The call for positive pensions

Written by Bruce Davis on 19th October 2015

By Bruce Davis, Founder and Joint Managing Director, Abundance Investment

We all want a comfortable retirement, and we know it’s up to us to ensure that happens.

When it comes to saving for it, though, we don’t always do so at the right time, or in the best way. But if the industry changes, that might too.

That’s what we found when we commissioned the Positive Pensions Survey (PP Survey) in October 2015. An independent survey of 2,000 adults conducted by OnePoll shed a light on what we, savers, want from the pensions industry to help us.

We know we need to save, so why aren’t we?

A vast 88% of us think it’s our responsibility to ensure we have an income in retirement. Less than half think it’s also up to the government (40%).

But if we’re so confident we have to look after ourselves, why do only 63% of us have a pension? And why do we not start saving when we know we should?

The Positive Pensions Survey revealed a number of likely explanations.

1. We’re worried about where our money is invested

One third (33%) of people said they worry about where their pension funds are. Since the 2008 financial crisis, many of us take a much keener interest in where our money is. We want to keep it close, to be able to see clearly what it’s earning.

None of which plays into the hands of the pensions industry in its current form. Just 14% of people in the PP Survey felt their pension provider was ‘very transparent’ about where their funds were invested. If you asked most people where their pension was invested, chances are they wouldn’t be able to tell you. And that’s over one fifth of people (21%) said they would save more into their pension if they knew exactly where the funds were invested.

The solution here is clear: if we want people to save into a pension, we need to be fully transparent about where their money is, and what it is doing.

2. We want to protect our money from the ups and downs of the stock market

Most of us are happy to admit we don’t really know where the stock market is going to go next. That’s why we leave things to the ‘experts’. Or rather, we used to.

The truth is that often, they have no more idea than us. It’s a case of the blind leading the blind. None of which inspires much confidence when it comes to choosing a pension, particularly when the majority of them are invested heavily in stocks and shares on both national and global markets.

With this summer seeing another ‘stock market shock’ following the Chinese stock market crash, people are wary once more.

47% of us are worried about the effect of global stock market shocks on our pensions. Accordingly, 44% would be interested in options that allow us to reduce our exposure to these markets.

What this shows is that the pensions industry needs to be more diverse in what it offers savers. Widening options to include sectors uncorrelated to the stock market, such as peer-to-peer lending, may encourage people to save into pensions in the first place, as well as save more.

3. We want to invest in the things we can see

This is where pension providers may be missing the biggest trick to encourage more. More than one fifth (22%) of those asked said they would be interested in a pension that offered returns solely from renewable energy projects. Of those people, an average pension saver would move around 25% of their pot into this type of pension.

This reflects our wider desire to be more in control of where our money goes. If we’re choosing where to put it, we want to put it into things that we understand, and that to use the renewable energy example again: it’s clear exactly why your return is what it is. The sun shone a lot, or it wasn’t so windy this period. It’s not affected by a CEO quitting, or rumours of a takeover bid.

So what the PP Survey has shown is that British people want what we call ‘Positive Pensions’. They want to have transparency and control. To have somewhere to put some of their money where it won’t be affected by stock market ups and downs. To be able to invest in the future we want to see.

Yesterday saw the launch of the Abundance Pension, which allows you to invest directly into the social and environmental projects of your choice. Find out more about the UK’s first peer-to-peer pension on our website.

The Abundance Pension is a self-invested personal pension (SIPP) provided by European Pensions Management (EPM), who are authorised and regulated by the FCA (461099). Setting up an Abundance Pension involves entering into a SIPP contract with EPM to hold Abundance Debentures. Abundance is not a direct pension provider and cannot give pension advice.