For most of us, a pension may be the biggest investment we hold in our lifetimes. And yet, so many of us have little engagement with that money. Research by the Pensions and Lifetime Savings Association (PLSA) found that although 82% of pension savers understand that their pension’s invested, only 26% know what it’s invested in.
But what if we did take an interest in our pension and where it’s invested now? We could make a difference not only to our own future, but to the planet and society too. Here are three reasons to think about where your pension’s invested today.
1. You can invest in line with your ethical values
For many of us, our pension fund invests money on our behalf, whether that’s via a workplace or a personal pension. This investment has an impact in the wider world - for good or for bad.
Your money may be invested in companies that are causing harm, supply chains that are unsustainable, and industries that are driving climate change. Usually, pension fund managers primarily consider two things when deciding where to invest - risk and return. But there’s a third, equally important factor - responsibility.
If you looked into where your pension’s invested, you might find it doesn’t align with your life choices and personal values. The campaign Make My Money Matter found that 68% of UK pension holders want their investments to consider people and the planet alongside profit. But you can only align your pension with your principles if you look at where it’s invested in the first place.
PensionBee’s Climate Plan invests in companies at the forefront of the transition to a low carbon economy while their specialist Shariah Plan is Shariah-compliant. This means it only invests in companies that comply with Islamic finance principles and excludes alcohol, tobacco and weapons companies.
When you know where and what your money is invested in, you can choose to use the power of your pension to invest in line with your values.
2. You can cut your carbon footprint
An increasing number of us are making more sustainable lifestyle choices to cut our carbon footprint - the total amount of carbon dioxide (CO2) emissions caused by an activity or product over its life cycle. You might be going veggie, giving up flying or switching energy providers in a bid to cut yours. But according to Make My Money Matter, ‘greening’ your pension is 21x more powerful at fighting climate change than all these efforts combined.
In the UK alone, £3 trillion is invested in pensions. That’s almost the same as the entire country’s GDP - which is the total value of goods and services they produce.
This means our retirement savings have tremendous power, and how that power’s used is up to us. Currently, UK pension schemes are estimated to invest £88 billion into the fossil fuel industry. That’s an average of £3,096 per pension saver.
All this means that by taking control of your pension, and using it to invest in companies that are better for the planet, you can cut your personal carbon footprint.
3. You could benefit from greater financial returns
Choosing to invest your pension for good isn’t pure altruism. It can also be a logical financial strategy. The latest Good Investment Review shows that actively managed sustainable funds have performed comparatively well to their traditional peers in recent years, despite difficult market conditions. While companies that do harm to the environment face a future of increasing consumer criticism, government regulation and financial penalties.
Analysts are optimistic that sustainable funds are in a good position for strong returns over the long term. However, bear in mind that as with all investments, sustainable funds are subject to changes in market conditions so their value may go down as well as up.
How to find out where your pension’s invested
Looking into your pension and changing it for the better might seem daunting, but it needn’t be. Just a few years ago, there were very few sustainable pension options on the market. So even if you passed the first hurdle of thinking about where your pension is in the first place, it was difficult to do anything about it.
Thankfully, all that’s changing. As consumer demand has grown for pensions that help solve the world’s problems, rather than contribute to them, so have the plans on offer. It’s easier than ever to take control of your pension and move it to a plan you can be proud of.
PensionBee’s Climate Plan was created in direct response to customer feedback. Their customers told them they wanted to send a strong message to polluters and so, the new plan excludes fossil fuel producers while also investing in companies that are better prepared for the low carbon shift.
If you’re a PensionBee customer, you can see exactly where your pension’s invested. Whatever PensionBee plan you’re in, you can see the top 10 holdings. And if you decide to switch plans, it couldn’t be easier to do. You just need to head to your online account - your BeeHive. If you’re in the app, head to ‘Account’ and tap ‘Switch Plans’. If you’re logged in via desktop, click through to your ‘Account’ in the top navigation, select ‘My Plan’ and scroll down until you see ‘Switch Plan’. From there, you can view the curated range of PensionBee plans.
Your pension is your money and you’re saving towards the future you want. Knowing where it’s invested means you can plan for your retirement more intentionally. Plus you have a say in the kind of world you want to retire into.
Lori Campbell is a Freelance Journalist specialising in sustainable finance and investing. She’s the Editor of ethical personal finance website Good With Money. Lori was previously a Senior News Reporter at the Sunday Mirror.
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.
