Some think their money sits in their pension provider’s bank account, waiting for it to be withdrawn at retirement. However, it’s actually invested in companies and funds which aim to earn more money than if the money was sitting in a bank account. As people are becoming more aware of how their savings products are being invested, many are demanding change.
It’s no secret that people are trying to do as much as they can to be more sustainable and ethical in their day-to-day lives – this also applies to investments. Choosing sustainable investments that help to reduce the impact of climate change, improve diversity and inclusion, and eliminate modern slavery is at the front of people’s minds.
There is still a great deal of education and innovation left to do for sustainable investing particularly in the pension industry – but there are some providers that are dedicated to paving the way. For example, we have partnered with Make My Money Matter to pledge to net-zero well before 2050 and are also trialling innovative sustainable investment tools with our members.
Sustainable investing means that the aim is to generate financial returns on pension savings so that members can have a more comfortable retirement, and do so in a way that will positively impact society and our planet.
The industry term for this is ESG (Environmental, Social and Governance) investing. This means that when investing, they take into consideration factors ranging from the Environmental impact with the aim to protect the planet, Social impact – looking at issues affecting the fair treatment of people – and Governance, which considers the way companies are run.
Some providers give members little control over how their savings are invested, but some will give members the option to choose which funds they invest in. Here at Smart Pension, we offer 17 self-select funds to complement members lifestyle choices including Shariah Funds. However, whilst offering self-select funds for members is a great option, the fact is that the majority of members will remain in the Default Fund, so our approach is to make the default option a sustainable one. Our entire fund range is invested in line with the trustee’s responsible investment policy. Additionally, 71% of our default investment strategy is invested with a specific sustainability focus. The investment strategy invests more in companies with strong sustainability credentials, for example, strong gender equality or emission reduction goals, and less in companies that are not as sustainably strong. These funds are also invested under a distinct climate pledge and have temperature reduction targets included supporting the Paris Agreement. We’re always looking at how we can invest even more into sustainable funds that benefit society and the environment, and expect the amount in funds with a specific sustainability focus to increase over time.
Watch our What is Smart Pension’s commitment to sustainability? video to learn more about our approach to sustainable investing.
Visit Smart Pension’s financial wellbeing hub for more information.
Launched in 2015, Smart Pension exceeds £4bn in assets under management (AUM) and now serves over one million members and more than 70,000 employers. It is powered by Keystone, Smart’s global savings and investments technology platform.
Aquiline Capital Partners, Barclays, Chrysalis Investments, DWS Group, Fidelity International Strategic Ventures, J.P. Morgan, Legal & General Investment Management, Link Group and Natixis Investment Managers are all investors in Smart Pension.