This article is an excerpt from the Good Guide to Pensions 2020. Download your free copy to find out more about your own pension and how to make it as good as you are.
At PensionBee our company vision is to help all people achieve a happy retirement, through financial freedom, good health and social inclusion.
Right now, many savers are investing into pensions with those very expectations – and that they retire into a world that is environmentally stable, has good social support structures and fair access to the earth’s resources. But if that future world is characterised by climate disaster, then their retirement savings will be stretched in ways they didn’t anticipate. For example, as a result of a climate catastrophe, the cost of food can increase so much that pensions saved over a lifetime will last only a few years in retirement.
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Since late 2019 we’ve been hearing from customers who are concerned about climate change, and who are resolute that their pension investments should not be accelerating it. We welcome their feedback, as at PensionBee, all our innovation is led by real customer needs and preferences, and building a pension that customers truly want can only increase engagement and saving.
Balancing returns with doing good
Contrary to popular opinion, pension investing is not just about high returns at the expense of the planet or society. Our research indicates that most customers want to balance making money with investing in companies that create positive social outcomes too – and that most believe in an ‘engagement with consequences’ approach. This is the strategy of our Future World Plan, which is bound by a climate impact pledge. And it’s an approach that we fully support, as we believe that sustainable, well managed companies will lead to better returns in the long term.
The money managers of this plan – Legal & General – engage with companies that the fund invests in, and hold them accountable for improving their carbon footprint, as well as other environmental, social and governance practices. Engagement involves setting targets and divesting from companies if these are not met within certain timeframes, alongside publicly calling out companies in the national media and voting against company management. The purpose is to improve the behaviour of some of the biggest companies in the world.
Demand to exclude fossil fuel producers
However, we’ve also discovered that a significant proportion of customers want to completely exclude fossil fuel producers from their pensions. A female respondent to a PensionBee survey suggested that removing companies entirely is an effective way to push them to change: ‘Unethical companies will only listen to concerns of individuals when they start losing money’. She is aged under 30.
A male respondent in his fifties sees investing in alternative energy companies as a profitable opportunity: ‘Low carbon…. renewables… anti plastic lobby… clean oceans… these are all ethical but real opportunities’. While another male respondent, also aged over 50, felt a sense of urgency and called for more extreme action: ‘We’re running out of time to make a change… act now act hard and fast. The alternative is to be part of the problem. .. i.e. the destruction of our environment’.
Across all age groups and genders people are calling for the removal of fossil fuels from their pension investments, challenging a commonly held assumption that young women are driving demand for sustainable investing.
In response to these findings we searched the market for an existing mainstream ‘Fossil Fuel Free Fund’, but discovered a dearth of suitable options. To be offered by PensionBee, funds must meet four key criteria. Funds must be:
2. Good value
4. 100% FSCS protected
UK’s first mainstream fossil fuel free plan
We couldn’t find any existing funds in the market that met these criteria. So we compiled evidence of consumer demand through two major surveys with around 2,500 responses, and shared it with our money managers to see if they had a solution. As a result, we will soon be launching the UK’s first mainstream Fossil Fuel Free Plan in partnership with Legal & General, who have created an entirely new fund.
The UK Government has made a legally binding commitment to achieving net zero greenhouse gas emissions by 2050, and we believe it’s only going to be possible to meet those targets if we directly pressure oil companies to stop polluting. The willingness of these huge fossil fuel companies to adapt is critical in whether we, as a society, succeed in the shift to a zero-carbon future fast enough to meet the needs of the planet.
Pensions provide consumers with a vehicle to drive change, and make their voices heard, whether through the ‘engagement with consequences’ approach of the PensionBee Future World Fund, or through the exclusionary approach of our new Fossil Fuel Free Fund. Join our waitlist and become one of the first to investors in our fossil fuel free pension!
Risk warning: When you invest, your capital is at risk and you could lose all of your investment. The value of investments and any income from them can go down as well as up, and past performance is not necessarily an indicator of future performance. Before you invest, make sure you are comfortable with the level of risk you are taking on.