A giant UK pension scheme with more than 8 million members is going tobacco-free across all its investments.

Nest (National Employment Savings Trust), a publicly-owned scheme set up by the government, says stricter worldwide regulation, increasingly aggressive legal action by governments against the tobacco industry and falling global smoking rates have all led it to conclude that tobacco is a poor investment for its members.

Nest will be going tobacco-free across its entire portfolio - both passive and active funds – though it estimates it will take up to two years for this to fully happen.

The £6bn scheme’s exposure to tobacco is currently put at around £40m and includes holdings in British American Tobacco (whose brands include Dunhill and Rothmans) and Philip Morris, the company behind Marlboro.

Nest was set up by the government to help employers meet their obligations under the “automatic enrolment” retirement saving initiative, which went live in 2012. Currently, one in four UK workers have an account with Nest.

Nest says it has not taken this decision lightly, “but we don’t think it makes sense to continue investing in an industry whose business model looks increasingly unsustainable”. It already has a tobacco-free policy on a couple of its funds.

Commenting on the announcement, Dean Walker, a scheme member based in Portsmouth, says: “I’m a new dad and I’ll certainly be encouraging my daughter not to smoke when she grows up. Everyone knows it’s not good for you and can cause cancers, which I feel very strongly against.

“I think what Nest are doing is a great idea and I hope more companies follow suit.”

In 2017 it emerged that Nest was shifting a chunk of its investments into a new climate change fund designed to move people’s money out of fossil fuels and into renewable energy. It said it wanted to protect members from the risks associated with the climate emergency by reducing their exposure to companies with reserves of coal, oil and gas.

It is predicted that by the late 2020s, one-third of the UK working population will have a pension pot with Nest. The average income of a member is around £18,000 a year.