An amendment to the Pension Schemes Bill has been tabled in the House of Commons today that would make “system-level considerations” part of pension funds’ investment duties.
According to MP Liam Byrne’s explanatory statement for the amendment (NC17), the “new clause gives the Secretary of State a duty to make regulations clarifying investment duties of occupational pension schemes, including system-level considerations and other matters including impacts of investee firms, beneficiaries’ standards of living and views”.
“It also imposes duties on the FCA and the Secretary of State to make corresponding rules and regulations for workplace personal pension schemes and the Local Government Pension Scheme, respectively.”
System-level risks are often described as risks that cannot be diversified away from.
Hailed as “game changing” when it was published in June, the wide-ranging Pension Schemes Bill is currently being scrutinised at the Public Bill Committee. It is expected to receive royal assent in 2026 before regulations are made to bring its measures into effect.
The tabling of the fiduciary amendment is in large part the result of advocacy for fiduciary duty reform by NGO ShareAction. Writing on LinkedIn today, chief executive officer Catherine Howarth said that the legal duty for schemes to act in the best interest of their members had too often been “misinterpreted as a narrow requirement to chase short-term investment returns”.
“A more member-centric definition is needed in the 21st Century, one that pays attention to members’ fragile standards of living and priorities whilst protecting our pensions from financial risks such as those coming down the track as a result of climate change,” she said.
She said that if NC17 becomes law “it will empower (but not compel) schemes to invest more responsibly on behalf of their members without fear of breaching their legal duties”.
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