Kerry King: Embedding the charter principles into all future bulk annuity activities is vital to ensure that this market is an enabler to the UK’s climate ambitions
The 30-plus signatories of the Sustainability Principles Charter for the Bulk Annuity Process have launched an industry-wide initiative to cut the number of sustainability surveys completed by insurers annually from ten to one.
The industry-wide Bulk Annuity Sustainability Survey (BASS) would replace the multiple surveys used by different advisers to assess insurers' sustainability credentials for the bulk annuity process – significantly improving the efficiency of the process and the breadth of information available for comparing the insurers responses on sustainability.
The survey – developed by Accounting for Sustainability (A4S), with input from all signatories – comes a year after the launch of the Sustainability Principles Charter for the bulk annuity process, an initiative launched by A4S, the Church of England Pensions Board and Railpen, to align expectations around sustainability within the bulk annuity process.
Since the charter's launch, over 30 insurers, advisers, schemes and other industry organisations have agreed to adopt the principles – including eight bulk purchase annuity (BPA) providers and ten pension and investment advisers as well as nine pension funds.
A4S said adoption of the charter has accelerated change in the market – with several pension schemes publicly announcing that commitment to the charter principles were key considerations in selecting their buy-in provider. The charter has also been mentioned in The Pensions Regulator's 2024 annual funding statement, which recommended its use during the due diligence process.
A4S executive director for capital markets Kerry King commented: "Embedding the charter principles into all future bulk annuity activities is vital to ensure that this market is an enabler to the UK's climate ambitions.
"The significance of this market to those ambitions is set to increase with over £500bn in bulk annuity transactions expected over the next five to ten years. The signatories to the charter have demonstrated a fantastic collaborative approach, coming together throughout the year with a common goal to raise the importance of sustainability within the bulk annuity process."
Railpen senior manager of pensions policy Tim Miller added: "It's fantastic to see the amount of progress that's been made in such a short space of time, with pension schemes, advisers, and insurers all pulling in the same direction. Sustainability already appears to be playing a more prominent role in bulk annuity transactions for many schemes, and I expect excellent collaborative initiatives such as the Bulk Annuity Sustainability Survey will make it easier for all parties to consider sustainability in more detail moving forward."
The charter was developed after members of the UK Chapter of A4S's Asset Owners Network, which comprises some 40-plus UK pension scheme chairs, wanted reassurance that considerations around sustainability-related risks and opportunities – something they have embedded into their own investment decision-making processes – would continue once a bulk annuity transaction has been completed.
The pension chairs wanted increased transparency, both before the point of transaction to compare how insurer approaches to sustainability aligns to their own, as well as post transaction to assess continued alignment.
More details are available in a progress report produced by A4S to mark the first anniversary of the charter: www.accountingforsustainability.org/bulk-annuity-charter-one-year-progress.
Signatories to Sustainability Principles Charter
Insurers:
- Aviva
- Just Group
- Legal & General Group
- M&G
- Pension Insurance Corporation
- Standard Life, part of Phoenix Group
- Rothesay
- Royal London
Advisers:
- Aon
- Barnett Waddingham
- Cardano
- EY
- Hymans Robertson
- LCP
- Mercer
- Redington
- WTW
- XPS Group
Pension schemes:
- Cancer Research UK Pension Scheme
- Church of England Pensions Board
- Church of Scotland Pension Schemes
- HSBC Bank (UK) Pension Scheme
- Merseyside Pension Fund
- National Grid Electricity Group Trustee Limited
- Railpen
- Railways Pension Scheme
- United Reformed Church Ministers' Pensions Trust
Others:
- Accounting for Sustainability
- Association of Member Nominated Trustees
- Pensions and Lifetime Savings Association
- Pi Partnership Group
The four Sustainability Charter principles
1. Transparency - Transparency of values, principles and investment beliefs in relation to sustainability, as well as ongoing commitments that may guide future policy and practice affecting sustainability approaches.
2. Decision making - Evidence and understanding of how sustainability considerations are incorporated into investment analysis and decision-making processes, and investment stewardship activity.
3. Reporting and Engagement - Ongoing reporting and engagement to key stakeholders on sustainability commitments beyond the point of transaction.
4. Collaboration - Commitment to ongoing engagement across the pension sector as responsible investment best practice evolves.
