Pensions Bill update: new guidance to support pension managers on long-term risks

The Pension Schemes Bill has completed its Lords stages and will now return to the Commons for consideration.

Following cross-party efforts by P4P Peers, alongside MPs and organisations including ShareAction, the Government has committed to address longstanding uncertainty around pension trustees’ investor duties, particularly how to respond to system-level risks such as climate change and nature loss, while acting in savers’ best interests.

This will be delivered through new, industry-shaped guidance. For the first time, this guidance will set out practical ways pension managers can manage long-term risks and opportunities linked to the transition to net zero, which could include issues such as nature-related dependencies, helping trustees balance these factors with delivering good returns for savers.

In a strong example of cross-party collaboration, the Government’s approach was shaped by proposals from Peers across all the main parties. Many Peers pushed to go further by embedding clarifications in the Bill and extending the guidance across all major pension schemes, prompting Government action and agreement to involve the wider pensions market in designing the guidance. 

Although a Government amendment to put the guidance on a statutory footing was narrowly rejected by Opposition Peers, the Department for Work and Pensions has confirmed it will proceed with developing the guidance. P4P Director, Baroness Hayman, who led the cross-party efforts, also pressed the Minister on how this work would be taken forward - securing a commitment that DWP would review options on next steps - with many hoping changes to regulations could be considered. 

Baroness Sherlock, DWP Minister for the Lords said: 

“In response to the questions from the noble Baroness, Lady Hayman - I commend her on her work on this important issue. The Government remain committed to improving clarity around trustees’ existing investment duties, including how schemes consider long-term and financially material factors such as climate and systemic risks, while maintaining their core duty to act in members’ best interests. We will press ahead with this important work. We are currently reviewing next step options to ensure this objective continues to be progressed in the most important way in the light of the decision of the House on this matter." 

P4P Peers also pushed for greater transparency from schemes heavily invested in coal, with potential to extend monitoring to other fossil fuels. While not voted on, Ministers acknowledged the value of this approach and agreed to keep it under review, creating an additional platform for continued engagement.

These outcomes show what sustained, cross-party engagement can achieve, influencing policy, beyond the text of the legislation itself. With a number of positive commitments secured and further opportunities for engagement to make sure guidance is as useful to industry as possible, P4P will build on this strong foundation with both Ministers and partners, working to align the UK's £3 trillion pensions sector with a net zero, nature-positive economy, delivering better outcomes for savers. 

With thanks to @Share Action @Finance Innovation Lab and @UK Sustainable Investment and Finance Association for all your support