I. Introduction
In recent decades, there has been a significant shift in the structure of occupational pension schemes from Defined Benefit (DB) to Defined Contribution (DC) schemes. This paradigm shift has given rise to various governance challenges, hence requiring a reassessment of the duties and rights of the occupational pension scheme (OPS) members. As a result of this change, employees are now responsible for the risks associated with their investments. Therefore, the relationship between agents and principals in occupational pension schemes has altered.
This democratic deficit becomes particularly acute when considering that UK pension assets exceed £3.5 trillion.Footnote 1 Yet the small number of enthusiastic members who actively wish and seek involvement in investment decisionsFootnote 2 find themselves structurally marginalised by governance systems designed for passive majorities. Current governance mechanisms fail to capture preference intensity, a critical oversight that Quadratic Voting (QV) can directly address. Unlike the traditional one-person-one-vote mechanism, which treats all preferences equally, QV enables scheme members to express not just their choices but also the strength of their views through quadratic cost functions.
This article examines whether QV can reduce agency problems in occupational pension schemes. Members receive a fixed budget of voting credits, with additional votes becoming progressively more costly. Those with strong views on issues such as sustainable investment can concentrate credits there, while others can reserve credits for matters they regard as significant.
The current pension landscape makes QV not merely useful but necessary. However, establishing voting rights for scheme members runs into two major obstacles: widespread passivity, comparable to shareholder passivityFootnote 3 in corporate governance, the absence of a clear ownership link between members and pension fund assets. OPS members are not in the position of shareholders. They do not own the fund assets, and the law gives them no ordinary proprietary lever over investment policy. That weakness matters most in DC schemes, where members bear the investment consequence without holding the investment power. QV does not solve this by pretending they are owners. It gives their beneficiary interest a limited governance form.
QV gives trustees a better record of member views than ordinary consultation. Low turnout would still matter, but it would not make the exercise useless. The members who do participate would reveal not only their preferred option, but the strength of their concern, especially on questions such as sustainability, alternative assets or default fund design. The result would not relieve trustees of judgment. It would give them evidence they presently lack.
II. Barriers to engagement
1. The rational passivity of OPS members
In DB schemes, member passivity may often be economically rational because the employer, not the member, ultimately bears investment underperformance.Footnote 4 By contrast, in DC schemes, where members bear investment risk directly, the case for continued passivity is much weaker. This additional burden on members appears to be causing many people to feel anxious and overwhelmedFootnote 5 , forcing them to prefer being passive.
DC pension governance is characterised by a separation between risk-bearing and decision-making: members bear the consequences of investment choices,Footnote 6 while trustees and managers retain control over them. That structural division warrants a more effective mechanism for articulating members’ preferences. The shift from DB to DC provision sharpens this concern by transferring a substantial share of investment risk from employers to members.
A Danish study that examined a large dataset of 41 million observations proposes a more detailed way to categorise savers into “active” and “passive” groups. Active savers change their saving habits when they receive financial incentives, while passive savers stick to their old habits no matter what happens to the policy. The results show that 85% of respondents are passive, while just 15% are actively involved. This is a big problem for policymakers who rely on people’s responsiveness.Footnote 7
The Danish evidence shows that passivity is not an accident of poor communication. It is a predictable feature of pension saving. The task, then, is not to keep giving members more information, but to create a mechanism that draws out preferences even where many members remain rationally disengaged.
2. Financial illiteracy
Financial illiteracy remains a central cause of pension passivity. UK evidence shows weak adult financial literacy, with the UK ranking poorly among OECD countries and around two-fifths of adults displaying low financial literacy.Footnote 8 Similar patterns appear in defined contribution schemes: one US survey found that only 42% of participants tried to analyse their retirement funds, while 42% had little or no financial expertise.Footnote 9 The point is old. The OPB Report had already treated lack of knowledge as a barrier to participation, attributing weak participation not to unwillingness but to “a general lack of knowledge.”Footnote 10 Digital voting is now technically easier, but the cognitive burden remains. Even educated investors struggle with risk, diversification, compound interest and debt, and more than half of UK DC pension holders report very low or low levels of engagement.Footnote 11 This supports limited strategic voting, not member control over portfolio construction.
3. Behavioural aspects of member passivity
Member passivity is not simple indifference. It is produced by regret avoidance, present bias and the cognitive cost of financial choice, all of which push members towards delay even where action would serve their long-term interests.Footnote 12 Choi et al. give the point empirical force: after a retirement-planning meeting, all attendees said they would join the company savings plan, but only 14% did so.Footnote 13 In OPS governance, the problem is sharper than in corporate shareholding. Berle and Means’s account of rational passivity helps explain why members treat investigation, comparison and switching as costs not worth incurring, but pension members lack the shareholder’s ordinary exit route, as leaving the scheme is usually a last resort.Footnote 14 Procrastination, fear of error and default reliance then reinforce each other.Footnote 15 This supports a voting design that amplifies serious member preference without inviting portfolio construction. QV is relevant at that point because it lets members express intensity through credits, not a bare yes-or-no vote.
4. The role of default funds
Despite the DC scheme participants’ right to opt out and invest their contributions in any fund or asset, a majority of themFootnote 16 choose or are allocated to the scheme’s default funds, which are commonly the ones offered by the scheme provider.Footnote 17 Default funds have become essential, providing a safety net for those who are either unable to engage or overwhelmed by the complexity of investment options. The dominance of default funds in DC plans exacerbates passivity, with most UK members opting for these preselected choices.Footnote 18 Default funds are easy to use and help with some behavioural biasesFootnote 19 through professional management, yet they demonstrate considerable performance variability, with returns ranging from 3.4% to 11.9%,Footnote 20 which significantly affects retirement outcomes.
Opting for default funds, like procrastination, stems from cognitive biases that prioritise short-term convenience over long-term rewards.Footnote 21 Individuals who select default funds often regret their choices later, suggesting that reliance on defaults may not always align with their long-term preferences.Footnote 22 This dependence might result in unintended outcomes,Footnote 23 as default options may not align with individual risk profiles, retirement timelines or financial goals.
5. The proper scope of member voting
The behavioural case for member participation must be scaled back. The evidence on financial illiteracy, procrastination, default reliance and unstable portfolio preferences does not support voting across all investment decisions. It points the other way. Members should not be asked to construct portfolios, select individual funds, rebalance investments or perform the work of investment managers. Detailed investment choices are the wrong subject for member voting because they assume a level of expertise, attention and preference stability that many members do not possess. The failure of member choice at that level is not a reason to abandon member voice altogether. It shows that the voice must be directed at the right institutional level.
Two types of decision remain suitable. The first is major asset allocation. This concerns the scheme’s broad investment posture, including the balance between growth and security, exposure to volatility, time horizon and the role of responsible or sustainability-led investment. These are strategic choices about the conditions under which members’ retirement savings are put at risk, not day-to-day portfolio decisions. The second is the appointment, review or replacement of investment managers. That decision concerns who should exercise delegated investment judgment over assets held for members and under what mandate. Members are not being asked to choose securities or time markets. They are being asked to express a view on the fund’s broad direction and on the persons entrusted with delegated authority over their retirement savings.
This limited model also deals with the fiduciary objection. Member voting would not bind trustees or take investment judgment away from professionals. Its role is evidential. It gives trustees a record of what members prefer, and how strongly, before strategic powers are exercised. If members’ protection lies in due administration and the proper exercise of fiduciary powers, their voice should be heard where those powers are framed, delegated and reviewed. QV does not make members investment managers. It brings their preferences into view at the level where governance decisions shape retirement outcomes.
III. OPS members’ non-financial concerns
Member interest in ESG and responsible investment has made pension investment harder to describe as a purely technical exercise. Retail-investor research shows growing demand for sustainable investment, while UK pensions evidence suggests members increasingly prefer digital routes to engagement, including mobile applications, dashboards and online banking-style access.Footnote 24 That matters because ESG is no longer only a question of values. It also concerns risk, transition exposure, regulatory pressure and long-term investment performance.Footnote 25
Fiduciary law still sets the boundary. Cowan v Scargill is often invoked for the claim that trustees must prioritise financial benefit over ethical preference, especially where the alleged preference risks prejudicing the benefits promised to members.Footnote 26 However, the case should not be treated as a complete account of modern pension investment law. Responsible investment has moved into the fiduciary frame, not outside it.Footnote 27 MNRPF directs attention to the purpose of the trust and the benefits intended for beneficiaries, while Harries shows that ethical restrictions are not unlawful merely because they are ethical, provided they remain consistent with proper investment judgment.Footnote 28
The public sector guidance and Law Commission material sharpen the point. Non-financial factors are not free-standing instructions. They are relevant where trustees have good reason to think members share the concern and where the decision does not involve significant financial detriment.Footnote 29 That test exposes the institutional weakness. The law asks trustees to identify member preference, but gives them no serious machinery for doing so. Advisory QV supplies that missing evidential mechanism. It records whether members support an ESG or sustainability position and how strongly they support it. It does not bind trustees. It gives fiduciary judgment better evidence before trustees decide.
IV. Legal foundation for voting rights
The legal foundation for member voting does not rest on direct ownership of pension assets. It rests on a narrower but stronger claim: OPS members hold beneficial interests, rights to due administration and proprietary-adjacent governance interests within a fiduciary structure. The problem is not that trustees lack legal authority to decide. It is that DC members bear investment consequences while remaining largely excluded from the governance processes through which those consequences are shaped.
Most OPS members are auto-enrolled in default funds and bear financial risks without meaningful input into scheme governance, as financial illiteracy and behavioural barriers persist even while interest in ethical and ESG priorities grows. This disconnect reveals a governance gap and highlights weaknesses in the legal framework. A robust legal foundation for member voting rights, mirroring the link between property interest and voting rights in company law, would recognise both the financial and ethical interests of members as stakeholders. Such a structure would better reflect the diverse interests affected by pension scheme decisions, including employees, sponsors and other stakeholders,Footnote 30 and ensure that members have a genuine say in investment-related matters.
Ewan McGaughey believes that corporate governance of pension funds should be shaped by participation and contributionFootnote 31 rather than by ownership and control, the governance model suggested by Berle and Means.Footnote 32 He argues institutional investors act as agents for ultimate investors, such as pension scheme members, to contribute to corporate ownership. This shifts the focus from share ownership to contributions, allowing for the exercise of participation rights, including voting. Therefore, OPS members, as stakeholders of the investee companies and assets, have the right to monitor the trustees and investment managers to ensure they are looking out for their best interests in the long term, as their money is being invested. We believe this idea can apply corporate governance principles to pension schemes, emphasising contribution and participation above ownership and control. This entitlement, which is based on contributions and enhances pension governance by raising accountability, reflects the democratic idea that capital suppliers should participate in its management.
1. OPS members’ property rights
Shareholders’ voting rights derive from their property rights in company shares, enabling them to influence key decisions and protect their interests as owners. This ownership-based control helps to reduce agency costs by allowing shareholders to monitor management effectively.Footnote 33 Similarly, OPS members hold beneficial interests that provide a legal and logical basis for recognising a governance claim capable of supporting advisory voting mechanisms in investment-related decisions. Just as shareholders oversee company management, OPS members ought to have a say in how their pension assets are managed, particularly regarding investment strategies and trustee oversight, to ensure their interests are represented and safeguarded.
In the UK, pension scheme assets are held in a trust structure, ensuring they are protected for the benefit of scheme members rather than forming part of the employer’s property. Notably, it is a sui generis Footnote 34 and a drastically different species of trusts. Footnote 35 Members’ beneficial interests in these assets, in our view, justify the extension of governance voting rights analogous to those enjoyed by shareholders. This consideration is particularly significant in the context of DC schemes.
The property rights debate in DB schemes centres on whether members have enforceable rights in the trust fund, since the sponsoring corporation separates the plan’s assets from its own financial records.Footnote 36 Members are entitled to future pension benefits in accordance with the scheme rules, which are secured by the pension fund’s assets held in trust. Although members do not own these assets outright, some commentators have characterised their rights as beneficial interests in the trust fundFootnote 37 proportional to their accrued benefits, even if not a direct slice of the assets.Footnote 38 In Davis v Richards & Wallington, the Court of Appeal rejected the argument that members possessed a direct proprietary claim to pension fund assets or surplus. The decision therefore supports the view that members’ protection lies less in outright ownership than in the equitable and contractual mechanisms through which pension rights are administered and enforced.Footnote 39
That analysis is consistent with orthodox trust doctrine: the member’s core protection lies in the right to due administration and supervision of the trustees, rather than in any direct proprietary claim to identified scheme assets.Footnote 40 Hudson’s account usefully describes this as a control-based, rather than asset-based, proprietary position.Footnote 41 Other leading scholarship reflects the same view: the beneficiary retains a continuing and enforceable right to due administration that structures trustee accountability.Footnote 42
The difficulty is that this conclusion does not eliminate the governance question. If members are neither outright owners of scheme assets nor mere contractual claimants awaiting future payment, their legal position occupies an intermediate space that orthodox trust law has never fully resolved. The courts have been reluctant to translate members’ contributions into direct proprietary ownership of pension assets, yet they have been equally unwilling to treat members as strangers to funds accumulated through their labour and contributions. The practical significance of membership therefore lies less in ownership of identified assets than in the continuing entitlement to have fiduciary powers exercised properly, honestly and for the purposes for which they were conferred. Once the member’s interest is understood in those terms, the question ceases to be whether members own the fund and becomes whether a governance structure that leaves beneficiaries largely voiceless remains adequate in schemes where they bear much of the economic risk.
The point becomes sharper in DC schemes. The same doctrinal structure remains, but the member’s economic exposure is more direct. The retirement outcome depends on the value of the individual pot, and that value is shaped by decisions about default design, asset allocation, charges, stewardship policy and the appointment and review of investment managers. The member still does not own any of the identified assets within the fund. Yet the member’s equitable position attaches to the administration of value held for retirement benefit and to the proper exercise of powers that affect that value. DC therefore exposes the control dimension of the beneficiary’s interest with unusual clarity. Governance decisions do not merely affect the scheme in the abstract. They alter the economic conditions under which members retire.
2. Equity, due administration and member voice
The equitable case for member participation in occupational pension schemes does not rest upon voting as an orthodox remedy for breach of trust. The argument operates at a prior level, arising from the structural conditions of membership itself. The beneficiary’s claim in equity does not require outright ownership of scheme assets. It lies in the right to due administration, proper fiduciary supervision and the conscientious exercise of powers held for the membership’s benefit. Where the scheme structure excludes members from meaningful participation in the governance of a fund to which they are economically exposed, equity is called upon to give that exposure a more adequate institutional expression.
McDonald v. Horn provides limited but useful support for this argument.Footnote 43 The case did not concern member voice or voting. Its importance lies in the court’s use of equitable costs protection to prevent pension beneficiaries alleging breach of trust and improper administration from being priced out of enforcement. Equity treated their interest in due administration as deserving practical protection. A beneficiary interest strong enough to justify procedural protection after fiduciary power has been exercised should not be reduced to a passive entitlement to future payment. British Airways Footnote 44 reinforces the point from the side of trustee power. It confirms that powers granted by a pension trust deed remain subject to equitable limits, including the proper purpose requirement. Pension governance is therefore not insulated from equity merely because the instrument confers broad formal discretion.
Comparable reasoning appears outside pension law. In Schmidt v Rosewood Trust Ltd,Footnote 45 the court’s supervisory jurisdiction treated access to trust information as a matter of fiduciary accountability, not as a right dependent on proprietary ownership. Investors were permitted to bring a derivative claim in Certain Limited Partners Footnote 46 where the ordinary governance channel was blocked. Neither case creates a right to vote. Their value is narrower. They show courts resisting arrangements in which intermediary control leaves investors without a meaningful route to information, supervision or enforcement. That supports member voice as a governance mechanism short of control.
This position is not alien to pension trust administration. In Benge,Footnote 47 the court confronted the governance difficulty created where membership, beneficiary status and trustee decision-making overlapped. The case does not create participatory rights. It does, however, show that members’ interests can shape the administration of fiduciary power, rather than sit outside it.
Pension trusts are already treated as special. Hanbury and Martin identify their scale, quasi-public character, risk of employer misappropriation, public interest and the non-volunteer status of beneficiaries as reasons for special rules.Footnote 48 Moffat similarly shows that pension trusts combine trust law, employment, contribution, regulation and collective expectation in a way ordinary private trust doctrine cannot accommodate without strain.Footnote 49 Statutory pension law has already modified orthodox trust governance through member-nominated trustees, majority decision-making, trustee knowledge requirements, professional advice, investment rules, funding duties, disclosure, Ombudsman jurisdiction and regulatory supervision. These interventions reflect a recurring legal judgment that ordinary trust administration gives insufficient protection where large occupational funds are controlled by fiduciaries and employers whose incentives may diverge from those of members.
QV should therefore be understood as an equitable governance response, not a displacement of trustee discretion. It gives practical content to the members’ right to due administration by supplying trustees with structured evidence of what members prefer and how strongly they prefer it. Disclosure alone does not solve the engagement problem, and ordinary consultation often records only shallow approval, weak objection or silence. QV preserves trustees’ final duty to act for proper purposes and protect members’ financial interests, while making member preferences visible before fiduciary power is exercised. In ESG, default fund design, asset allocation, stewardship policy and investment-manager review, this is not ornamental. It supplies a disciplined mechanism through which non-volunteer beneficiaries with equitable administrative rights can be heard within the fiduciary structure.
3. Technological advancements as catalysts for member engagement
Digital pension infrastructure makes advisory QV more administratively plausible than older forms of member voting. Behavioural pension policy has long relied on nudging rather than intensive member deliberation, most visibly through automatic enrolment, but that model still leaves member preferences largely unexpressed.Footnote 50 Recent DWP work on pensions engagement recognises the continuing difficulty of turning access to pension information into active member involvement.Footnote 51 Scheme portals, pension apps and dashboard-style interfaces now offer verified channels through which members can receive information and interact with their schemes.Footnote 52 A QV mechanism could build on that infrastructure through a credit-allocation interface, identity checks and trustee-facing reports of aggregated preference intensity. Technology does not remove the legal limits on member voting, including the statutory model of member-nominated trustees.Footnote 53 It does weaken the older objection that large-scale member consultation is impracticable.
4. Regulatory and statutory evolution toward enhanced engagement
The regulatory landscape has evolved to embed pension scheme members more directly in the governance of their schemes. The UK’s Pensions Act 2004 marked a pivotal shift, requiring that at least one-third of trustees in OPSs be member-nominated trustees (MNTs). By ensuring that members have representatives at the decision-making table, this legislation acknowledged their stake and embedded their voices within the layers of scheme governance.Footnote 54
Statutory developments have advanced significantly over the past few years. The Pension Schemes Act 2021 gives the UK government the authority to set rules requiring some pension scheme trustees to manage and report on how climate change might affect their schemes, both the risks it poses and the opportunities it creates.Footnote 55 These requirements, implemented through the following regulations and guidance, are designed to increase transparency and help members understand how climate risks are managed. However, they do not provide a direct platform for members to influence the investment policy. The UK Stewardship Code 2020 complements these statutory requirements by setting high standards for responsible investment and stewardship for asset owners, including pension schemes.
Building on this, The Pensions Regulator has issued guidance urging schemes to prioritise clear communication and engagement, particularly regarding investment options and performance, recognising that informed members are more likely to participate actively.Footnote 56 In March 2024, TPR’s new General Code of Practice replaced ten previous codes, including DC Code No. 13, and set clear expectations for scheme governance, requiring trustees to provide members with clear, accurate and timely information, especially about investment options and performance, and to review their communications and engagement processes regularly.
The next step in pension governance is to develop institutional mechanisms through which member preferences can be expressed and more effectively taken into account. Regulation is expensive, and regulators are giving members greater control over their schemes to mitigate regulatory costs.Footnote 57
5. Bridging the gap: the case for quadratic voting
Persistent passivity, complexity and weak engagement show why pension governance needs a different mechanism. Digital infrastructure, including the UK Pensions Dashboard, now makes member preference-collection more feasible than earlier paper-based models.Footnote 58 Innovative mechanisms, such as quadratic voting, enable scalable and equitable voting by allowing members to allocate votes based on the intensity of their preferences, thereby addressing apathy and complexity.Footnote 59 Compared to past decades, implementing voting rights is now less daunting, as digital tools reduce administrative burdens and empower members. By leveraging such technology-enhanced platforms, many jurisdictions can advance toward more democratic governance of pension schemes, ensuring accountability and aligning governance with members’ long-term interests.Footnote 60
In this article, QV is proposed as a limited advisory mechanism through which members can express preference intensity within a fixed credit structure. Its value lies not in transferring investment authority to members, but in giving trustees a more disciplined record of member views on strategic governance questions. Properly confined, it addresses the agency problem in OPS governance while preserving fiduciary responsibility.
V. Voting right implementation
The case for member voting in OPS governance is strongest where conventional voting suppresses intensity. One-person-one-vote treats weak preference and urgent objection alike, which matters in schemes where most members remain passive and the engaged minority is often concentrated around ESG, stewardship or other non-financial concerns.Footnote 61 QV answers that defect without turning members into investment managers. It lets members spend a fixed allocation of credits on the strategic questions they care about most, while trustees retain fiduciary responsibility for the final decision.
The older objection that beneficiary voting is impracticable because pension funds contain large and changing memberships has lost much of its force.Footnote 62 Digital identity systems, scheme portals, dashboards and app-based interfaces now make preference collection more realistic. The claim is not for member control over investment policy. It is advisory QV, as better evidence of members’ preference for trustees to whom investment authority is delegated.
1. Quadratic voting
A significant constraint of conventional voting is its failure to consider the intensity of individuals’ preferences. The Quadratic Voting method enables individuals to effectively express the strength of their preferences by distributing votes among various options. QV is a “method that can be used in any setting where a group must make decisions collectively”Footnote 63 by offering voters a restricted number of votes that they can distribute in a quadratic fashion. This allows voters to allocate a more significant number of votes to the options they feel most strongly about, thereby accurately reflecting the intensity of their preferences. Individuals can demonstrate the magnitude of importance associated with a given matter by spending more voting credits.
Glenn Weyl and Eric Posner suggested QV, where one share/person is not equal to one voteFootnote 64 But, citizens are given several “voice credits” to operate freely on various public initiatives up for a vote. Because the number of votes acquired with a voice credit on any given issue follows a quadratic function, the system is quadratic in nature. A single vote costs one voice credit; two votes cost four; three votes cost nine, etc. When used on a small scale, the authors show that QV accurately represents voters’ concerns about various issues. Similar to how cost allows customers to maximise their money, QV will enable citizens to fulfil their preferences better while overcoming the typically imposed constraints of one-person, one-vote majoritarian systems.
The QV enjoys two main peculiarities that make it more efficient than conventional voting: disciplined and motivated minority members can overcome the majority, and members can express the intensity of their preferences. Securing the participation of really committed individuals in a specific choice allows enthusiastic OPS members to indicate their relative preference for other alternatives by casting additional votes.
However, implementing this method raises various concerns regarding laws on trusts, fiduciary duties, trust deeds and rules, compliance with regulations and members’ rights. To act in the scheme’s best interests, OPS trustees must ensure that quadratic voting aligns with their fiduciary duties. Therefore, trustees must ensure that the voting process is conducted with fairness, transparency and the utmost consideration for the well-being of all scheme members. Furthermore, ensuring that the implementation of quadratic voting aligns with the trust deed provisions and rules governing the pension scheme is crucial. Modifying the voting mechanism would necessitate revisions to the trust deed and rules, potentially requiring the consent of scheme members and regulatory authorities.
2. Quadratic voting in the real world
Quadratic voting (QV) has been adopted in diverse settings to capture the intensity of participants’ preferences and improve resource allocation. In Colorado’s legislature (2019–2022), Democrats used QV to prioritise over 100 budget bills with a fixed virtual-token budget, yielding clearer legislative signals than conventional debate.Footnote 65 In the United States, local governments have also developed new ways to use quadratic voting (QV).
In 2018, a Dutch pension fundFootnote 66 conducted a seminal study in collaboration with Maastricht University exploring sustainable investment behaviour when members are granted a real vote on its sustainable investment policy.Footnote 67 The initial survey included a question allowing members to vote on whether Pensioenfonds Detailhandel (PD) should prioritise sustainable investments, such as engaging with companies to meet ESG standards. With a 6.7% response, 67.9% voted to expand engagement on sustainability, and 98.8% of repeat voters maintained this preference, even when informed of potential lower returnsFootnote 68 with only 11% opposed and 21% uncertain. The 6.7% response rate (1,669 of 24,776 members) appears problematic under traditional voting frameworks. However, quadratic voting’s theoretical advantage lies precisely in empowering engaged minorities to express preference intensity through credit allocation. PD’s board of trustees acted on these results, expanding engagement with investee companies.
This research has important implications for the UK DC schemes, where members typically have limited influence over investment decisions. Bauer et al. show that when members are granted participatory rights, they strongly prefer to prioritise sustainability, especially in ESG matters.Footnote 69 Extending voting rights to UK DC members could better align investments with their ethical preferences and promote ESG integration. Such empowerment may also strengthen member engagement and understanding, supporting improved outcomes for both members and schemes. This evidence thus supports greater democratisation of investment decision-making in UK DC schemes to ensure investments reflect members’ sustainability values.
Large pension funds in the UK offer their members a range of investment choices, enabling them to represent their individual financial preferences. For example, the USSFootnote 70 Investment Builder scheme gives members various investment options. They can invest in either the USS Ethical Lifestyle Fund or the USS Default Lifestyle Fund, the latter of which is meant for investors who do not specify where they want their money to be allocated. The investment risk exposure of both lifestyle funds will decrease as the members of those funds approach retirement age.Footnote 71 Furthermore, USS runs annual surveys and ad-hoc research and collects member feedback and administrative data on members’ preferences.Footnote 72 For example, the USS launched the Member Voice,Footnote 73 an online forum for USS members to discuss the governance of the USS pension with each other and share their thoughts with the managers. It is also used to research a process or preview new initiatives that managers plan to implement.Footnote 74 Yet, it is unclear how those discussions contribute to reducing agency costs or agency problems, even if decision-makers can afford to read them.
In practice, direct voting rights for OPS members on investment or governance matters remain the exception rather than the rule globally, despite mounting calls for democratisation. The United Kingdom, for example, relies on member-nominated trustees as an indirect channel for member influence, while direct voting on investment policy is not standard practice. Australia has experimented with non-binding advisory votes, particularly in the context of ESG integration, but these remain exceptional and do not determine fund policy. The Netherlands offers the most advanced model of member involvement, occasionally allowing votes on board composition or strategic direction, yet even here, engagement is hindered by financial illiteracy, behavioural barriers and the lack of accessible participation mechanisms. The United States, similarly, centralises decision-making with fiduciaries, offering members little opportunity for direct involvement. This persistent gap between theoretical ideals and practical realities highlights the limitations of existing governance structures and the urgent need for innovative solutions that can overcome entrenched passivity and empower engaged minorities.
The comparative material should not be made to carry more than it can bear. The Dutch example shows that pension beneficiaries may express coherent sustainability preferences when given a real channel for doing so. The US examples show that QV can operate as a preference-intensity mechanism in institutional settings. Neither example proves that QV can be transplanted directly into UK occupational pension law. That question depends on the legal architecture of the scheme. This article is concerned principally with trust-based DC occupational pension schemes in the UK, where members bear investment risk while trustees, advisers and investment managers retain the relevant governance powers. Jurisdictions built around contract-based pension provision, centralised state schemes, differing fiduciary standards or weaker digital infrastructure will pose different problems. The comparative claim is therefore modest. These examples show practical possibility, not legal portability. The argument is narrower: where pension governance combines a legally recognised member interest, fiduciary decision-making, member exposure to investment risk and sufficiently secure digital infrastructure, QV offers a plausible method for making member preferences visible within, rather than outside, the fiduciary structure.
3. Practical challenges
Challenges include educating users on the quadratic cost function (1 vote = 1 credit; 2 votes = 4 credits; etc.) and designing fair credit distributions without a one-size-fits-all solution. While theoretical concerns about collusion exist, empirical studies have found that QV is no more vulnerable than one-person-one-vote systems, especially when paired with identity verification or anti-Sybil safeguards.Footnote 75
Another shortfall with QV is that it may potentially exclude the less privileged, as participation in voting is excessively costly. This might result in an uneven allocation of credits in decision-making, regardless of whether all voters have equal financial means. This phenomenon arises because individuals allocate different amounts of money to their votes according to the intensity of their concern for the issue.Footnote 76 Suppose wealthy scheme members were given the power to manipulate elections in their favour by casting a disproportionately large number of votes. In that case, the democratic integrity of the system might potentially be jeopardised.
These weaknesses may suggest that the current implementation of QV will not lead to a higher level of member engagement. It is unlikely that anybody would be willing to participate in such an expensive activity if an enthusiastic member had to spend the square of the votes to get the desired number. To tackle these issues, the quadratic voting system has to be meticulously modified for the OPS context to minimise the risk of manipulation, guarantee fairness and ensure continued effectiveness.
This study suggests that OPSs will provide each voter with a specific allocation of credits, which they can distribute over multiple elections. As a result of this equal budget requirement, voters with strong preferences would have the opportunity to cast votes that accurately represent their opinions. QV-based voting rights would provide superior outcomes to conventional voting, even when resources are evenly distributed.
QV can serve as an effective advisory tool for OPS trustees, enabling them to assess member sentiments on critical decisions such as asset allocation, investment strategy selection and investment manager hiring. QV’s advisory nature can provide non-binding recommendations and allow trustees to retain discretion in aligning decisions with their fiduciary duties. By empowering members to allocate votes based on the intensity of their preferences, QV mitigates agency problems by enhancing member engagement and monitoring.Footnote 77 This increased engagement fosters transparency and trust, as members feel their voices influence scheme governance.Footnote 78
However, trustees can establish robust governance mechanisms to maintain equity, including vote limits (e.g., a maximum of 50 votes per member) or restrictions on allocation (e.g., no more than 25 votes per option), as authorised by the trust deed. Such safeguards and transparent communication about voting rules ensure that QV enhances decision-making while aligning with the scheme’s best interests.
The original Quadratic Voting suggested by Posner and Weyl permits individuals to purchase votes, which may disproportionately favour wealthier members in the OPSs. We propose a modified QV system that allocates a fixed number of voting credits to each member over a specified period. Under our model, members receive an equal allocation of credits, such as 100 every three years, to distribute across key decisions, such as appointing investment managers or approving asset allocation strategies. These credits are non-transferable and expire if unused, ensuring equitable influence without establishing a vote market.Footnote 79 This approach preserves QV’s capacity to reflect preference intensity while mitigating the risk of manipulation by affluent members. This credit-based QV enhances fairness, transparency and member participation in OPS governance, offering a more democratic and effective decision-making mechanism.
For this study, new forms of communication technology, such as the UK Pensions dashboard and mobile apps, can be considered platforms for implementing Quadratic Voting. However, a lack of interest in pension-related matters among the young, behavioural barriers such as procrastination, the complexity of the topic and insufficient financial knowledge can deteriorate voting participation.
The practical implementation of QV would require careful legal design, not merely technical capacity. In trust-based DC schemes, the mechanism would need to operate within the scheme rules, the trustees’ investment powers and the statutory framework governing trustee decision-making. Unless expressly authorised by legislation or the scheme instrument, the vote should remain advisory. Trustees would retain responsibility for selecting suitable issues, framing the questions, considering the results and deciding whether the preference signal is compatible with their fiduciary duties, investment duties and proper purpose obligations. Independent administrators could manage identity verification, vote collection, audit trails and anonymised reporting, but outsourcing the process would not remove trustee accountability for governance oversight. The results should be recorded in trustee minutes as evidential material considered before a strategic decision, not as a binding instruction from members. Cybersecurity, confidentiality and data-protection duties would require authentication, encryption, restricted access, anonymised reporting and compliance with UK GDPR and the Data Protection Act 2018. The legal difficulty is therefore manageable but real. QV is defensible only if designed as a controlled fiduciary consultation mechanism, not as a transfer of investment authority from trustees to members.
VI. Discussion
The shift from DB to DC provision has exposed a structural weakness in UK occupational pension governance. Members now carry more investment risk, while authority over default design, asset allocation, stewardship policy and investment manager selection remains with trustees, advisers and managers. Disclosure does not cure that separation. It gives information, not voice. The case for member participation must stay confined. Financial illiteracy, procrastination, default reliance and unstable portfolio preferences make detailed investment voting indefensible. Members should not construct portfolios, select securities, rebalance assets or act as substitute investment managers. The defensible claim lies at strategic governance level, especially material asset-allocation change and the appointment, review or replacement of investment managers. Those decisions frame the risk members bear and identify who exercises delegated authority over their savings.
The legal basis does not require direct ownership of scheme assets. Members are not shareholders in disguise, but neither are they detached creditors. Their position rests on beneficial interests, due administration, fiduciary supervision and a proprietary adjacent stake in the proper exercise of powers held for their benefit. Pension trusts already depart from ordinary private trust administration because members are non-volunteers, pension funds perform a quasi-public function and scheme governance affects large bodies of workers over long periods. Equity supplies no orthodox voting remedy. It does supply a reason to reject fiduciary power insulated from the interests it serves.
QV gives that reason a controlled institutional form. Its value lies in measuring preference intensity, not in transferring investment power. A credit-based advisory process would give trustees structured evidence of member views on ESG, responsible investment, asset allocation, default design and manager review. The result would not bind trustees. They would remain responsible for prudence, proper purpose, statutory investment duties and the financial interests of the membership as a whole. Member preference would discipline fiduciary judgment without replacing it.
The practical and comparative evidence supports only a modest claim. Digital voting requires verified access, credit allocation, anonymised reporting, audit trails, cybersecurity and data-protection compliance. Those costs matter, but they do not make advisory QV fanciful in large DC schemes already using sophisticated digital and regulatory systems. Dutch experience shows beneficiaries expressing coherent sustainability preferences when given a channel. US QV experiments show preference-intensity mechanisms working in bounded institutional settings. Neither proves direct transplantation into UK pension law.
The proposal is narrow, but serious. QV is not a cure for passivity and not a substitute for trustee responsibility. It makes member preference visible within fiduciary governance. Trust law remains in control. But fiduciary governance should not continue to treat the people most exposed to pension investment decisions as administrative bystanders.
Declaration of generative AI and AI-assisted technologies
During the preparation of this manuscript, the authors used ChatGPT for language editing, structural refinement and improving clarity of expression. Grammarly and QuillBot were used for spelling, grammar and style checking. Perplexity was used to assist with locating and checking background sources. The authors reviewed, revised and approved all AI-assisted outputs. No AI tool was used as an author. The authors remain solely responsible for the accuracy, integrity, originality and final content of the manuscript.
Competing interests
I hereby declare that in the publication of the above title, there is no conflict of interest.
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