Providing for your own future need not mean you have to compromise on your principles. Saving into a pension is a wise decision, and one you should prioritise at an early age to ensure that you take full advantage of tax breaks and compound interest (this is where you earn interest on your interest, which over time makes a huge difference to your pot).
You can build your own pension portfolio using any number and combination of sustainable funds, trusts and shares through a SIPP (self-invested personal pension) – see the latest Good Investment Review for more – or through a normal private pension.
Here are some Good options to consider.
Run by Legal & General, the Future World Plan invests in companies generating revenue through low-carbon activities. It has a reduced exposure to environmentally unfriendly companies while increasing and engaging more with greener companies.
Like all PensionBee funds, it is free to transfer existing pensions in. It does come with a slightly higher fee than the platform’s other plans at 0.95 per cent for the first £100,000 of savings, but this is still pretty low relative to the rest of the pensions world and falls by increasing amounts for savings over £100,000. Your money is invested globally in over 3,000 companies, that are screened against a set of Environmental, Social and Governance (ESG) criteria.
The Fossil Fuel Free Plan, created and managed by Legal & General, is the UK’s first mainstream private pension plan to completely exclude companies with proven or probable reserves in oil, gas or coal. It also excludes tobacco companies, manufacturers of controversial weapons, nuclear weapons and persistent violators of the UN Global Compact.
Alongside this, it invests more of your money in companies that are aligned with the Paris climate change agreement.
While the Future World Fund (see above) seeks to engage with fossil fuel companies to get them to change their business practices and carbon footprint over time, the Fossil Fuel Free Plan excludes them completely from the outset.
You’ll pay one annual fee between 0.50 per cent and 0.95 per cent, depending on the plan you choose. If your pension pot size is larger than £100,000 the fee will be halved on the portion of your savings over this amount.
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 (but has performed better over the last five years), invests in companies with positive records on human rights, fair labour practices and 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 record, as well as companies that damage the environment.
Read the latest Good Guide to Pensions, from Good With Money, here
Pensions giant Aviva has a number of ethical funds that can go into a pension. Top performers with strong sustainable investment policies include the Liontrust Sustainable Future range, all of which are available through Aviva. Others include Royal London Ethical Bond, Rathbone Ethical Bond, Axa Ethical Distribution and Kames Ethical Cautious Managed. For more on these funds and more, see Good With Money’s latest Good Investment Review.
Aviva charges an annual management fee of 0.35 per cent, dropping to 0.25 per cent on pots over £200,000.
Royal London runs both a workplace and a personal pension plan. The former will be decided by your company while the latter is available to buy through a financial adviser. The firm has a number of ethical and sustainable funds, including its ethical bond product (see above), as well as Royal London Sustainable World and UK Ethical Equity.
The Henderson Global Sustainable Equity fund is an offshoot of the Janus Henserson Global Sustainable Equity fund and is available through the Zurich pension scheme. After the Liontrust Sustainable Future range available through Aviva, it is one of the better ethical pension funds.
Unlike most, it does not invest in oil and gas with the manager seeking to actively invest in global companies whose products and services are considered as contributing to positive environmental or social change. It also regularly publishes all of its holdings as well as a positive impact report.