Measures aimed at encouraging pension schemes to invest in a more diverse range of long term assets, including green technology and infrastructure, have been outlined by the government.
It has launched a consultation and is seeking views on additional steps to encourage the consolidation of smaller pension schemes into larger schemes.
The government believes a key wider benefit of an increase in consolidation could be the increased share of assets saved in large, defined contribution (DC) schemes potentially able to direct funds towards longer-term, illiquid investments.
This could mean that key and potentially strategically important sectors of the economy such as smaller innovative firms, housing, infrastructure and green infrastructure receive more investment flows than previously, which can have wide-ranging impacts across society.
There is no requirement that trustees report on percentage holdings invested in a “green” or “climate-friendly” way – only that they take account of the opportunities and risks these factors present.
Guy Opperman, Minister for Pensions and Financial Inclusion said: “We want all pension scheme members to benefit from efficient administration, first-class investment governance and access to diversified investment strategies.
“The UK has a world-class occupational pension system. We want to encourage scale and innovation by pension schemes and help drive new investment in important sectors of the economy as we build back better.
“The UK is committed to leading the way in the provision of green technology and infrastructure and we want pension funds to be at the forefront of taking advantage of these long term opportunities.”
The consultation is open until 30th October 2020.