The scope of fiduciary duty in pension scheme investment has been debated for decades. In recent years, in particular, discussion has focused around whether the duty allows trustees to consider wider issues such as systemic risks and member quality of life in retirement.
The question has resurfaced following a proposed amendment to the Pension Schemes Bill, tabled by the Rt. Hon Liam Byrne MP in October this year. The amendment aims to clarify that trustees may take account of some of these wider factors in their investment decisions.
While broadly welcomed by many in the industry, others argue that legislation is unnecessary because the law already gives trustees the flexibility they need, and that the real issue is uncertainty about how best to apply it.
On 3 December 2025, during the Bill’s Report Stage debate, the government signalled that, whilst the amendment remains tabled, it is considering addressing these issues through statutory guidance rather than through primary legislation. This approach is intended to provide clarity without risking the unintended narrowing of trustees’ existing discretion.
What would the amendment change?
The amendment provides that, when determining what is in members’ best interests, trustees may take account of:
- system-level risks and opportunities, such as those linked to climate change or global economic shifts which cannot be managed through diversification alone;
- reasonably foreseeable impacts on members’ standard of living, reflecting the idea of investing for a world worth retiring into; and
- members’ own views, where relevant and practical to assess.
It also clarifies that, where any of these factors are financially material, trustees must take them into account.
The amendment, is intended to be clarificatory rather than reformative. It does not rewrite the core fiduciary duty, which remains to promote the purpose for which the trust was created – which, in the case of a pension scheme, is the duty to provide pensions – nor does it, of itself, create a “safe harbour” protecting trustees from challenge.
Trustees would still be judged by familiar standards. As set out in Edge v The Pensions Ombudsman, the leading case on trustee decision-making, trustees must consider all relevant factors, disregard the irrelevant and reach a decision that no reasonable trustee could consider perverse. Investment decisions are assessed against that standard, taking account of the scheme’s particular circumstances, investment strategy and liability profile. Within this framework, trustees can already consider systemic risk, social stability and member sentiment, provided they reasonably believe these factors to be relevant, in the context of their scheme, to the purpose of providing pensions and they must consider them if financially material.
Do trustees need legislation or just more confidence?
Supporters of the amendment argue that explicit wording could help smaller schemes or less experienced trustee boards feel confident in considering wider risks and that, by validating this approach, the legislation will encourage the development of analysis tools and datasets to support decision-making around these wider risks. Critics counter that the fiduciary duty enables consideration of a very broad spectrum of factors and that legislating to “clarify” the duty is unhelpful and risks unintentionally narrowing discretion. Specifying in legislation what trustees may consider could also encourage a box-ticking/compliance approach rather than appropriate consideration of the issues.
Similarly, while the amendment has been described as signalling support for trustees who wish to take account of these wider factors, it would not protect trustees from challenge where they are unable to evidence the relevance of these factors to their purpose of providing pensions for and in respect of members. Arguably, the greater need is for education and guidance rather than legislation, and commentators have suggested that the real blocker to considering these wider issues is in understanding how to analyse their impact and relevance. Targeted training, detailed, practical guidance and clear examples of good practice could be more effective than new legislation. In practice, the key challenge may not be authority but confidence.
What does this mean for trustees and policy?
The debate connects closely with the government’s productive finance agenda, which aims to encourage pension schemes to invest in the UK, including in infrastructure and green transition projects. Some see clarifying fiduciary duty as a way to encourage trustees to invest more domestically but, in reality, this is already permitted, assuming that it satisfies the test of supporting the purpose of the trust.
For trustees, the key takeaway is that fiduciary duty continues to evolve through practice rather than prescription. The best way to demonstrate compliance is to strengthen investment governance and decision-making by documenting how ESG, systemic and member-related factors are assessed and integrated into investment strategy.
Whether or not the amendment becomes law, the renewed focus on fiduciary understanding is valuable. Given the government’s indication that any clarification may now be delivered through statutory guidance rather than through legislation, trustees may ultimately see interpretative support rather than legislative change.
Many trustees are keen to engage actively with emerging risks, member perspectives and long-term value creation. Statutory guidance which is robust and clear should give them the greater confidence and support that they need.
