Pension savers in the UK could be losing significant retirement income due to the growing influence of net zero investment strategies, according to a new report. Analysis from the Prosperity Institute has warned that even small drops in annual returns can have a major long-term effect. It estimates that a 25-year-old saving £150 a month could be £178,000 worse off by retirement if their pension fund returns 8% instead of 9% each year.

The report claims Environmental, Social and Governance (ESG) policies have shifted attention away from maximising returns, with asset managers instead factoring in environmental and social goals. It calls for new laws to ensure pension providers prioritise financial performance unless savers choose otherwise.

Reform UK’s deputy leader Richard Tice said: “Alarm clock Britain should be able to trust that its pension savings are being invested in a way that will maximise their retirement income. Instead, their money is being used to fund net zero.

“This paper lays bare just how much worse off ESG makes British pension savers. Asset managers should beware of a future government committed to stopping this nonsense.”

The paper, reported on by The Telegraph, also points to low awareness among savers, with 55% of workers unsure where their pension money is invested.

It highlights differences in recent market performance. Some clean energy funds have struggled, while oil, gas and defence stocks have delivered strong gains. Defence firms, often excluded from ESG portfolios, have especially seen sharp rises.

Shadow Business Secretary Andrew Griffith said: “The simplest ideas are often the most powerful. In the ‘Death of the Fiduciary Duty’, the Prosperity Institute shows how undermining a simple principle has left ordinary people poorer.”

He added that lawmakers should “bury the well-meaning but toxic wasteland of ‘ESG’ forever”, and called for reform to be treated as a priority.

The report recommends savers should still be able to choose ethical investments, but only with clear and informed consent.

Supporters of ESG investing argue that environmental and social risks can affect long-term financial outcomes, and that responsible investment strategies may help protect returns over time.