The Department for Work and Pensions is consulting on guidance to give pension fund trustees greater confidence about how to interpret their fiduciary duty when taking investment decisions. The 12-week consultation runs until 27 January.  

The non-statutory guidance has been drawn up by a technical working group that includes pension funds, lawyers, pension organisations and sustainability groups, chaired by High Court judge Sir Robin Knowles. An advisory group of schemes, unions, asset managers and others also had input. 

"From my work with the sector on this guidance, I wish to place on record my sureness that the guidance is needed," said Sir Robin. 

"Fiduciary duty is there as a constant in the law. But as circumstances and experience develop so too the way in which fiduciary and related duties work is further illuminated. By understanding fiduciary duty in today’s circumstances, we can ensure it continues to protect and enable," he added.  

The guidance comes after the House of Lords unexpectedly rejected putting a provision for statutory guidance into the Pensions Schemes Act 2026, with some fearing investment mandation 'by the back door'.
 

   

Pensions minister Torsten Bell has now said that the working group’s guidance is intended to support trustees and advisers in understanding and applying the existing legal and regulatory framework.   

"It does not change trustees’ duties. Rather, it seeks to provide practical support in areas where questions have arisen about the application of established legal principles, while preserving the discretion and judgement that remain central to trustee decision-making," he said.  

The draft guidance speaks in broad terms about financial and non-financial matters, time horizons, stewardship and system-level considerations among others, and includes eight practical examples to further support trustees.  

Campaign group ShareAction, which was part of the technical working group, was pleased about the draft guidance, having originally lobbied for writing fiduciary duty directly into legislation.  

Senior UK policy manager Claire Brinn said: “We're delighted that our campaigning on fiduciary duty has resulted in new government guidance that will enable pension trustees to make better decisions with greater legal certainty.” 

Brinn said the guidance, while leaving the law unchanged, would clarify how fiduciary duty should be applied to investment decision-making, particularly in relation to long-term and systemic risks such as climate change. 
  
“There are two areas where we feel the law should be strengthened if it is to support pension trustees in serving members' best interests,” she added. “In our view, trustees should be able to take account of member views when making decisions, and to consider not just how investments might affect the size of a saver’s eventual pot but also how investment decisions might influence their standards of living in retirement.”  

Another working group member, Sackers partner Stuart O’Brien stressed that trustees are not expected to address every conceivable factor, predict the future or be judged with hindsight. 

"Within the framework, the guidance is notable for looking beyond individual investments and highlighting systemic risks and opportunities, stewardship and the potential relevance of these considerations to buy-ins, buyouts and consolidation," he said. 

However, O'Brien added that trustees should not read the draft as requiring an immediate wholesale revision of existing arrangements. 

"What matters is identifying financially material considerations, taking appropriate advice and following careful and proportionate processes to reach the best overall decisions for members," he said.

The Society of Pension Professionals was represented on the advisory group by David James, who chairs the SPP's DC Committee.   

“The consultation published today provides a further opportunity for industry to develop the guidance to ensure that it helps trustees navigate some of their most important duties,” James said.