UKSIF letter to the UK’s Pensions Commission: Recommendations for the Commission’s work programme

We have strongly welcomed the UK government’s decision to re-launch the Pensions Commission to consider the critical question of adequacy in pensions in the UK today and how, moving forward, we can deliver improved long-term outcomes for pension savers across the country.

In our letter, we welcome the opportunity to contribute to the Commission’s work programme and highlight a number of areas for exploration. This includes consideration of climate change and the global transition towards a net-zero economy, which we believe will be important for the Commission to explore and note that, at present, are not directly referenced in the Commission’s formal terms of reference from government. This also includes – as many different groups in the UK’s pensions and investment industries, as well as wider stakeholders, have highlighted – long-lasting reforms to automatic enrolment (AE) in the UK that can build on the success of AE to date in helping normalise pension saving.

Climate change cannot be divorced from the main focus areas highlighted in the Commission’s terms of reference. We suggest the Commission at a minimum highlight the need for the government’s pensions review to consider climate change and the global transition to net-zero. Specifically, a number of areas could be identified at a high-level for exploratory work for HM Treasury and the Department for Work and Pensions to consider, aligned to the Commission’s objectives.

This includes: clarification to fiduciary duty for occupational pension schemes in regards to system-level risks building on last year’s report from the Financial Markets Law Committee (FMLC); capturing investment opportunities for pension savers in the UK’s sustainable private markets landscape (such as clean energy infrastructure) including through a well-designed Value for Money (VFM) framework; the role of UK pension funds in advancing our international leadership position on transition finance; and the importance of a whole of economy transition for the pensions system’s long-term sustainability, including through supportive real economy incentives for schemes such as clear sector decarbonisation pathways.

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