When it comes to saving the planet, the power of pensions is impressive. Total private pension wealth in the UK was £6.1 trillion at the last count in 2018 – and rising, as more people are auto-enrolled via their workplace and funnel more of their hard-earned cash into investments managed by some the UK’s biggest pension providers.
As we squirrel away for our futures, the potential impact of our money lies not only in what it can do for us when we retire, but what it can do for the world in the process.
Green pensions almost make a mockery of all of our smaller daily efforts towards planetary betterment. You could re-wild your garden 50 times over and the impact on the atmosphere would (probably, I’ve not done the CO2 reduction calculations on this one) pale alongside the effect of pulling your £100,000 pension pot out of fossil fuels.
Switching to sustainable
Luckily, switching to sustainable investments within a pension is no longer a niche activity.
Although you might expect that green pensions is the realm of ‘woke’ millennials or Gen Z, the green pension investor appears to defy such stereotypes. We’re all getting in on the act – although women and younger people do seem to want to get in on it even more than they are doing already.
According to interactive investor’s Great British Retirement Survey 2020, one in five people with pensions are investing ethically (encompassing sustainability concerns) – and the proportion is relatively stable across all age groups, as well as between genders.
That said, women seem to show a greater propensity for investing according to values than men, with 42 per cent of women who are not currently invested ethically saying they are interested in doing so, compared with 32 per cent of men. Similarly, young pension investors in their twenties are more likely to say they are keen – 61 per cent of those aged 18 to 23 and 59 per cent of those aged 24 to 29. Interest declines gradually with age, with only 27 per cent of 72 to 77-year olds being interested in ethical investing, perhaps feeling like it may now be too late for their investments to make a huge amount of difference.
How is your current pension invested?
Women and young people were also more likely to say they think workplace pension providers should offer ethical investments as the default option and the most likely to say they are unsure about the way their pension is currently invested.
This ‘don’t know’ response to the question “Is your pension invested in a way that aligns to your moral values?” is troubling: 53 per cent of people overall do not know whether their pension is invested in a way that aligns to their moral values.
That’s a huge wall of ignorance we need to break down before we can get to the ‘making your pensions greener’ part of this story.
The great news is, the Pensions Minister is working on it, so is the Financial Conduct Authority, so are campaigns like Make My Money Matter and Share Action, websites like Good With Money, investment platforms like Interactive investor, apps like Tumelo, and the pension providers themselves, with the likes of Nest, Aviva, Legal & General, the People’s Pension, Royal London and others all starting to ditch the paternalism and show people where their own money is being invested. They are even setting Net Zero targets – a trend that could only be dreamt of five years ago.
The not so great news is, time is running out to keep global warming within 1.5 degrees of pre-industrial temperature rises – the level set by the Paris Agreement of 2015.
Have your say
So in this year’s Great British Retirement Survey, it would be nice to see more progress, with that ‘don’t know’ cohort of pension holders declining in number and evidence of greater understanding emerging.
That £6.1 trillion we have in our pensions won’t do it all by itself.
If you want to have your say on greener pensions and your retirement outlook in general, you can complete the latest interactive investor Great British Retirement Survey here. There are prizes to be won for those who complete it and it takes about 15 minutes. It’s a great way to dig deep into your own pension, retirement plans and thoughts on where your money is going.