Pensions Used as an Investment Vehicle for Good

Those who work in the financial services industry will have been told to advise clients to save first and then spend what’s left. However, not everyone is good at saving money – it can be even more difficult to consider retirement planning and saving for our older age when there are things that are more fun that happen earlier, such as that trip to Spain you’ve been planning. Saving for retirement is a distant prospect that only becomes real the closer we get to it, wishing we had started to save seriously earlier.

However, could this be about to change for many?

More investment has been channelled into ‘green’, ‘responsible’, and ‘ethical’ funds in recent years – socially responsible investing was once considered a fairly radical strategy; however, it is becoming more prevalent. For example, research by Morgan Stanley in 2019 reported that 85 per cent of U.S individual investors are interested in sustainable investing.

Is it possible that savings – and in particular saving for pensions – could become a force for good? Could young people’s perceptions of savings change and evolve from something they are reluctant to do into something that could act as a driver for social change?

More and more governments are increasingly committing to green initiatives. For example, the UK Government will be prohibiting the sale of new petrol and diesel vehicles from 2030.

When ESGs were a relatively new concept, they largely avoided tobacco, gambling, and the arms industry, as they were viewed as unethical areas.

Consider the rising dominance of millennials and Gen-Z in the workplace – demographics who are primarily interested in ethical employers and investors – we can expect that this shift towards ESG will gather pace. For example, the Cone Communications Millennial Employee Study reported that 64 per cent of millennials will reject a job if the company doesn’t have a strong corporate social responsibility (CSR) policy. Interestingly, Gen-Z is ‘the first generation to prioritise purpose over salary’.

The newer investors that want their pensions to be invested in ethical funds that care about social and environmental causes, the more fund managers will have to adapt. And the more ESG funds that are launched, the more that young people might be willing to save.

The content of this article is for your general information and use only and is not intended to address your particular requirements or be considered advice. Pensions are not normally accessible until age 55. Your capital is at risk. The value of investments can go down as well as up in value and you may get back less than you invested.  Your pension income could also be affected by interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future. Accessing pension benefits early may impact on levels of retirement income and is not suitable for everyone.

Sources

https://www.morganstanley.com/press-releases/morgan-stanley-survey-finds-investor-enthusiasm-for-sustainable-

https://esgclarity.com/esg-assets-could-grow-to-more-than-50-of-total-european-fund-aum-by-2025/

https://www.forbes.com/sites/afdhelaziz/2020/03/07/the-power-of-purpose-the-business-case-for-purpose-all-the-data-you-were-looking-for-pt-2/?sh=779d361a3cf7

https://www.edie.net/news/11/Government-confirms-2030-ban-on-petrol-and-diesel-cars–unveils–20m-electric-vehicle-package

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