Pension schemes assessing portfolios in response to Ukraine crisis

Schemes are taking action to comply with UK sanctions and considering whether to enact any exclusion policies, industry body the PLSA said.

01 March 2022

Pension schemes are assessing their portfolios in response to the crisis in the Ukraine and considering whether to enact exclusion policies, according to an industry body.

The Pensions and Lifetime Savings Association (PLSA) said UK pension schemes will have an “extremely low level” of direct investment in Russia.

But it added that schemes are looking at the levels of any direct or indirect holdings they have in their investment portfolios and taking action to comply with UK sanctions.

The PLSA represents schemes collectively providing retirement incomes to more than 30 million UK savers, with more than £1.3 trillion invested in the UK and abroad.

Nigel Peaple, director of policy and advocacy at the PLSA, said: “Typically, UK pension schemes will have an extremely low level of direct investment in Russia – less than 0.5% of assets in the case of the schemes we have consulted.

“In response to the events of the last week, schemes are currently assessing the levels of any direct or indirect holdings they have in their investment portfolios, taking action to comply with the UK sanctions, and considering whether to enact any exclusion policies they have in place.

“There have been higher than normal price movements on financial markets in reaction to the conflict in Ukraine as investors interpret the economic impact.

“Pensions schemes have very long-term horizons and invest in a broad range of globally diversified assets to lessen the impact of unexpected shocks such as this.”

Tony Burdon, CEO at Make My Money Matter, a campaigning body co-founded by film writer and director Richard Curtis, said the organisation believes having pensions invested in Russian companies and Russian government debt “is morally and financially unsustainable in the current climate and goes against the prevailing mood of the UK public”.

He continued: “That’s why we’re encouraging all pension providers to urgently assess and reduce their exposure to Russian investments.

“In doing so, the financial sector can do the right thing, while at the same time helping protect the security of UK pension holders.”

Simon Pilcher, a chief executive at private pension scheme giant the Universities Superannuation Scheme, told BBC Radio 4’s Today programme on Tuesday: “We think there’s a clear financial as well as a moral case for divestment with respect to our Russian holdings.”

Mr Pilcher told the BBC that ethical and financial considerations overlap, adding “morals drive finance”.

He added: “If you are a financial investor and you don’t think about the moral impacts of what you are doing, I think you’re both short-sighted and, dare I say it, immoral.”

The Church of England Pensions Board recently instructed managers to exit direct holdings in Russian companies.

A spokesperson for the Church of England said: “On February 24, in response to the attack on Ukraine by Russia and supporting the sanctions announced by the UK and other Governments the Church Commissioners and the Church of England Pensions Board issued instructions to our managers to exit all of our current direct holdings in Russian companies and to make no further investments in Russian companies.

“Prior to the instruction, holdings across portfolios in Russian companies represented approximately 0.16% of total investments. No investments were held in Russian sovereign debt.”

Money managers Man Group and abrdn also revealed on Tuesday that they have been slashing their positions in Russia.

Asset manager abrdn – formed from the merger of Standard Life and Aberdeen Asset Management – has cut its exposure to Russia in recent weeks and declared it uninvestable for the foreseeable future.

But it still has around £2 billion of Russian assets, which is equivalent to around 0.5% of its total funds.

Hedge fund Man Group added it had sold out nearly completely from Russia and Ukraine before Christmas on fears over rising tensions and sanctions.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown cautioned consumers who may have seen their savings pots affected by market volatility in recent weeks against making “knee-jerk reactions”.

She said: “We’ve already seen the effects of the conflict on markets and this volatility is likely to persist as the crisis continues.

“We’ve seen the share prices of some UK-listed companies, like BP and Evraz, move dramatically, but the majority of pension holders are unlikely to hold a concentrated portfolio of shares.

“They are more likely be invested in collective funds, like global trackers so, while they will still feel the effects there will be less of an impact on the value of their pensions.

“Pensions are a long-term game and while it is concerning to see fund values go down, it’s worth remembering that markets do recover.

“Most pension holders will be invested in portfolios well diversified across sectors and geographies and so it is usually a good idea to wait things out rather than make knee-jerk reactions such as changing investment strategies or cutting pension contributions as these can crystallise losses.

“Continuing pension contributions will also help your pension to recover more quickly as the markets improve.”

A spokesman for the Association of British Insurers (ABI) said: “The events in Ukraine are deeply disturbing, and our thoughts are with those affected.

“Our members are monitoring closely and reacting to developments in this fast-moving situation, including continuing to support the implementation of any sanctions put in place.

“Anyone who has any concerns over their insurance and long-term savings policies in the current situation should contact their insurer or independent financial adviser.”

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