Signatories of the Sustainability Principles Charter for the UK bulk annuity process have agreed to adopt the Bulk Annuity Sustainability Survey (BASS).
The survey will replace the multiple different surveys used by various advisers to assess insurers’ sustainability credentials for the bulk annuity process. This initiative has the potential to reduce the average number of sustainability surveys completed by insurers annually from 10 to 1.
The launch of the survey comes a year since the charter was established by Accounting for Sustainability (A4S), the Church of England Pensions Board and Railpen.
The charter set out guiding principles for the bulk purchase annuity (BPA) process focusing on transparency, decision making, reporting and engagement, and collaboration amid concerns that sustainability did not feature in the process.
The 30-plus signatories have worked to embed the charter’s principles into their operations, and address the inefficiencies within the insurer-selection process.
According to the charter, BASS will significantly improve the efficiency of the process and the breadth of information available for comparing the insurers’ responses on sustainability.
The survey was developed by A4S, with input from adviser and insurer signatories. As it aligns with the charter principles, it sets a high bar on how insurers should consider sustainability in their strategic and investment decisions.
BASS will be rolled out in 2025.
A4S added that in the past year, the prominence of sustainability in the market has grown as the number of signatories has increased. This includes eight BPA providers (representing 97% of the UK BPA market), pension schemes representing over £100bn in assets under management, and pension and investment advisers with more than £3.1trn of UK-based assets under advisory.
Kerry King, A4S executive director, capital markets, said: “Embedding the charter principles into all future bulk annuity activities is vital to ensure that this market is an enabler to the UK’s climate ambitions.”
She said that the significance of this market to those ambitions is set to increase with over £500bn (€599bn) in bulk annuity transactions expected over the next five to 10 years.
King continued: “The signatories to the charter have demonstrated a fantastic collaborative approach, coming together throughout the year with a common goal to raise the importance of sustainability within the bulk annuity process.”
Tim Miller, senior manager of pensions policy at Railpen, added that sustainability already appears to be playing a more prominent role in bulk annuity transactions for many schemes.
“I expect excellent collaborative initiatives such as the Bulk Annuity Sustainability Survey will make it easier for all parties to consider sustainability in more detail moving forward,” he added.
The Pensions Regulator (TPR) said that defined benefit (DB) schemes looking at an insurance solution should take sustainability into account as part of their due diligence.
Mark Hill, TPR’s climate and sustainability lead, has called on trustees to consider the climate resilience of a scheme’s pension investments when considering a buyout or buy-in with an insurer.
“Where schemes are considering an insurance solution, we encourage trustees to take sustainability into account during their due diligence. The A4S Sustainability Principles Charter for the bulk annuity process provides helpful guidance,” he added.
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