Good Guide to Pensions reveals ethical funds outperform at biggest providers

Written by Rebecca Jones on 20th Aug 2019

Good With Money has launched a comprehensive guide to the UK pensions market – the Good Guide to Pensions – covering everything you need to know to make sense of your pension savings and make them as Good as you are.

In the guide, we find that ethical funds have strongly outperformed the default option at the country’s two biggest independent pension providers over one, three and five years. At both Nest and The People’s Pension, which together manage more than £14 billion of pension savings for more than 12 million Britons, ethical funds have performed strongly over both the short and long term.

Nest’s ethical fund – which does not invest in tobacco, controversial weapons, fracking, open-cast mining or tar sands firms – has returned over 12 per cent more than the default option over 5 years to 31 March (67.9 per cent compared to 55.5 per cent). At The People’s Pension, it’s ethical offering returned even more – 72.4 per cent compared to an average of 49.5 per cent across the default range.*

Ethical funds also returned more than equivalent default funds over one and three years, with Shariah options performing particularly strongly. Elsewhere, the Good Guide to Pensions shows strong returns for ethical and sustainable funds offered by providers including Aviva, Scottish Widows, Legal and General and Prudential.

Despite this, however, studies show that 99 per cent of pension savers remain in default options.

The free downloadable Good Guide to Pensions, published in partnership with Nest, the UK’s biggest independent workplace pension provider, online personal pension provider PensionBee and forward thinking fund manager Pictet Asset Management, examines top pension providers across the workplace pensions, personal pensions and Self Invested Personal Pensions (SIPP) and Lifetime ISA (LISA) sectors.

 

Inside the Good Guide to Pensions you will find:

  • What workplace and private pensions are, in plain English
  • Simple flowcharts to help savers figure out where their pension money is
  • 18 workplace and private pension providers rated using the Good With Money Good Egg criteria in handy tables
  • Performance figures for default and ethical funds at over 13 providers 
  • All you need to know about Self Invested Personal Pensions and Lifetime ISAs, with investment ideas from The Good Investment Review

 

Good with Money editor Rebecca Jones said: ‘Thanks to auto-enrolment and other government schemes designed to get us saving for the long-term, a good number of us will now have a pension. In fact, at a value of £32 trillion, the global pensions industry accounts for half of all the managed money in the world! And of that, £2.2 trillion is in UK schemes.

‘However, how many of us have stopped to think what our pension is invested in? The sad fact is, a significant majority of pension funds are invested in stocks and funds which have a clear negative impact on the planet. Are you happy that you could unwittingly be continuing to help fund environmental and social breakdown?

‘We’ve produced this guide to help the everyday pension investor – that’s any one of us – understand what their pension is doing, and how they can switch to a more environmentally positive impact fund if they would like to. Yes: pensions can be complicated, but switching your pension fund to a Good option could be easier and cheaper than you think.

‘We really rate all three of our partners for our guide. Nest has cemented its position as the leading provider of auto-enrolment schemes, and recently took the decision to divest from tobacco stocks altogether – even in its default fund. Additionally its investment process is focused on low carbon aims. PensionBee is a truly innovative provider blazing a trail in helping people make sense of an often tangled web of pensions and giving them a strong-performing ethical option as well. And finally, Swiss asset manager Pictet’s thematic investment funds are some of the most forward thinking, innovative vehicles in the sustainable investment universe today.

 

Auto-enrolment and workplace pensions 

The guide covers workplace pensions including auto-enrolment. It compares the mastertrust default funds of the following five providers: Nest, The People’s Pension, Aviva, Standard Life, and NowPensions. 

Commenting on the guide, Diandra Soobiah, head of responsible investment at Nest said: ‘We want people to know how the money they save into their workplace pension is invested and why it matters. Nest is a responsible investor. Our goal is to grow our members’ pension pots while helping to build a world they want to live and retire in.

‘In June we announced our plan to stop investing in tobacco. We will continue to make decisions like these because the evidence shows investing responsibly makes more and reduces investment risk over the long term. If there’s one thing you do today, check your workplace pension and make sure it’s being invested responsibly.’

For personal pensions scheme, the Guide compares Aegon, PensionBee, Nutmeg, Standard Life, and Virgin Money. It includes an article from PensionBee.

Jasper Martens, chief marketing officer, said: ‘We’re thrilled to be sponsoring the Good Guide to Pensions. It’s so important to get on top of your pension savings and understand your options so you can plan for a better retirement. We hope this guide will help savers feel empowered to take control of their pensions and choose the best options for their needs.’

 

DIY pensions

The Guide also explores the self-invested options, from SIPPs to LISAs, comparing funds from: Pictet, Liontrust, Threadneedle, Thesis, among others, as well as rating and reviewing investment platforms AJ Bell YouInvest, Hargreaves Lansdown, Barclays Smart Investor, Charles Stanley Direct and Fidelity Personal Investing. An article from Pictet’s Hans Peter Portner, head of thematic equity is entitled, ‘Going back to the future.’

Commenting on the guide, the firm said: ‘Pictet Asset Management is delighted to be working with the team at Good with Money. Pension planning is essential to building a secure future. As pioneers in thematic investing, at Pictet Asset Management we believe our proven long-term investment approach of targeting companies seeking to solve environmental challenges will help savers to both build a positive financial future and invest positively in the world we inhabit.’

Finally, the Guide also looks defined benefit (DB) and defined contribution (DC) schemes, clearly explaining the difference between the two with a handy flowchart and comparing group pension providers: Aviva, L&G, Royal London, Scottish Widows, and Prudential. 

Rebecca Jones concludes: ‘The UK pensions space has long been a minefield: a knotty web of bureaucracy and lost schemes that has sent savers running for the hills rather than confront their annual statements. As we all know, though, that has to change. We hope the Good Guide to Pensions will add to the work that is starting to be done in the industry to help savers align their pensions with their principles to provide for a comfortable retirement on – crucially – a habitable planet.’

Download a copy of the Guide for FREE today!

The Good Guide to Pensions front cover

 

 

 

 

 

 

 

 

 

 

 

 

 

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