What do heatwaves have to do with your pension?

Much of the UK’s in its third heatwave of the year - and it’s still only early July.

It follows a June that rewrote the record books. Last month, the Met Office issued a rare red extreme heat warning (the level reserved for the most severe events). Meanwhile, a new June temperature peak of 37.7°C was recorded in Norfolk. The UK’s all-time high of 40.3°C, set in July 2022, no longer looks like a distant outlier.

During heatwaves, other extreme weather events can also occur. On 23 June, the Met Office recorded 29,074 lightning strikes across the UK. London was hit by flash flooding and the London Fire Brigade took around 400 calls overnight. At least two house fires are believed to have been sparked by lightning. 

While extreme weather dominates the headlines, there’s a long-term savings angle you might not have seen. Your pension is more connected to these extreme weather episodes than you might think. Both in where your money’s invested today, and in how a rapidly changing climate could shape your retirement planning and future income. 

This isn't 'just weather'

It's tempting to think that extreme weather’s just an anomaly. The science, however, says otherwise - at least for the heat.

The Met Office says that temperature extremes in the UK are becoming more frequent and more intense. The UK has been warming at around 0.25°C each 10 years since the 1980s, and 2025 was the warmest year ever recorded here. 

Chief Scientist, Stephen Belcher, has a clear explanation for why. Without human-caused climate change, he says, it’d be "virtually impossible” for UK temperatures to reach 40°C. 

In short, the heat we're seeing this summer is part of a gradual and predicted upwards temperature trend. It’s not a one-off.

It’s about financial risk too 

Climate change poses financial risk to your retirement savings.

In June 2026, days after the UK’s record heat, the Society of Pension Professionals (the professional body for the experts who run UK pensions) published a report. Titled ‘Pensions in a Warming World’, it warns that climate risk is now retirement risk. Climate change has shifted from a future concern to a present-day financial reality for pension schemes. 

The report also makes a point that’s easy to miss. Pensions are invested across the economy and for decades at a time, diversified across sectors and regions. That can help offset losses in one part of your investments if a single company or industry doesn’t perform so well. 

But climate risk affects the whole economy, rather than one corner of it. A hotter, more disrupted world could push up costs and drag on productivity.

As a result, it’s harder for pension schemes to get away from climate risk. They can’t avoid it the way they might by divesting from struggling companies or sectors - it affects everything at once. 

There are real physical costs in a warming world. The everyday cost of living, including health, infrastructure, food, and insurance, is increasing as extreme weather becomes more common. 

Some of that cost is already being counted. A City Hall study behind London’s first-ever heat plan estimated that the capital’s 2022 heatwaves cost the city around £1.5 billion. That was across:

• health;
• transport;
• energy;
• emergency services;
• wildfires, and;
• lost productivity.

The study also warned that heat-related hospital attendances across the UK could triple by 2050.

It’s a similar story for home maintenance costs. Data from the Association of British Insurers shows that UK insurers paid out a record £6.1 billion in property claims in 2025. That includes £1.2 billion for weather damage alone.

For a growing number of homes, the concern is shifting from the price of cover to whether it’s available at all. Homes built since 2009 are already excluded from Flood Re, the industry and government scheme that keeps flood premiums affordable. The scheme’s only a temporary backstop, due to end in 2039. There are around 6.3 million properties in England already in flood-risk areas. That could see home insurance become inaccessible for many.

Back in 2019, the then-Governor of the Bank of England, Mark Carney, co-signed an open letter warning that the financial risks from climate change are potentially existential. In it, he urged banks, insurers, and regulators to treat those challenges as core financial risks, rather than an afterthought.

The wider economic risks are notable. Research shows that, without changes, climate and natural damage could cause a loss of around 50% of global GDP between 2070 and 2090. 

Your pension is invested for decades, so how the climate changes matters for your money too.

What you can actually do about it

The good news is that, as a pension saver, you have more influence than you might think. There are a couple of practical steps worth thinking about.

• Factor the changing climate into how much you save - a warmer world will likely push up the cost of living over time. This means the pension pot you’ll need in retirement could be larger than past trends suggest. Saving a little more now, if you're able to, helps build in that buffer. 
• Check what your pension is funding - you can ask your provider where your money’s invested and what their climate policy is. That includes whether the plan you’re invested in still includes companies that are large emitters.

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To help them invest in line with these views, our customers asked us to create the PensionBee Climate Plan. This is a 100% equity plan that excludes fossil fuel producers. It also reduces exposure to carbon-intensive companies via a Paris-Aligned index as you save for retirement. 

Some of its key features:

• Excludes fossil fuels - the plan excludes companies with fossil fuel reserves. It also goes further by excluding those with any ties to direct fossil fuel reserves and those that heavily rely on them. For example, that's utility companies with fossil fuel-based power generation.
• A Paris-Aligned decarbonisation pathway - it follows a Paris-Aligned Benchmark (PAB) with a decarbonisation pathway in line with the 2015 Paris Agreement. This aims to reduce carbon intensity over time. The index it tracks targets a 10% average annual reduction in carbon emissions intensity, exceeding the EU minimum standard of 7%.
• A low-carbon future - it increases investment in companies with climate transition opportunities. It also reduces investment in companies exposed to climate transition risks.
• Long-term opportunity - it invests more in companies prepared for the transition to a low-carbon economy. That may offer opportunities that come with reduced exposure to transition and physical risks. The Climate Plan also aims for long-term financial returns on your investment.
• Beyond reducing carbon emissions - the plan also excludes other industries that harm the environment and society. That includes controversial and nuclear weapons, civilian and conventional firearms, tobacco, alcohol, gambling, adult entertainment, palm oil, for-profit prisons, recreational cannabis, and companies misaligned with the UN Sustainable Development Goals.

Read more about the PensionBee Climate Plan.

Have a question? Get in touch!

Want to know more about your pension plan with PensionBee? You can check out our Plans page to learn how your money’s invested in different assets and locations. Or, log in to your account (‘BeeHive’) to see your specific plan. You can always send comments and questions to our team via engagement@pensionbee.com.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.