Future finances

Our viewpoint

Understanding the link between peoples’ ethical and investment views is one of the most challenging things to do. Many people hold quite strong views on topical taboo subjects such as the use of plastics, animal testing or gambling but rarely do these views then translate into actual investment decisions within their pension investments...

We can say this as, typically, less than 5% of a scheme’s assets are invested in “ethical” investment offerings. The findings from our recent financial wellbeing survey of 10,000 UK employees has similar results with only 1 in 6 employees saying that investing ethically is an important factor when investing over the long term. However, around three quarters also say they would want to avoid investing in companies involved in certain unethical practices.

Many schemes offer members choices to invest ethically, but typically they have to choose these investments themselves. And it’s here where we see very few members select these options.

Is this because members really don’t care about ethical issues after all? I doubt this is the case. Clearly, one of the main contributing factors is that most pension scheme members do not have the financial knowhow to confidently choose their own investments. The survey shows that 2 of the 3 most important features of a pension scheme is ease of access and the ability to change investments easily. Clearly members do not feel either of these are true at the moment as in many UK DC schemes less than 10% of members select their own investments.

How do we change things? Well, we can look to the FinTech world for help on how to improve member engagement and the sense of ownership that people might have with their pensions scheme as they do with other areas of their financial life. We need to tone down the jargon and give members simple clear guidance to nudge them towards making decisions that are in their best interests. The use of tech is essential for this,  the majority of people communicate with their bank through an app on their phone, we should be working towards a similar situation for access to information about their pension scheme. There are promising signs with a number of providers now offering apps with transactional functionality on them, not just static information. And pensions dashboards are now on the horizon, we have a real opportunity to reboot pensions for the modern world and give members the experience they are used to in all other areas of their life.

Master Trusts Unpacked

Master Trusts Unpacked

Default Investment Strategies

Find out about the vast array of master trusts available and the considerations to be taken into account when using a master trust to ultimately provide good outcomes for members.

Read the report