More than a third of pension schemes considering appointing IFA – XPS. (So be informed about ESG!)

The news that a third of  XPS pension schemes either have an IFA or are likely to be looking for one is important news for the ESG/SRI community – and I’d like to thank Mike Clark (Ario Advisory), who spoke at our event last Wednesday, for bringing the following to my attention.

This, to my mind, points to the need for advisers to gem up on sustainable, responsible and ethical fund options given that the pension rules relating to this area have changed this month (October 2019).

The blog I wrote at the time the changes were announced is here.   But in brief, the main points are that as a result of the changes, relevant pension funds will now have to update their main and – where applicable – default Statements of Investment Principles (SIP) to include:

1. 1. 1. How they take account of financially-material considerations, including (but not limited to) those arising from ESG considerations, including climate change;
      2. Their policies in relation to the stewardship of investments, including engagement with investee firms and the exercise of the voting rights associated with the investment.

In addition, the SIP will have to be published and circulated to scheme members annually, and eligible pension funds will have another year (until October 2020) before they have to explain how they implemented what they state in their SIPs.

Links to the new rules can be found here: https://www.gov.uk/government/consultations/pension-trustees-clarifying-and-strengthening-investment-duties

My hope is that advisers who benefit from XPS’s policy are well placed to advise on all relevant investment options, including of course sustainable, responsible and ethical options.

What can we do to help?

Although detailed fund strategy information sits within the ‘primary’ funds on Fund EcoMarket, the tool also lists individual retail pension fund options that often mirror OEIC or SICAV funds. Users can therefore find named SRI/ESG pension funds on the tool (using the ‘Pensions’ product filter) – and if required, read up on their strategies within the OEIC, SICAV or Life fields by searching for the fund by name.

The XPS media  release is ‘cut and pasted’ below:

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More than a third of pension schemes have appointed or are considering appointing an IFA to support their members, XPS Pensions Group research has found.

One-in-10 of XPS’s pension scheme clients already have an appointed IFA working with them, while one-quarter (25%) are actively considering appointing one.

According to the pensions consultancy, trustees of defined benefit (DB) schemes have historically focused on the benefits provided to the scheme, but since the introduction of freedom and choice, more options have been made available to members.

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Should schemes want to work with IFAs, XPS recommends trustees select an adviser who is “truly independent”, does not use a contingent charging structure, has the pension transfer specialist accreditation and has signed up to the Personal Finance Society’s gold standard for DB transfers.

XPS Pensions Group head of IFA selection team and senior consultant Simon Reddish said: “Freedom and choice has been a game changer for the pensions industry. We are seeing a growing number of trustees and sponsors looking to provide more support to help their members make the right decisions for their retirement.

“The increased level of knowledge and access to professional advice means that trustees and sponsors are in a much better position than their scheme members to select an IFA, and I think doing this can meaningfully improve member outcomes and protect schemes.”

https://www.xpsgroup.com/news-and-views/35-of-schemes-have-or-are-considering-appointing-an-ifa/