The master trust is the latest to launch Sharia-compliant pension options including Islamic bonds to reduce risk for workers approaching retirement.
Martyn James, director of investment at NOW Pensions, told Pensions Expert that the master trust is gearing up to launch new Sharia options in 2025.
More details will be released closer to the time, but James confirmed that it will include a Sharia-compliant investment lifestyle strategy combining equity funds and sukuk bonds, assets in line with the Islamic principles of investing.
The move to include sukuk bonds, which are widely seen as more stable and less risky than equities, is important as it allows investors to derisk their investment portfolios as they approach retirement.
In the past, many Sharia-compliant pension offerings from large master trusts were pure equity funds that members had to actively select, and featured no risk management in the run-up to retirement age, unlike mainstream default funds.
Earlier this year, Smart Pension teamed up with Wahed to launch the Halal Workplace Pension, which offered a mix of equity funds and sukuk bonds.
Since then, Nest and Aviva have followed suit and now offer a mix of equity and bonds in their Sharia-compliant offerings.
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James said: “At NOW Pensions, we have a mission to help the underserved market save for their retirement, which is why we will be developing a range of options for savers who have different needs.
“We will be offering a Sharia-compliant investment lifestyle strategy, involving underlying Sharia equity and sukuk bond building blocks, and a Sharia equity self-select fund to all members in 2025.”
James confirmed that members will be given jargon-free information on the products to break through any confusion that can surround Islamic-compliant products.
He said: “Industry trends show that engagement and take up in these schemes has been relatively low. When we launch our new Sharia options in 2025, we will be looking to provide information to the membership on these strategies using simple, no-nonsense communication to see if we can have more of an impact.”
As part of NOW Pensions’ inclusion efforts, James said the master trust wanted the government to take a collaborative approach to raising minimum contribution levels and broadening the scope of auto-enrolment.
He added that any review of auto-enrolment should consider the impact of the cost-of-living crisis on members and employers, as well as seeking to promote greater inclusion, especially for “under-pensioned” groups.
“The UK pensions system is facing both immediate and long-term challenges,” James said. “We believe it’s time for a more strategic, consensus-driven approach to reform, with clear safeguards in place to ensure that pension savers remain at the heart of all decisions.”
