Only one AE provider has a member on its board; members ‘side-lined’ out of investments

Auto-enrolled members of workplace pension schemes have been largely “side-lined” out of investment decisions, with only one UK provider having a member on its board, it has been highlighted.

Speaking at the Trades Union Congress’ Fixing the retirement lottery conference, earlier this week, ShareAction chief executive Catherine Howarth noted that under auto-enrolment “it is distressing to see that there is only one automatic enrolment pensions provider that has put a member on its board.”

The provider with a member on its board is Royal London. As a result of this lack of member presence, Howarth emphasised that “members have been side-lined in the auto-enrolment space”.

Despite the policy bringing millions of people into workplace pension saving, “chronic under-saving” still persists, she said.

Howarth highlighted that only 19 per cent of people think there is adequate or interesting communication available to them about their pension savings.

Encouraging more members to become aware of how and where their pensions are invested could ultimately lead to greater pension saving, Howarth suggested. Both Howarth and PLSA policy lead: stewardship and corporate governance Luke Hildyard noted that 84 per cent of scheme members would prefer a pension that uses its investments to push companies to be more socially and environmentally responsible and 70 per cent of members want pension funds to avoid unethical investments.

“We believe that it is an important opportunity to start engaging with people about the reason to invest,” Howarth said. “People do want to see their savings going into renewable energy systems, to companies that pay the minimum wage and sweatshops around the world.” These help members to get an “emotional connection with their pension fund”, as well as realising the kind of investments and saving that is needed to achieve an adequate income in retirement, Howarth summarised.

This needs to be joined with having members on boards and allowing members to attend AGMs where they can hear about the management of assets and risks in their pension fund, it was noted.

In terms of making socially responsible investments, Howarth praised Nest for considering how its investments impact the lives of those it provides pensions for. Through recognising that a large proportion of its members are women, part-time workers and low-paid people, the master trust has worked to ensure its investments assist these people. Nest has “decided that it wants all FTSE 100 companies in its portfolio to be a credited living wage employer,” Howarth stated.

“We would like to see pension funds really thinking though: Who are out members, what is their economic reality and how can we as an investor invest in a way that will secure them a good, long-term, sustainable investment return but also think about the impact we can make as an owner of shares in these companies,” she added.

ShareAction’s proposal to give people the right to know how their pension savings are invested, that was put forward in 2015, has now been accepted by the government.

On Monday, the Department for Work and Pensions laid new regulations in parliament that will provide additional rights to disclosure on costs and charges, as well as on what is invested by pension funds.

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