A third of members are now calling for workplace defaults to offer investment options with positive ESG impacts, according to the latest DC master trust report by Hymans Robertson.
Although many default schemes take ESG considerations into account as part of their investment strategy, Hymans Roberston found that more than four out of 10 defaults do not offer any allocation to stricter ‘impact’ investments, and have no plans to include this investment option at present.
However, Hyman’s report found a significant increase in demand for more choice around ESG options as the take up of master trusts continues to grow across the market.
The report also shows that the performance of many of these funds has been hit by volatile markets, potentially hitting retirement outcomes for DC scheme members.
Hymans Robertson points out that in some cases default fund values have slipped below pre-pandemic levels as a result of ongoing challenges in both equity and bond markets.
The report examines the impact of this on anticipated member outcomes, as well as looking at what steps can be taken to support members, especially for those in legacy arrangements or coming up to retirement.
Hymans Robertson head of DC provider relations Claire Roarty says: “DC Master Trust members are demanding more from their funds with nearly a third of members expressing a desire for investment options which offer positive environmental and social impacts.
“We launched the ‘Climate Impact Initiative’ in 2021 to meet these demands and more DC savers than ever now have access to impact options. However, there is much work still to do and 42 per cent of master trusts don’t offer impact investing options to members and have no plan for their inclusion – creating a gap between what members want and what the market offers.
“With the DC market continuing to grow, it is imperative that providers put plans in place to introduce an impact choice and communicate this to their members. Improving member engagement must remain a key priority, particularly in the current market where longer-term savings like pensions can slip down the agenda. Providers must do all they can to encourage better retirement planning before it’s too late.”
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