The Employer Pension Pledge in full

Employer Pension Pledge: our ambition to maximise pension value

Purpose and Background 

Employers and their advisors play a critical role in the retirement outcomes of UK employees and, in turn, the UK economy. Questions they ask of pension providers, and the principles they follow when selecting employee pension plans, significantly influence how ambitiously pension providers will invest and, therefore, the potential outcomes for employees.

This Pledge sets out clear principles to i) ensure a focus on value for money before, during and after a pension provider is reviewed or selected by an employer, and ii) drive transparency around the level of investment in private assets from pension providers. It also commits to facilitating a greater level of training to ensure adequate knowledge and understanding of the potential benefits that can arise from an allocation to private markets as part of a diversified portfolio.

This Pledge is designed to align with, and support the success of, other related industry initiatives, such as the Value for Money framework and the Mansion House Accord and Compact.

The Signatories to the Employer Pension Pledge 

The signatories of this Pledge are committed to ensuring a focus on value for money, rather than solely cost, when selecting and reviewing pension providers, and recognise that a sole focus on cost of pension scheme investments may not lead to optimal retirement outcomes for members. Furthermore, signatories acknowledge that investment in private markets, as part of a diversified portfolio, has the potential to provide higher long-term returns, net of fees.

To support better outcomes for our employees, as well as the UK economy, signatories commit, on a voluntary basis, to adhere to the principles set out and advocate for the use of this Pledge as a guiding tool to others.

This Pledge further welcomes signatories who are UK employers of any size and welcomes endorsements from other areas of the UK pensions value chain, such as advisors and trustees.

The two Pledges are: 

1. Commit to a focus on value and investment returns, net of fees   

• Ensuring a focus on value for money when selecting or reviewing pension providers.
• Understanding of how private markets have the potential to contribute to better retirement outcomes for members, net of fees, as part of a balanced default portfolio which allows for proportionate levels of risk.
• Recognising that purely fee-based assessments and reviews of pension providers, with an absent focus on investment returns net of fees, can lead to sub-optimal retirement outcomes for members.
• Facilitating access to training and other education tools to those responsible for reviewing or selecting a pension provider, or to those with influence over the asset allocation of a pension scheme’s default fund, to help inform the potential benefits of higher-cost investments, such as private markets, as part of a diversified portfolio.

2. Request transparency on the allocation to private market assets 

• Supporting objectivity in the decision to invest in private markets in the context of the ambition to deliver better retirement outcomes for UK employees.
• Endorsing the need for transparency from pension providers of allocation to private market assets within defined contribution arrangements.