Changing the way our pensions work


I suspect when we look back at significant events in 2020, pension folk will consider yesterday’s consultation from the DWP;-

Taking action on climate risk: improving governance and reporting by occupational pension schemes

as another small step in the upheaval in the way our pension savings are invested. The consultation covers both those investments that back the promises made by our employers and those that directly impact the money we get later in life. The guidance in the consultation does not yet cover the default investments made by insurers offering contract based workplace pensions nor the fund selections made by SIPP platforms. But we can reasonably assume that TPR is moving in lockstep on this, as it is on matters such as Value For Money.

When the Pension Schemes Bill becomes an Act (we hope in September) it will become compulsory for certain trustees to demonstrate governance and reporting aligned to the recommendations of the international industry-led Task Force on Climate-related Financial Disclosures (TCFD).

This will mean changes to the strategy and risk management of the money which one day be spent by us and the intention is that it is invested for the good of the world in which the money is spent. This is about very real things. It’s about calculating the ‘carbon footprint’ of pension schemes and assessing how the value of the schemes’ assets or liabilities would be affected by different temperature rise scenarios, including the ambitions on limiting the global average temperature rise set out in the Paris Agreement.

It’s about changing the way our pensions work, not just for our benefit but for those of a future world.

Improving the value of our money

Currently we conducted an analysis of the returns that savers are getting on various default strategies employed by workplace pensions, both contract based and occupational. The analysis will be carried out while AgeWage is in the FCA sandbox and will include data submitted voluntarily by our 300 testers (thanks to you).

The bulk of the data (the big data) will come from large DC schemes of the type covered by this consultation. The early signs suggest that since their introduction, funds managed with regard to  the environment, good governance and social purpose have delivered better outcomes than those that haven’t bothered.

Currently the benchmark index for measuring the value for saver’s money is set to “not bothered”.


as a stakeholder in the development of this index, we have- following the publication of the DWP consultation, asked Morningstar to review the rules of the index so that it does in future incorporate ESG criteria. The means to do this are simple enough as Morningstar has created comparable measurement of performance based on ESG and non ESC management criteria.

We are keen that Government policy influences that part of the pension eco-system AgeWage has some influence on. Though this is a small part, we think change needs to happen from the bottom up as well as the top down

The average UK pension pot will – we expect – reflect the impact of ESG and I am happy to say that early work of our analysis suggests that the prospects for British pension savers look better for the changes proposed in this consultation.

Making our money matter

The money we save into workplace pensions is not a tax or even a payment of national insurance. It is a payment to our future selves in a future world. It is an investment in our future so making this money matter is critically important.

Those trustees and those charged with watching over our personal pensions are now protected by the law in exercising the recommendations of the TCFD. Things will no doubt go wrong for ESG funds, there may be failures in the application of ESG principles in the investment of a fund and underlying assets may fail for reasons outside the ESG framework. This is to be expected and we can also expect, when failures happen , that there will be people who call into question the management of money this way.

But we live in a parliamentary democracy that has and is debating the adoption of TCFD disclosures by our pension schemes. Assuming the Pension Schemes Bill is enacted, the law will protect those who follow the TCFD disclosures and the detailed guidance in this consultation. The law will impose penalties on those who don’t.

The maximum fine for a penalty issued for the breach of any of the requirements proposed in this consultation would not exceed £5,000 for an individual trustee, or £50,000 for a corporate trustee

I expect that those few remaining trustees and members of IGCs and GAAs who are in denial of the value of ESG, will – in the face of the forthcoming Act and the detail within the consultation, step down.

The world is moving against them and if you read the consultation you will understand why.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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9 Responses to Changing the way our pensions work

  1. Derek Scott says:

    I’m afraid I can’t share your enthusiasm, Henry, as put upon trustees of DB schemes are picked on yet again. But yet more woke work beckons for the growing number of ESG consultants. Jobs for the boys and girls, as one of my fellow trustees reacted yesterday.

    Surely the emphasis (and fines for non-compliance) should be aimed at reporting by corporates and also by government issuers, who could report the carbon footprint for countries as a whole?

    I don’t remember you making any mentions of the TCFD before now, Henry, and I can only find one indirect reference on your blogs to the PCRIG back at the time of the PLSA investment conference in March, which so many of us missed as the pandemic approached. PCRIG, like TPR, extended their latest consultation during the lockdown, but I don’t recall a single blog hereabouts, unlike the number regarding the proposed DB funding code. Did anyone, other than “the usual suspects”, even bother to respond?

    I suggest fewer trustees will even know what these acronyms stand for, even among the few who may have heard mention of these task forces and groups. I still wait for a scheme member to raise such subjects with me or my colleagues.

    Regarding the TCFD, their flagship recommendations paper is about three years old. Most of their work since then, I’m told, has been encouraging uptake of the recommendations although they are working on a number of updates (due later this year, I’m led to believe). The recommendations aren’t tailored to UK pension schemes in any way, so one of my consultant contacts said he/she wouldn’t recommend looking at them in detail.

    You say we live in a parliamentary democracy, but I feel the DWP and others may be falling for a determined lobby and then reacting in the wrong direction altogether.

    • henry tapper says:

      Thanks for your comment – robust views properly stated 

      I have blogged on TCFD before – when it made its way into the Pension Schemes Bill in March and again when Guy Opperman spoke to the PLSA on it on March 18th (I think).

      Trustees may not know anything about this and most Trustees may not need to either. But schemes like yours with more than £1bn are going to have to comply or face a fine.
      I don’t see this as a problem, I see it as a solution!  

  2. Martin T says:


    I sympathise, I too have never been asked by a member about ESG/responsible investing. I am convinced though that long-term issues, such as climate change, company governance etc, should be of concern to those who invest in long-term assets.

    Although the requirements proposed currently only apply to the biggest schemes they may creep over time to affect smaller schemes with aspirational becoming accepted as best practice and then standard. Even before then questions arise such as “How do you resolve the tension between responsible investing and the need for short-term investment returns required to close funding deficits and reassure members that their DC investments are growing?” or “How do you find out what members think when they don’t engage?” If we ran a survey with a 10% response (high for these sort of things) we’d still only have about 30 replies which would inevitably have a range of contradictory views. LGIM did some work to try to help, which I found useful.

    Our scheme membership is a mixture of Boomers and Gen-X with few Millenials and zero Gen-Z. I suspect many small DB schemes will be the same.

  3. henry tapper says:

    Martin – I think the question – how do you find out what your members think when they don’t engage? is the key one. Perhaps we should try out new ways to get people interested – I am not so sure people aren’t interested in where their money has gone!

    • Martin T says:


      Designing and running a proper survey that generated a high response rate, with unbiased questions would present significant challenges on it’s own. Then consider the additional difficulty of interpretation, e.g. trying to derive a focused view on say, investment in oil companies, with views ranging from “don’t” to “yes, absolutely, they’ll rocket in value as the oil runs out and climate change is a myth!”. Overall we concluded it was incredibly challenging and would therefore be expensive.

      I loved Ros Altmann’s idea of a member’s pension sending a birthday card with greetings and a mini statement. How about a Christmas card with a note on “what I did this year”?

      “Pensions, a force for good now, for your future and for children’s future!”

  4. Replies duly noted.

    My own “ESG/SRI” credentials go way back. I was an early subscriber to EIRIS (now part of Vigeo Eiris) from the 1980s.

    But is this Government wishing trustees to invest in future in “green bonds” and “green” infrastructure, at a time when most DB schemes have moved over 60% of their assets into Government bonds and other “de-risking”?

    DB schemes’ potential impact as equity shareholders is very muted these days, probably less than 20% of total assets are equities for most schemes; and “engagement investing” is better done in collaboration or concert with other holders, rather than as a standalone reporting unit.

    I’ve still to see ESG analysis applied to issuers of government debt in the way that it is (only partially and imperfectly, I agree) applied to corporate issuers.

  5. henry tapper says:

    The equity investment is into DC and CDC where there is still appetite for long-term investment. Cynically you might argue that DC Trustees don’t need to worry about deficits , volatility or sponsor covenants. I hope that the Government will see the support for the Bowles amendment as a reason not to whip against it next month – which will certainly mean more longer term thinking – and investment. An important issue is alignment, currently the FCA are not mandating workplace pension providers to provide these disclosures, nor their IGCs /GAAs.

  6. Derek Scott says:

    The DWP proposal seems to be that authorised master trusts will be required to do this by TPR from 1 October 2021. As you say, Henry, the FCA are not mandating this. Watch that space. Will other lobbying push back the implementation date(s), as with previous initiatives such as transaction and other cost disclosures?

  7. henry tapper says:

    Slippage is the operative word. The question is why trustees , IGCs and DC platform providers should wait.

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