Standard Life will embed sustainable multi-asset strategies into its default fund portfolios as part of a plan to target better retirement outcomes.
The provider, part of Phoenix Group, is making a series of changes to its Active Plus and Passive Plus default propositions which target enhanced returns over the long term.
This will include adjusting the risks the portfolios take earlier and then optimising the glidepath appropriately to manage that risk overtime.
For example, the typical asset allocation will move from a 49.4% allocation to growth assets to a 79% allocation. Defensive assets will drop from 32.1% to 9.6%.
The risk adjustments will be achieved through increased exposure to equities, while also adopting an enhanced ESG focus through screening, tilting and stewardship practices. More than 80% of assets will be ESG-focused and built on transparent, financially focused ESG targets.
Members are also expected to benefit from a reduction in the annual management charge.
This includes screening out controversial weapons including nuclear, tobacco products, thermal coal and unconventional oil and gas, and UN Global Compact fails and ESG controversies.
Around 1.5 million Standard Life pension customers, including those within its master trust schemes, will be automatically brought along, with around £15bn of assets set to be invested in these strategies by the end of the year. The transition of master trust members is due to begin next month.
The process began back in 2020 when new clients were automatically invested in the Sustainable Multi Asset Universal Strategic Lifestyle Profile.
Speaking to Professional Pensions, head of investment solutions Gareth Trainor said the main focus was on delivering "good retirement outcomes that sustainable multi-asset brings".
He explained: "The uptick in the exposure to growth assets with a later de-risking phase is part of a philosophical change, following a root and branch review."
Targeting good outcomes is "critical to the rest of the design", he said, with the Pensions and Lifetime Savings Association's Retirement Living Standards used to inform this design.
"One of the things that this has is future proofing. This is a working example of that," Trainor added. "We have evolved Active Plus and Passive Plus through the years and now we have got flexibility there if the world evolves. The future proofing is a critical part of this."
Trainor stressed the ESG components of the fund were based on financially material risks and customers would still be able to choose their own funds and make their own judgments if they wished.
Each investment is assessed in relation to recognised industry-standard ESG scores, with this analysis looking beyond climate risks and into social and governance issues also.