As a new member of the Go Invest Green team I was intrigued and eager to take a deep dive into the world of pensions.
As a recent graduate I saw it as a great opportunity to get to grips with the different providers in the market, their offerings and how they match up to one another, before I start my career and choose a pension myself.
Part of my degree included a year in industry, which offered a chance to gain insight into how organisations operate. The job included a workplace pension, which I paid into at the time, not really understanding where it was going or what it was being used for. So I decided to look into it.
Research from the Office for National Statistics found that between 2016 and 2018 total private pension wealth in Great Britain was £6.1trn, accounting for 42% of all wealth in the country. Aggregate private pension wealth is an estimate of the value of all private pension wealth. These figures underline the power our pensions have, in terms of which organisations we invest in and the movement of financial capital.
Many members of my generation want to act against the existential threat of climate change. This takes many forms, including changing food habits by reducing meat intake, limiting flights, and buying electric cars. A consumer study by Cone Communications found Generation Z is the generation most likely (94%) to believe companies should address urgent social and environmental issues, with millennials narrowly behind (87%).
So we should expect to see consumers demanding more from companies on how they’re tackling these urgent problems: those exhibiting transparency on where their customers’ money is going will attract interest from the growing customer base.
The change in workforce mobility is another shift which may impact the future competitive landscape. The Bureau of Labour Statistics in the US stated the average number of jobs held in a lifetime is 12.5 for men and 12.1 for women. Many employees will have quite a few workplace pensions, or may choose to open a Self Invested Personal Pension, usually known as a SIPP. This allows users to consolidate multiple pensions onto one platform, aligned with their investment goals.
Making information transparent
My research has looked into ‘traditional’ pension providers, and some of the newer FinTech offerings. And there’s no clear path for customers seeking into investing sustainably. The constant mention of ESG funds was a common theme throughout. But as we’ve discussed on this blog, ESG is by no means synonymous with green investing.
I found a clear difference in the user experience between the more traditional and FinTech pension providers. The latter’s websites are often better designed and more usable, usually minimising the amount of content, making their proposition easier to navigate. They promise a well-defined route for customers with clear socially responsible investing goals. On the other hand, long standing large workplace pension providers do often provide real depth and breadth of information. But information about their commitment to sustainable investment can be hard to find.
The recent success of disrupters in the banking sector, like Starling, Monzo and Revolut, has forced high-street banks to offer more innovative products. Pension providers looking to ride the big wave of Environmental, Social and Governance (ESG) and green investments must make a clear and transparent proposition to customers.
Taking the time to do your own research
Right now ESG is something of a free for all. As we’ve discussed on this blog, there are no established industry standards in measuring sustainability. Recent research from Hargreaves Lansdown includes British American Tobacco and Coca Cola among the top ESG providers in the FTSE 100. This is because they are considered ‘best in class’ companies in their field, with higher ESG scores than their peers. That’s something to be aware of when you’re checking out ESG investments.
The rush to embrace ESG across all sectors is encouraging. But it really is essential to research each investment option to go beyond the spin and check it aligns with your goals.