Almost three quarters of employees want their workplace pension to be invested responsibly, but around half of employees don’t know if this is actually happening.
This was a key finding in the Scottish Widows Responsibly Invested Pensions Report. It found that 72 percent of UK employees say it is important that their employer offers a responsibly invested pension.
However, 47 percent of employees don’t know if their pot is invested responsibly.
The pension provider surveyed more than 6,000 employees, employers and financial advisers about their views on environmental, social and governance (ESG) related issues. It asked respondents what this means for investment decisions and expectations of their employers.
Researchers said the findings suggest there is a knowledge gap about responsible pensions as well as a divide in perceptions of the benefits ESG-friendly pensions can provide.
An uncertain future
Savers identified the biggest issues shaping the world they will retire into as cost-of-living crisis, climate change, and an unequal society.
Nearly two-thirds (63 percent) of respondents said the cost of living was their top concern and 49 percent expect it to still be the biggest issue in five years time.
More than two-fifths (44 percent) of savers said climate change was a big concern, with plastic waste and water pollution also major concerns, cited by 37 percent and 33 percent respectively.
Younger survey respondents raised concerns around issues related to the social part of ESG, such as diversity, equity and inclusion. Nearly a third (29 percent) of people aged 18 and 34, versus 18 percent of people aged 55 plus, highlighted these concerns.
There is clear concern about the future of society. This was reflected by the finding that 70 percent of all respondents said their employer’s social responsibility credentials or benefits were important when they chose their current role.
Researchers said that younger employees put an even greater emphasis on responsibly invested pensions. More than three-quarters (79 percent) said it is important for their employer to offer a responsibly invested pension, compared to 61 percent of people aged 55 plus.
People don’t want their employers to just ‘talk the talk’ on responsible pensions, the report warned. As a result, a large proportion (64 percent) expect their employers’ environmental and social commitments to be mirrored in their pension portfolios.
However, a lack of awareness and education around how employees can ensure their pension is more ESG-friendly remains a barrier to change. Almost two-thirds (61 percent) don’t know how to switch from their default pension to an alternative more ESG-friendly investment option.
There is also still a lack of knowledge about the returns more responsible pensions can generate, with 23 percent concerned about potentially losing money compared to sticking with traditional investing. A fifth (21 percent) were unclear about whether more responsible pensions would also cost more.
A quarter said they don’t have enough information about these types of pensions to understand their cost and benefits. This highlights that more needs to be done to educate and engage people who have access to more responsible pensions, as well as ramping up efforts to meet their investment demands, the report said.
Last month Scottish Widows launched a strategic partnership with asset manager Robeco to ensure that responsible investing was standard for its pensions.
Eva Cairns, head of responsible investment at Scottish Widows, said: “Employees are increasingly seeking to make sure their investments – including pensions – deliver financial return while considering the impact on people and planet, and there is clear demand for more responsibly invested options. We know pension savers are concerned about financial security and believe that considering risks and opportunities related to ESG can help build more resilient investment portfolios – but it’s also about contributing to a more sustainable future, tackling some of the societal issues people care about.
“There’s still a big knowledge gap to tackle, and employers should not only offer responsible pensions, but also do more to empower employees with the information they need to make more informed decisions.”
Cairns said the pension provider was committed to helping bridge this knowledge gap and ensuring that every pension saver can invest with confidence in a way that reflects their priorities, while also delivering the best possible return to set them up for retirement.
