Net-zero pensions 'could deliver £1trn for UK's green recovery'

By re-allocating a proportion of state pensions to low-carbon energy and transport, and giving seniors access to these sectors for free, the UK Government could unlock £1trn for the net-zero transition.

Around one-eighth of the money given to pensioners in the UK is spent on energy and transport

Around one-eighth of the money given to pensioners in the UK is spent on energy and transport

That is according to a new white paper sent to Ministers today (25 November) by energy technology firm Moixa.

The white paper outlines the benefits of the creation of a ‘net-zero pensions’ mechanisms. Beyond ensuring that state pension investments are allocated to businesses that will drive progress towards the Paris Agreement, such a mechanism would re-allocate a proportion of pensions for low-carbon infrastructure, which could then be used for free or at a discount by pensioners after their retirement.

According to the white paper, around 14% of the UK’s pension liability is spent on energy and transport costs for pensioners. By taking 14% of the UK’s national pension liability, which currently stands at £8bn, and using it to invest in the infrastructure that would deliver ‘low-carbon state energy’ and state transport for free to future pensioners, up to £1trn could be unlocked in the short-term.

For such a mechanism to work, the white paper states, the government would need to purchase clean energy and deliver it back to pensioners in the future, in the form of a service. It could work with energy firms to do so.

Moixa said that the mechanism could help the government to frame net-zero as a “universal basic service” and as a “right”, enabling better public support for the UK’s transition to net-zero by 2050.

Recent research from Climate Outreach found that 39% of UK residents are not particularly worried about climate change. When Boris Johnson announced his ten-point green recovery plan on Twitter late last week, many replies argued that the net-zero transition would be expensive, would detract from supporting the national economy and is not the priority of Conservative voters.

Moixa co-founder Simon Daniel, who authored the white paper, said that a net-zero pensions mechanism could act as a “platform for UK leadership” at COP26.

“We must build, serve and create jobs for a low carbon tomorrow, as a social imperative today,” Daniel said. “The UK can provide a blueprint for the new US government and the EU to address fundamental social issues while delivering Covid-19 recovery, ultimately enabling the world to deliver on the Paris Accord.”

Pensions Bill

The proposals come as the Pensions Bill is progressing through Parliament. 

In its current form, the Bill’s main climate provision is a new mandate requiring large pension schemes to disclose the climate-related risks posed to assets in their portfolios by the end of 2022, in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).

Unlike Daniel’s proposals, most environment-related recommendations for the Bill have centred around disclosures and divestment. Pensions Minister Guy Opperman has stated that there will not be any blanket requirements on divestment, as he sees engagement as a more effective way for the finance sector to drive decarbonisation.

Sarah George



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