Now Pensions U-turns on sharia fund for members

The mastertrust, which has had one investment option since it launched in 2011, has previously said choice creates complexity and confusion for people.

But the provider has now confirmed it will join its main competitors, The People’s Pension and the National Employment Savings Trust, and launch a sharia fund.

Now Pensions hopes to announce the partnership shortly. Morten Nilsson, chief executive officer at the mastertrust, admitted it had seen very little demand from either employers or employees for a sharia-compliant fund.

“However, we do not want any members to lose out on the benefits of auto-enrolment due to not being able to invest in a sharia-compliant fund, therefore external due diligence has been conducted on behalf of the trustees to appoint a provider to meet this need,” he said.

Last year, the scheme’s chair Nigel Waterson told Pensions Week that it would stick to its singular investment option.

“If people want a sharia fund, or they want more excitement in their investment lives, they can go somewhere else. They can go to [Nest] or if they want lots of excitement they can go to one of the existing providers,” he said.

Laith Khalaf, head of corporate research at Hargreaves Lansdown, said the reality was that very few savers or investors opt for a sharia fund.

“However, that doesn’t mean that it is not important for a pension scheme to have a sharia investment option just in case there are a small number of employees now, or indeed in the future, who do have a predilection to invest in that sort of fund,” he said.

He also highlighted recent research by the Pensions Regulator, which showed that trust-based schemes offering more than 50 funds to choose from had increased significantly

“That is the direction of travel for both trust and contract-based schemes – to provide more investment options for people,” Khalaf said.

“People are more responsible than ever for their retirement planning and in order to let them step up to the plate you need to give them the tools to do that, alongside information and guidance.”

But awareness among employers and schemes about the importance of catering for members who share common values has grown steadily in recent years.

Although take-up of such options was relatively low, with Nest reporting earlier this year that current take-up of its sharia fund represented just 1 per cent of its assets under management, availability of the option has been a real consideration for companies.

In January, the Islamic Bank of Britain launched a sharia-compliant investment option in response to auto-enrolment and to meet the saving preferences of its staff.

At the time, Sultan Choudhury, managing director at the IBB, spoke about the lack of sharia-compliant funds on the market for pension consumers.