Neither is necessarily more ethical than the other, but personal pensions give you more flexibility and choice, meaning you can be more discerning about where your money is invested. It should be noted that Nest and The People’s Pension only offered workplace pensions. Most of the providers in our guide offered both workplace pensions and some form of personal pension. The scheme, a well-placed nanny-state intervention, has led to a substantial increase in the number of workers holding a pension. In 2012, auto-enrolment came into force, meaning that all UK employers had to set up pensions for all workers that met the following criteria: These are set up by your employer and typically involve both you and your employer contributing to the fund. It is usually recommended that you speak with an independent financial advisor or impartial organisation before opening a personal pension. It is important to emphasise that personal forms of pension are only suited to those who are comfortable with managing their own investments. These are very similar in that both are generally set up by the individual and give you choice over your investments, with SIPPs giving greater flexibility. There is a huge amount of variation when it comes to pension schemes, but for our purposes, there are two main categories: personal pensions or self-invested personal pensions (SIPPs), and workplace pensions. The point is that, thus far, the importance of moving your investments has often been underappreciated.
Reducing consumption is, of course, essential. There are problems with comparing carbon emissions across such different areas as consumption and investments, so such claims should be swallowed alongside a fist-full of salt. It should also be emphasised that statistics such as Nordea’s do not mean that moving your pension to a greener fund suddenly justifies biweekly flights to the Algarve. One calculation by Nordea, a Nordic financial services group, suggested that ‘greening’ your savings such as your pension " could generate 27 times greater improvements in a personal carbon footprint than eating less meat, using public transport, reduc water use, and flying less". Moving your money to an ethical fund can mean that you are supporting important sectors such as healthcare or companies aiding the transition to a low-carbon economy. It is important not to frame our thinking around pensions as simply avoiding the negative consequences of investment. Bronwyn King, an Australian oncologist, who gave a TED talk in 2017 in which she described the horror of finding out that while she spent her days trying to treat lung cancer patients, her pension fund was heavily invested in tobacco companies.
If your pension is not invested in an ethical fund you will likely be the part-owner of companies in a whole range of unethical sectors such as arms, tobacco, and fossil fuels. It is vital that we all, young to old, take an interest in our pension, and not just for the sake of our (hopefully) wiser and more wrinkled future selves.įor many of us, a pension plan will be the largest investment we hold.Īs you pay money into your pension that money is being invested, and when it is invested in company shares (equities) you actually become a part-owner of that company. If you are part of a Local Government Pension Scheme (LGPS), you can find out more in this divestment guide from Unison about how they work and how you can influence them. In April 2016 to March 2018, aggregate private pension wealth in Great Britain was £6.1 trillion, which represented 42% of all wealth in Great Britain. In the UK, 77% of employees were members of a workplace pension scheme in 2019, up from 47% in 2012, when the government’s automatic enrolment initiative came into force. Making sure your pension is invested ethically is a key element in a properly sustainable lifestyle, and also ensures that you are not the unwitting part-owner of any particularly unethical companies.
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