The social investment wholesaler Big Society Capital has called on the government to encourage the introduction of social pension funds in the UK, saying they could provide hundreds of millions of pounds of funding to charities and social enterprises by 2025.
In a new report, Good Pensions: Introducing Social Pension Funds to the UK, published today, BSC and the think tank the Social Market Foundation argue that introducing them would provide much-needed investment for charities and social enterprises, particularly in areas such as social housing, rehabilitation and the environment.
The paper says the UK could establish an equivalent to France’s Solidarity Investment Fund, which invests 90 per cent of employees’ savings in traditional investments such as listed companies and the remaining 10 per cent in social investments. The fund, which was launched in 2001, has more than a million investors and assets worth £3.4bn.
A spokesman for BSC told Third Sector that if social pension funds were strongly promoted over the next decade, more than 10,000 people could be paying into the funds by 2020, which could generate "hundreds of millions of pounds" for charities and social enterprises by 2025.
The report says the scale of potential social investment from pension funds is "huge" because there will be an estimated 16 million savers by 2020 and up to £600bn invested in defined-contribution pension schemes by 2030.
It says that investment firms could develop the funds and the government could promote them through regulation – for example, by making it mandatory for employers to offer social pension funds to staff paying into defined-contribution schemes.
The report cites a survey by the Defined Contribution Investment Forum, which found that many savers, especially younger employees, were concerned about the social and environmental effects of their pension investments, as well as their financial performance. Forty-four per cent said they would prefer their employers to choose pension providers that invested in social funds even if this meant they would achieve lower returns on their investments.
Nigel Keohane, author of the report and research director at the Social Market Foundation, said: "Pension funds comprise huge reservoirs of capital. Putting these to productive use within the social sector has never been more important, given further reductions in government funding. But with people increasingly wanting to see positive social as well as financial returns, this could also be a route to encouraging people to save and creating the savings culture that the Chancellor has called for."