Politics, pensions, and retirement security in the days ahead

With the elections behind us and the end of 2024 just a few weeks away, new risks of political interference in public pension investing and retirement security are coming into focus.

Some newly elected state officials are redoubling their efforts to blacklist investment advisers they accuse of injecting non-financial factors into their decisions about pensions and public finance.

Likewise, elected federal officials have public investments in their sights, and hope to regulate whether and how investment advisers include considerations of environmental, social, and governance (ESG) factors in their financial decision-making.

It signals a revived debate over pensions blocking, allowing, or encouraging ESG and other non-financial factors to enter into decisions about public pension investing and, more generally, public finance.

Who will be affected? Current retirees, future retirees, and taxpayers — all of us.

It’s not just public employees pensions, either. The future of Social Security is also on the table.

Some legislation, like the Social Security Fairness Act, is stuck in the crush of year-end business in Washington. That bill passed easily in the U.S. House but is stuck in the Senate. It would get rid of policies that have led to over- and under-corrections of benefits for people who’ve spent most of their careers in public service, according to The Hill.

Based on the campaign promises of winning candidates in last month’s elections, more sweeping changes to Social Security will be proposed early next year.

The perennial debates over Social Security tend to focus on the solvency of the program and over the benefits it offers to retired Americans.

Current pension investing debates are mainly about whether pensions should consider factors other than financial returns in their decisions about where to invest money. Lately, that’s been about ESG in general, and about investments in the oil and gas and the firearms industries.

Whether those investments are in or out of favor depends on which politicians are talking, and, in turn, which investment advisers are in or out. When retaining asset managers for pension operations and banks for bond issuance and underwriting, those companies’ perceived positions on ESG factors matter as much in some states as their financial track records.

Those debates, as Thomson Reuters reports, are heating up as newly elected officials come into office. At the federal level, the change in parties at the White House is likely to come with a sea change in regulations of financial investments. And at the state level, local political differences are producing a patchwork of differing laws, rules, and regulations across the U.S.

In short: pensions and retirement security will continue to be a hot topic in 2025.