The NAPF believes that the fiduciary duties of trustees of pension funds are well understood and the law as currently understood is sufficiently permissive to allow consideration of wider factors when making investment decisions. In addition, the NAPF believes that that the apprehension concerning contract-based schemes could be addressed more directly through clear standards of conduct applicable to employers and providers in those areas in which they exercise discretion.   In its response to the Law Commission the NAPF explains that:

• Trustees understand that their duty is to act in the best interests of members, these interests are not general interests, but rather relate to the purpose for which the trust was created.
• The current law is appropriately permissive to enable trustees to incorporate environmental, social and governance (ESG) factors within their investments where these are financially material. In the case of most pension funds the consideration of ESG factors and the activities associated with stewardship are delegated to their investment managers who owe a duty of care to their clients to adequately consider issues and undertake such actions as appropriate to the investment strategy.
• Employers, as the ultimate decision makers in appointing workplace pension schemes, should be given the obligation to put in place a governance arrangement to support the interests of pension savers.
• If Independent Governance Committees are formed, they should be constituted primarily to act on behalf of employers, who as the purchasers are the actors that should have responsibility for bringing in pension arrangements that offer value for money and also have the most influence over the provider. The employers will be best placed to see that the providers deliver what is promised, and, on the whole, they will have more resources to devote to overseeing the investment and service arrangements. Then the chain of accountability from saver through to their investment managers would be much clearer and the relevant duties, of each party would be better aligned.

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