Campaigners urge use of French-style social investment rule in pensions bill announced by Chancellor

Date: 4 June 2014

The Social Economy Alliance, a growing collaboration of more than 400 socially-driven organisations, today called for a French-style ’90-10’ rule to be included in the forthcoming pensions bill, announced today in the Queen’s Speech. Under such a rule, pension fund managers would have to offer savers a choice of at least one social investment fund.

The Alliance is calling for a series of measures to allow the UK economy to deliver more for communities and society. These include an urgent extension of social value laws which currently apply to spending on public services. They said that this is key to ensuring that infrastructure spending and the sale of high-value land, both of which were announced in today’s Queen’s speech,  will benefit communities and taxpayers rather than overseas investors.

Under the so-called ‘90/10’ rule on French pensions, savers can choose a fund in which some of their money is invested in environmentally and socially responsible companies, and used to finance social enterprises, co-operatives and housing associations. Research shows that, contrary to perceptions, there is no evidence these funds do not perform as well as ‘just for profit’ funds.

The Social Economy Alliance said an introduction of a social investment rule on pensions could offer a once-in-a-generation opportunity for ordinary savers to use their money to shape the world in which they will grow old. They say that the new Pensions Bill must include provisions to allow savers to direct investment towards economically productive, socially useful and environmentally responsible sectors of the economy. Following George Osborne’s Budget announcement that pensioners can opt out of buying annuities, savers will now have far greater freedoms and flexibilities. Campaigners say a ‘90/10’ rule would complement the measures announced today, to give British people greater choice over how their savings are invested.

Jonathan Jenkins, Chief Executive of the Social Investment Business, which is a member of the Social Economy Alliance, said: 

“Too often, our economic rules and regulations make doing the socially responsible thing harder rather than easier. Giving people greater freedom and flexibility on their pensions should include giving them the option to invest socially. The upcoming pensions bill presents an excellent opportunity to do this.”

Nick O’Donohoe, Chief Executive of Big Society Capital, said:

“At a time when savers can build a nest-egg while also making the world a better place for their retirement, they must now be given the opportunity to make that choice. There are a number of steps the UK can take to empower its citizens to make socially responsible decisions when they manage their money. This is an important one.”

The Alliance also has a number of proposals to ensure that investors, asset managers and financial service providers can take into account longer-term social and environmental value, and not just narrow, short-term financial returns, when they invest people’s money.  This includes clarification of the notion of fiduciary duty and charity law, the role of the FCA and other steps which ensure finance doesn’t have to be anti-social.