Five green pensions

Written by Rosie Murray-West on 20th Sep 2017

Providing for your own future need not mean that you are depriving other people of one. Saving into a pension is a wise decision, and one you should prioritise at as young an age as you possibly can to ensure that you take full advantage of tax breaks and capital growth.

There are now many decent sustainability funds that can go into either a SIPP (self-invested personal pension) or a normal private pension. Here are some to consider.

The PensionBee Future World fund*

Run by Legal & General (see below), and launched relatively recently in response to demand from the digital platform’s customers, this option “is rooted in an enlightened view of how growth over the long-term can be achieved… it’s a virtuous circle that combines good business practices with future growth potential.”

It comes with a slightly higher fee than the platform’s other plans at 0.95 per cent, but this is still pretty low relative to the rest of the pensions world. Sustainable investing is ideally suited to the long terms involved in retirement saving… with returns in this area typically outperforming the mainstream over longer time periods, according to many studies… and how nice that you get to grow old knowing you are doing your bit for the planet your grandkids will live on.

The NEST ethical fund

NEST, the National Employment Savings Trust was set up by the Government as part of its commitment towards auto-enrolment. Its 0.3 per cent annual management charge is one of the lowest on the market, though there is a 1.8 per cent charge for contributions. It is also free to transfer existing pots in.

The ethical fund, which NEST says is slightly higher risk than its standard fund invests in companies with positive records on: human rights, fair labour practices, fair trade policies, especially with developing countries and the environment.

It avoids investing in tobacco, arms and corrupt states including those with a bad human rights records, as well as companies that damage the environment. The fund has grown 11.7 per cent a year since launch, making it a better performer than NEST’s other funds (except for its Sharia offering).

Aviva self-select pension

Pensions giant Aviva has a number of ethical funds that can go into a pension.

Some of the best performers include Aberdeen Fund Managers Ethical World Equity, although since this holds a large proportion of EOG, a shale oil producer, it might not fit everyone’s ‘ethical’ criteria. Likewise Axa’s Ethical Distribution fund has holdings in drinks company Diageo and several large banks. Kames Ethical Cautious Managed, which has Prudential as its largest holding, is another option.

Standard Life Ethical Pension Fund

Standard Life has a number of ethical pension funds. Its ethical pension fund has outperformed its benchmark (the ABI (Pension) Mixed Investment 40-85 per cent Shares Sector) in four of the last five years, returning 23.4 per cent in the year to end June 2017, and 75 per cent over five years. Large holdings include housebuilder Bellway, fashion retailer and posh tonic water business Fever Tree. The company also has corporate bond fund and European ethical fund options and an actively managed UK social bond fund.

Legal & General

Pension provider L&G’s ethical fund is available within a pension, and aims to track the return of the FTSE 350 Index (after adjustment for charges and tax), not including companies who don’t comply with a range of ethical and environmental guidelines. It has returned 72.6 per cent over five years to June 17, and its main investments are in financial services companies. The company filters out companies involved in practices such as intensive farming, gambling, adult entertainment, weapon manufacturing and selling tobacco.

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