Time to check on your pension?
Being furloughed for a month has been one long cooking, cycling, reading and watching experience. But social isolation has also allowed me to get down to the really, tedious depths of my to-do list.
One point left unchecked: Check company pension.
Most UK workers are now automatically enrolled into a pension scheme. And most of us think we'll get around to checking up on it some time, but it's such a small amount each month – is it really worth the effort? Nevertheless, the money soon piles up. Particularly for whoever is benefitting from its investment.
Now I finally had the time to find out exactly where it was being invested. It's relatively easy sourcing the name of the fund which most likely has 'Growth' in the title, googling it and downloading the PDF.
I knew it wasn't going to be easy reading, but I didn't expect it to be the antithesis of my adult values. It turns out that for nearly a decade I've been unwittingly supporting the future of companies I avoid at all costs in my day-to-day life. I commute on two wheels, powered by a breakfast that (mainly) comes from a locally sourced veg box, all in the effort to lower my carbon footprint. Yet, one of my pension's top holding investments is British Petroleum.
Cancer runs in my family, so I donate to support the charities that have supported them. But I also support British American Tobacco, through pension investments. I've carefully changed my banking so it doesn't invest in fossil fuel extraction, while in tandem, my pension has been helping one of the worst enablers of the fossil fuel industry, HSBC. I've gone to great lengths not to buy from Amazon, but there Jeff Bezos is, ranked third in my pension investments.
While there are also some 'ok companies' on the list; the top 10 (that I can view) do not bode well for the hundreds of other investments I can't see.
Thankfully, a financial advisor provided by Proximity offered a solution. After raising my concerns with him, he suggested moving my pension to an ethical and sustainable one. I wasn't aware I had this choice.
I read his recommended ‘Liontrust Sustainable Future Fund' 2019 annual review, cover to cover. It was interesting, intelligent, matched my values perfectly and just made complete sense.
They launched in 2001 "with a refusal to invest in companies exposed to petrol or diesel engines, believing the economics of a sector that emits poison into the air we all breathe were no longer viable." Good point. They were vindicated when EU emission regulation was put in place in 2009. Because of this, they also averted the biggest disasters of the time; the car industry's Dieselgate and the BP (Deepwater Horizon) oil spill. So shareholders weren't exposed to these losses and could be happy they didn't finance them. I'm confident the Liontrust's investment in trains over single car ownership will be another macro trend they get right.
"We continue to believe unsafe and degrading working practices make no business, common or investment sense and will continue to play our role in bringing them to an end. We do this to generate investment returns for our clients, but it is also clearly the right thing to do."
That's a mission statement I'm on board with. Their foresight again predicted big changes, this time in the fashion industry. By being attune to the changes, they turned investments away from fast fashion and instead towards a circular economy model.
So I thought, I'm prepared to move my pensions and take a financial hit, to invest in the things that align with my values. But it turns out there is no financial hit. The Sustainable Futures Fund performs much better and is rated more highly than my current pension fund. It's actually performing incredibly well. Who'd have thought?
My pension fund now invests in science and tech companies that meet the Liontrust’s sustainable and ethical standards. No more BP, British American Tobacco or HSBC.
Check my pension. That was at the bottom of my to-do list. I wish it hadn't been. I hope you’re inspired to see if your pension aligns with your values, too. And if it doesn’t, know that there’s something you can do about it.
How to switch your pension fund
If you’d also like your pension to be used for more ethical and sustainable investments, I’ve put together a simple walk-through guide: