The government has been urged to adopt a "bold but sensible" pension reform agenda, after industry research revealed high levels of public concern over insecurity in retirement caused by climate change and inadequate pension savings.

The research from ShareAction, Make My Money Matter and Finance Innovation Lab found that over three quarters (77 per cent) of savers believe the government should do more to ensure pension holders have additional retirement savings.

In addition to this, nearly two thirds (65 per cent) thought that the government should do more to ensure UK pensions tackle the climate crisis, while three quarters felt that the government should be doing more to ensure pensions invest in the UK economy.

These actions were also found to have significant bipartisan support, according to the research, with both Labour and Conservative voters in favour of action.

In light of the findings, ShareAction, Make My Money Matter and Finance Innovation Lab have outlined five key pension reforms that could help deliver on this agenda and prevent a national crisis in UK pensions.

The proposed pensions reform strategy, Better pensions for all and a sustainable, productive, economy, is designed to lead to a "step-change" in long-term and green investments, deliver adequate and secure pensions for all UK citizens and boost the productivity and sustainability of the UK economy.

It identifies five key areas of policy action for the government, which are intended to avert damaging impacts on pension holders and the planet and instead ensure pensions tackle the climate crisis, improve retirement security for millions and grow the economy.

In particular, the report emphasised the need to boost pension savings and state pension, encouraging the government to increase the mandatory minimum level of pension savings to 12 per cent or more, with a 5 per cent contribution from the employee and 7 per cent from the employer.

It also said that the government should ensure that default pension options focus on long-term investments, and support pension funds in driving green investment in the UK by expanding institutions like the UK Infrastructure Bank and developing initiatives that accelerate the take-up of new technologies and aggregate fragmented opportunities.

In addition to this, the organisations suggested that government should "clean up pension funds" and phase out fossil fuel investments by introducing science-based 1.5C aligned transition plans, mandatory deforestation due diligence and supporting trustees to better integrate climate and nature risks.

Better transparency and accountability was the fifth ask outlined in the report, as the organisations argued that government should introduce a requirement for schemes to ascertain the views of members and provide standardised information on their climate, nature-related and social impacts.

Commenting on the report, Finance Innovation Lab CEO, Jesse Griffiths, said: “With over £3trn in assets, UK pension funds are major investors. But right now, the pensions system is in a shocking state.

“People are right to be worried that their retirements will be ruined by climate change and inadequate pension savings. It’s time for the government to act and adopt a bold but sensible reform agenda that can make the pensions system work for savers, the environment, and the economy.”

These concerns were echoed by ShareAction Catherine Howarth, who warned that "enormous challenges lie ahead for pensions policy makers, from ensuring people have enough income to live well in later life to ensuring pension investments don’t undermine people’s future security by exacerbating climate change".

“This report sets out a host of practical reforms that would set the pensions sector up for long term success," she said.

"These include clarifying the legal duties of pension schemes to allow them to address social and environmental considerations in their investment decisions when these are relevant to the long-term best interests of scheme members.”

Adding to this, Make My Money Matter CEO, Tony Burdon, said: “Our pensions exist to protect our futures, but right now they’re jeopardising them. Today, just 4 per cent of our pension assets are invested in climate solutions – but it’s estimated that the UK pensions industry could invest up to £1.2trn by 2035.

“This new data shows that the public want change. We are calling on all political parties to put our pension reform agenda at the heart of their manifestos ahead of the upcoming election, and ensure action is prioritised in the first term of the next parliament.”

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