Your workplace pension is being invested. And probably in Exxon Mobil

Written by Rebecca Jones on 13th Nov 2018

Marking #TalkMoney week, Good With Money explains how you can switch your pension from the default fund and change the world.

Your workplace pension is being invested. Whether its £20 or £2,000, the money that leaves your paycheck every month to save for your retirement is going straight into financial markets, without fail.

Yes, dear reader: YOU are an investor. – an actual, real, honest-to-God market mover – and you didn’t even have to don a pair of pinstripes and braces!

The fact so many of us don’t know this underlines our nationwide reluctance to talk about our money, with Talk Money Week highlighting the ways in which many of us still find money stuff a bit dull, confusing and uncomfortable.

However, while there may be a seed of truth in this, the problem with us not engaging with our finances – especially our pensions – is that we are neglecting the one area where we have the most power to change the world for the better.

 

You’re investing in fossil fuels, tobacco and arms

This is because – and brace yourself – if you do have a workplace pension and you don’t know it’s being invested, then your money is probably being invested in Exxon Mobil, British American Tobacco and BAE Systems – among other bastions of environmental and social wellbeing.

And this is because most of the big default pension funds invest in the FTSE 100 index and other mainstream global markets, all of which are full of oil and gas, mining, tobacco, arms, pharmaceutical companies and corporate banks.

Indeed, recent research conducted by Share Action showed that six out of nine of the UK’s biggest auto-enrolment pension funds take no action to ensure they are not invested in chemical weapons, for example, while only two take any action on avoiding major tax avoiders.

Abbie Jones Walters, an employee of a Cornwall based digital marketing firm recently found out her pension savings are going into the UK’s biggest auto-enrolment fund, NEST. A life-long climate activist, she was shocked when she discovered what her money was invested in:

“I had no idea that my money was being invested and then, when I looked into it, I was horrified to discover where my money was going: the biggest holdings of the fund included Exxon Mobil, JP Morgan Chase, Amazon and Bank of America.”

To find out where your pension fund ranks, see The Share Action report here

 

Auto-enrolment misalignment

There is currently an estimated £2.4 billion invested in UK pensions, a figure that has grown significantly since 2012 when auto-enrolment brought an extra nine million British savers into the pension system.

The big default funds, otherwise known as ‘master trusts’ have been the main beneficiaries of this wave of new money with memberships reportedly exploding from 270,000 in 2012 to over 10 million employees today.

However, as studies like Share Action’s show, these funds are not representing the wishes of many of their members, with survey after survey showing that people increasingly want their money to do good.

This is especially true for millennials in their twenties and thirties. Indeed, a 2017 survey conducted by the UK Sustainable Investment and Finance Association showed that 54 per cent of millennials want a fossil free option offered to them “as standard” in their workplace pensions.

Women are also more inclined to invest responsibly, with Morgan Stanley finding that 84 per cent of women want to invest responsibly, versus 67 per cent of men, a finding almost exactly mirrored (83 per cent) by a report from Moxie Future.

 

Change the world on your lunch break

All of this points to a potentially earth shattering power laying dormant in our pensions. Imagine, for example, that tomorrow everyone that didn’t want to be invested in fossil fuels, wasn’t? That would be one bad, if not fatal day for Exxon Mobil.

The good news is that you have that power. Right. Now. Indeed, if – like Abbie – you happen to be paying into a NEST pension plan you need only pick up the phone and switch into their ethical fund option.

“I can’t believe how easy it was. As soon as I realised what was going on I just contacted the adviser on the scheme and asked them to switch me into the ethical fund. I did it on my coffee break!”

NEST is by far and away the leader in the auto-enrolment space, with Share Action scoring it highly across a range of sustainable themes. It is also the only provider to have a fixed target to reduce its funds’ exposure to climate risks.

 

Taking back control

Many other providers do offer ethical and sustainable options, though, particularly if yours is a non-master trust scheme where fund choices tend to be higher. Simply get in touch with your workplace adviser to find out more.

Other options include opening a self-invested personal pension, or SIPP, with a low cost online fund platform. While a bit more complicated than sticking to your employer’s scheme it will give you complete control over where your money is going.

For many Britons – especially the less well-off millennial generation – the only significant savings we have are in our pension pots. And so, it is here we have the most power to affect change.

So, this week why not #TalkMoney and make sure your pension savings are as good as you are?

 

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