Clarification on pension trustee investment duties – the amendment that got away?

Proposed amendment to Pension Schemes Bill

On 3 December, parliament debated proposed amendments to the Pension Schemes Bill. One eye-catching amendment, tabled by Liam Byrne MP, focused on clarifying pension scheme trustee investment duties.

What’s the big idea?

The amendment aimed to provide trustees with clarification on what factors they can consider when deciding where to invest a scheme’s assets. 

Trustees have a fiduciary duty to invest in members’ best financial interests, but to what extent trustees can consider factors like sustainability and climate change remains an area of uncertainty.

We looked at this area in detail in an article written by Steven Hull in November 2024. 

Pension trustees fiduciary duties – time for clarification and/or reform? - Burges Salmon

Byrne's rationale for the proposed amendment? In his own words, ‘We ask trustees to act in members’ best interests, yet the law today is so unclear that many of them feel unable to invest in the very things that could secure the long-term interests of their members: growth, productivity, and the living standards on which those members will one day rely.’ 

The proposed amendment would clarify that when a trustee is interpreting members’ best interest, trustees could take into account:

• risks and opportunities relevant to the scheme that arise from economic sectors, environmental or social matters;

• impacts on members’ standards of living; and

• the views of members.

In short, this amendment may help trustees to feel more at ease investing in funds that align with members’ values – particularly around ESG (Environmental, Social and Governance) issues.

When will this amendment become law?

Here’s the twist: the Pension Schemes Bill has now reached the House of Lords, but the Bill brought from the Commons does not include this amendment. It now looks unlikely this proposed amendment will be accepted and included in the final Bill.

Whilst some trustees, legal experts and politicians believe the current law is already sufficiently flexible, there will be many trustees who would have welcomed this legal clarification of investment factors. The good news for those trustees is that not all hope is lost. During the parliamentary debate of this proposed amendment, the Minister for Pensions, MP Torsten Bell, announced plans ‘to bring forward legislation that will allow the Government to develop statutory guidance for the trust-based private pensions sector.’ 

So, whilst this amendment won’t become law under the Pension Schemes Bill, something similar is likely on the horizon in the form of future legislation with statutory guidance following. The hope is that this guidance would act as a practical investment compass for trustees. 

Whilst statutory guidance would help trustees to meet legal duties, statutory recommendations are not always mandatory and in some cases only advisory. As a result, even with more statutory guidance, trustees will still need to consider carefully how this guidance interacts with their scheme rules and the law. 

When asked for a timeline on this future guidance, the Minister for Pensions, responded; ‘I hope to bring forward clarity on the next steps in a matter of months.’ 

So, for now, it’s a case of sit tight and watch this space.

More information 

To keep up to date with all things Pension Schemes Bill related, head over to our handbook or for more information on navigating the developing landscape of ESG compliance, view our ESG focused tool.

If you would like to discuss balancing ESG compliance and trustee duties please contact Suzanne Padmore, Kate Granville Smith, or your usual Burges Salmon contact.

This article has been co-authored by Emma Mitchell, Apprentice Solicitor.