UK master trust seeks pension minister’s backing to review fiduciary duty
NatWest Cushon master trust is pushing to review the concept of fiduciary duty, the initiative is welcomed by the newly appointed pensions minister
The new guidance, developed by £3.1bn master trust NatWest Cushon and global law firm Eversheds Sutherland, confirms that trustees can legally consider factors beyond traditional financial returns—such as the future standard of living of pension scheme members—when making investment decisions.
The interpretation is significant for pension funds’ role in the UK’s energy transition, as it gives trustees greater flexibility to allocate capital towards private market investments in UK infrastructure, clean energy, and industrial decarbonisation projects.
NatWest Cushon’s push to review fiduciary duty appears to have found a powerful ally in the form of newly appointed pensions minister Torsten Bell.
Bell, who has taken on the role of pensions minister in January this year has previously spent nearly a decade as chief executive of the think tank Resolution Foundation.
The announcement, made at a Mansion House event in London on 5 March, follows legal analysis suggesting that pension trustees’ fiduciary duty is broader than previously understood.
A landmark paper issued by the UK's Financial Markets Law Committee (FMLC) last year defined climate change as a financially material risk.
Mansion House is the official residence of the Lord Mayor of London. Located in the heart of the City of London, it is often used by UK politicians for major economic policy announcements.
A shift in fiduciary duty
Traditionally, trustees have prioritised maximising financial returns, often leading them to invest in global markets rather than UK infrastructure. However, the new legal advice clarifies that trustees can also consider wider economic and social factors that impact members' long-term standard of living in retirement.
Pensions minister Torsten Bell, who spoke at the event, welcomed the findings: “Pension scheme trustees have a fiduciary duty to secure good outcomes for members. That duty supports rather than undermines the case for investing in a broad range of assets and for investing in the UK.”
This interpretation challenges the notion that pension funds must take a narrow view of risk-adjusted financial returns. Instead, it provides a legal framework for trustees to consider the long-term impact of investments on members' retirement, including access to clean energy, healthcare, infrastructure, and a strong economy.
A boost for UK green investment
One of the most immediate implications of the legal opinion is that pension funds may feel more confident investing in the UK’s energy transition, rather than funnelling capital into overseas projects, NatWest Cushon believes.
The master trust, which made the headlines two years ago for its use of carbon offsets to meet more ambitious net zero ambitions has been one of the first DC investors in climate solutions and has pledged to invest 5% of its default fund in private markets as part of the so-called Mansion House Pledge.
Julius Pursaill, strategic adviser at NatWest Cushon, argued that trustees have long been at a disadvantage when allocating capital:
“It's always seemed unreasonable that trustees should feel obliged to create societal infrastructure across Asia, Australia, the Americas, and continental Europe rather than focus on creating it in the UK. The Eversheds opinion makes it clear that, to the extent it impacts members' standards of living in retirement, trustees can create that societal infrastructure in the UK.”
The shift could support the UK government’s growth and decarbonisation agenda, encouraging pension funds to channel billions into renewable energy, low-carbon transport, and industrial decarbonisation projects. With pension schemes collectively managing £3trn in assets, even a small reallocation of capital towards green investment could significantly accelerate the UK’s transition to net zero.
Trustees still need robust investment cases
While the legal framework is now seen as more permissive, experts caution that trustees must still conduct thorough due diligence before making investment decisions.
Michael Jones, partner and head of defined contribution pensions at Eversheds Sutherland, emphasised that trustees must balance financial and non-financial factors carefully:
“In our view, the law is sufficiently broad, flexible, and permissive for trustees, in the right circumstances, to take a wider and more holistic view of sustainability. Trustees still need to take their own professional advice and be satisfied with the robustness of the investment case.”
Trustees will still need to justify their investment decisions in line with Section 36 investment advice requirements and ensure they meet long-term return expectations, he added.
