Pension savers appear to be largely in the dark regarding how responsibly their pension is invested according to analysis of Financial Conduct Authority data by Broadstone, a leading independent pensions, investments and employee benefits consultancy.
The United Nations Principles for Responsible Investment define it as “considering environmental, social and governance (ESG) issues when making investment decisions and influencing companies or assets.”
When asked if their pension was invested responsibly, just 17% of Defined Contribution (DC) savers said they were sure it was while a quarter (26%) assumed so but were unsure. Four in 10 (40%) admitted they did not know.
Even among those who said their pension was invested responsibly, or assumed it was, two-thirds said that they did not make an active investment decision but just assumed that either their pension provider invests this way (33%) or their employer chose a pension provider to invest in this way (33%).
Further statistics from the FCA’s data indicate how responsible investing can drive positive savings behaviours.
Nearly two-thirds (63%) of DC savers said that they feel or would feel more engaged with their pension overall if it was responsibly invested and four in 10 (41%) would pay more into their pension as a result.
Damon Hopkins, Head of DC Workplace Savings at Broadstone, said: “Responsible investment is fast becoming well and truly entrenched in the design and selection of pension investment strategies – and rightly so.
“However, the type and extent of integration of responsible investment factors varies significantly and many pension savers are blindly assuming their pension is invested responsibly, banking on the good intentions of their employer or pension provider.
“We expect scrutiny over responsible investing to intensify amongst savers, so providers and employers (and their advisers) will need to be able to clearly evidence and articulate their investment profile and its wider ESG benefits.
“As this issue snowballs in prominence we believe it could become a key area of risk and differentiation, as savers increasingly focus their savings in investments that provide long-term real returns and make a positive difference to society and the environment.”
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