The introduction of auto-enrolment could lead to more pension funds taking on stewardship policies reflecting their members’ interests such as pushing for the living wage, ShareAction has reported.

A new report by the organisation explains that auto-enrolment means that a vast majority of UK workers have retirement savings invested in UK public companies. Therefore, more and more members will be more concerned with the labour force practices of the companies they invest in.

The report noted that pension scheme member engagement with pension scheme trustees and executives is relatively novel, but ShareAction has seen how dialogue between members and their funds can influence pension fund stewardship practices.

For example, following engagement with ShareAction the National Employment Savings Trust’s shareholder voting policy includes explicit support for the UK living wage. It said it reflects the interest of many of the scheme’s beneficiaries in seeing earnings growth.

Another example given was the Leicestershire County Council Pension Fund, which after 30 emails from members, adopted a resolution that requested, “where there is the opportunity to do so the fund’s investment managers, when they consider it to be in the best financial interest of shareholders, support the concept of the living wage.”

In addition, following a meeting of scheme members with trustees of The Pensions Trust, two of the trustees went on to attend the AGMs of FTSE 100 companies to raise questions about the living wage publically with company directors.

The report encouraged the need to clarify fiduciary duties in pension investment regulations so that pension fund trustees take environmental, social and governance factors into account.

“For too long, pension trustees have interpreted their duties as requiring them to maximise financial return, often over the short-term. The Law Commission confirmed that this is incorrect: trustees do not need to chase short-term returns and there is no legal barrier to them taking account of wider factors in meeting the best interests of beneficiaries,” the report concluded.

“But the Commission’s guidance is still not sufficiently well known by pension funds and misconceptions about trustees’ duties remain widespread.”

ShareAction chief executive Catherine Howarth said: “Many of those now saving into workplace pension schemes are distinctly vulnerable in our economy […] It seems right to ask in an era of mass participation in the private pension system if schemes should take account of their members’ lives and needs in the here and now.”

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