The Impact Investing Institute, ShareAction and ClientEarth have submitted joint written evidence to the UK Work and Pensions Select Committee’s 14 May 2025 session on boosting UK pension funds’ UK investment.
We consider that clarification of fiduciary duty and regulation of strategic asset allocation advice by investment consultants would both be helpful levers for encouraging UK investment and both of these measures would be more acceptable to pension schemes than current threats to mandate UK investment.
Why are we pursuing fiduciary duty reform?
UK workplace pension schemes manage an estimated £2.5 trillion in assets – capital that could both better serve people in retirement and drive growth in the UK economy.
However, the current regulatory framework is acting as a significant barrier. Pension fund trustees remain cautious about directing capital into investments that contribute to economic growth, regional development and making work pay – like innovative technologies, clean energy infrastructure, housing and SME finance. These investments can deliver competitive returns for people’s financial futures, strengthen the broader UK economy and improve the economic conditions in which people will retire.
Despite non-binding analysis, including a paper by the Financial Markets Law Commission in 2024 and legal opinions commissioned by individual pension schemes, trustees’ caution persists. Current interpretations of fiduciary duty (legal obligations of trustees) are often complex and often focus narrowly on financial returns without adequately considering:
- economy-wide effects: factors that cannot be fully managed through diversification, such as climate change or broader economic conditions;
- members’ standard of living: how a pension’s value is affected by the economy and society in which people will retire;
- their own impact: how pension investments themselves affect the UK infrastructure and public services that people rely on – now and in retirement.
This results in many trustees feeling legally barred from considering how investments could affect the quality of public services, housing affordability, energy costs and other factors that directly impact people’s future standard of living – even though these factors materially affect the real value of pension benefits.