Pensions Update: State pensions and ESG prove the biggest trends so far this year
By Sara Neidle
February has seen the start of people slowly transitioning their way back into the office. Gone are the days of the traditional 9 to 5, as most workplaces have moved to the hybrid model of working, now being offered across the industry. Whilst Covid is beginning to feel like a bad dream that never happened, we still can’t forget the ongoing impact it continues to have on investment activity - the geo-political pressures, and heightened market volatility, alongside low-yield environment and soaring inflation at its highest rate for 30 years which are core concerns for the pensions industry.
SEC Newgate Insights showed State Pensions dominated the news agenda, followed by ESG across the pensions industry, with more than a 20% increase in volume of mentions on social media from last month (source: brandwatch). This is perhaps unsurprising after news covering the state pension underpayment issues, with the Public Accounts Committee (PAO) describing the situation as a “shameful shambles”. Latest figures from the Office for Budget Responsibility (OBR) suggested that the government could face paying £3bn over the "systematic underpayment", with a report from the National Audit Office estimating that DWP has underpaid over £1bn in state pensions to around 134,000 pensioners.
Last year, the Make My Money Matter campaign found that 71 per cent of the UK’s largest pension schemes do not have credible plans for reaching net zero. With ESG growing with importance amongst pension schemes, it could be argued we are embarking on a transformational year for business and the environment. As we start to get our head around what this means for the business and the pensions industry, we hope to see meaningful action take place. Post COP26, we saw a series of commitments and aspiration, but this year in the lead up to COP27, we are hoping to see from governments and businesses starting to demonstrate measurable and meaningful impact.
We are seeing through the regulatory backdrop and initiatives from the industry at large, with this month’s launch of a new template aimed at helping pension schemes calculate their carbon emissions, to help better understand the environmental impact of their investments, along with a raft of other regulatory. We are firmly on the road to net zero, even if it’s just the beginning of the journey for pension schemes and big institutions, there still some progress.
In other news, we saw the DWP launch a consultation on pensions dashboards, setting out the proposed requirements that will need to be met by pensions dashboards and their providers (along with the Trustees and managers of relevant occupational pension schemes). New research by the Association of British Insurers (ABI) found that dashboards which show savers all their pension pots in one place provide a once in a generation opportunity to help people engage with their pension.
Furthermore, the Work and Pensions Select Committee published its report: Protecting pension savers – five years on from the Pension Freedoms: Accessing pension savings. In the report, the Committee call on the government and regulators to play more active role in supporting savers to make better decisions about their money. The report included a specific recommendation that the government should commit to trial of automatic Pension Wise guidance appointments and set a target of at least 60% take up.
After an already busy start to the month, we are all eager to see all the opportunities and challenges in store this year in the world of pensions.
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