Govt urged to consider using pension obligations to power push to net zero

A new white paper has proposed that the government reallocates some unfunded state and defined benefit (DB) pension obligations to fund debt and build low-carbon infrastructure.

The white paper from smart battery maker Moixa, entitled A New Net Zero doctrine: The Social Responsibility of Nations is to Reduce Debt, attempts to solve the twin challenges of ageing populations and the climate crisis by enabling energy and mobility in retirement.

After pointing out that more than one seventh of the UK’s £8trn pension liability is spent on paying for energy and transport costs through retirement, the white paper noted that the government could reduce financial and climate debt by redirecting a proportion of contracted pension cashflows.

It proposed that future pensioners could give up some of their pension income promise in exchange for the provision of low-carbon energy and transport in retirement, which it said would ensure they do not need to worry about the costs of keeping warm while also contributing to climate recovery.

Tangibly, this could involve the government investing in projects such as fleets of shared electric vehicles or putting money towards keeping HS2 a low-carbon project.

The document proposes that the government reallocate a proportion of unfunded state and DB pension obligations that would have paid for energy and mobility costs, before investing and allocating that future cash-flow commitment today to fund debt to build low carbon infrastructure.

Moixa explained: “The state could then become a dominant purchaser of this greener energy and deliver it back to future pensioners in the form of energy as a service.”

The white paper noted that the elderly spend an average of 14 per cent of their retirement income on energy bills and mobility.

Additionally, although it acknowledged that green energy taxes charged via low-carbon levies incentivise low carbon, the paper noted that the cost burden fell harder on the poor and elderly.

It claimed that its solution, which was referred to as “basic, greener, state energy”, was a small trade-off for “a modest reduction in practical monthly pension income for some”.

At a scheme level, the doctrine proposed that DB legislation should allow greater freedoms for scheme managers and members to opt into net zero services, such as via accelerating the pension risk transfer market with environmental, social and governance targets for the proportion of scheme liabilities that relate to energy and mobility costs.

It also argued that DB schemes could reduce their shortfalls by allowing members to allocate a portion of their pension to net-zero energy and mobility services.

The paper’s author co-founder and CEO of Moixa, Simon Daniel, said: “This new net zero doctrine can be a centrepiece of COP26 and a platform for UK leadership. It radically rethinks how we meet our obligations to pensioners as societies age, while also delivering climate recovery for future generations.

“We must build, serve and create jobs for a low carbon tomorrow, as a social imperative today. The UK can provide a blueprint for the new US government and the EU to address fundamental social issues while delivering Covid recovery, ultimately enabling the world to deliver on the Paris Accord.”

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