continues to be rolled out across the country, with 10 million additional people entering the nation’s private pension system. UK pension funds already control £2.9 trillion in assets, demonstrating the impact a responsible and sustainable system could have.
ShareAction argues that savers have the right to know how their money is being invested, their pension provider’s investment policy and how their provider sees and manages long-term risks to their money.
The charity adds that over the last decade it has been made clear that our investment markets are “dysfunctional” and “failing in their core purpose of allocating capital effectively”.
The manifesto continues that too few institutional investors are properly engaged with the long-term drivers of business success, and in particular overlook environmental sustainability and social inequality. Pension savers are often investing with a long-term view and as a result these factors can have a material impact on their savings.
Catherine Howarth, ShareAction CEO, said, “With up to ten million people in the UK becoming pension savers for the first time, it’s critical we have a pension system that people can trust and that answers to them. For too long, the pension and investment industry’s interests have come ahead of those savers. Our manifesto put the interests of the saver right at the heart of our pensions system.”
In order to address these issues, ShareAction is calling for all pension providers to owe a legal duty to scheme members to act in their best interests. The comments follow the Law Commission clarifying that pension trustees can consider long-term environmental, social and governance (ESG) issues when making investment decisions.
Additionally, the report also suggests that pension providers should have the same obligation as companies to hold annual meetings. This would provide members with the opportunity to meet and question the people looking after their money, it says.
Shadow pension minister Gregg McClymont backed the suggestions in the manifesto. He pointed out that the Financial Conduct Authority is currently consulting on governance in contract-based workplace pension schemes.
He added, “There is no justification for the governance requirements to be watered down in comparison with what is required for trust-based schemes. ShareAction is right to say that all workplace pension providers should have a fiduciary duty to scheme members.”
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