Policy briefing: UK pensions

The UK pensions sector manages over £2 trillion of assets and worldwide, the pensions sector has approximately £38 trillion assets under management. Pension funds, as universal asset owners, can play a key role in influencing how systemic sustainability issues, such as climate change, are addressed by other actors, and drive long-term value creation by pursing positive sustainability outcomes that mitigate the root causes of these risks. As long-term investors, pension funds’ ability to generate long term value for their beneficiaries depends on the health and resilience of the environmental and social systems that underpin the economies they invest in.

The PRI’s 2020 report on the UK pensions market identified a number of policy and structural barriers to creating a sustainable pensions system. In recent announcements such as the Mansion House Speech (July 2023), the Autumn Statement (November 2023) and the Spring budget, the UK government has shown a renewed interest into pensions investment practices, market structure, and policies that influence the performance of pension schemes. These proposals aim to shift incentives away from a focus on cost towards long-term value and investment performance, without including specific considerations linked to sustainability outcomes or the economic and social benefits of the transition to net zero.

This brief builds on existing PRI pensions and fiduciary duty work, analysing some of the key UK policy developments since 2019, highlighting areas that require further work and the PRI’s recommendations to help address ongoing issues.