Ethical pensions: Considering where your money is invested

Posted on

Considering ethics when investing has slowly been on the rise over the last couple of decades. However, even if it’s something you think about with your investment portfolio, you may not have factored in your pensions. As contributions are often deducted from your salary automatically, they can slip your mind.

Yet, whether you have one or multiple pensions, they’re likely to be one of the largest assets you have. After all, employee contributions typically span decades over your working life, coupled with employer contributions, tax relief and investment returns. As a result, if ethical investing is something you’re interested in, including your pension in decisions is worthwhile.

What is ethical investing?

Put simply, ethical investing is about incorporating your personal views into how and where you invest. Much like ethical shopping means actively choosing some products and avoiding others for ethical reasons, it’s the same with investing, Whilst you might choose the fair trade fruit at the supermarket, for example, you’d choose the companies that pay a fair wage to invest in.

It’s about having a goal that goes beyond simply delivering returns on your money. For example, encouraging green energy innovation, fairer working practices across the global supply chain, or reducing environmental degradation. Some refer to ethical investing as having a double bottom line; the returns and the positive impact you hope it will encourage.

Ethical investing is often filled with jargon and you may have heard the practice of incorporating values into investing as sustainable, responsible or green investing; they all broadly mean the same thing. Ethical investing can then be broken down into three key issues, referred to collectively as ESG:

  • Environmental: These link to sustainability and the depletion of resources. Environmental considerations may be using energy efficiently, managing waste, or reducing deforestation.
  • Social: The social issues are the ones that relate to how a company treats people. This could cover relationships in communities where they operate, diversity policies, and labour standards throughout supply chains.
  • Governance: This term focuses on corporate policies and how a company is run. Among the areas covered are tax strategy, executive remuneration and protecting shareholder interests.

When it comes to pensions, incorporating ethics may mean switching to a different fund or actively selecting ethical investments if you have a SIPP (Self-Invested Personal Pension).

Growing interest in ethical pensions

Research conducted by Invesco highlights a growing demand for pension products that reflect ESG principles in some way:

  • 82% of people would favour part of their pensions automatically going to a company which meets a certain ethical standard
  • 72% of defined contribution (DC) pension members want their scheme to include ethical investments in its default fund
  • 46% would choose a fund that only invests in ‘socially and environmentally responsible companies’ with returns of 6%, rather than a fund that delivers returns of 6.5% but invested in all types of companies
  • If both the above funds had the same historic returns of 6%, 60% would rather invest in the responsible option

The drawbacks of investing ethically

Whilst ethical investing does allow you to back companies that align with your values, there are drawbacks to consider.

First, ethics are highly subjective. Whilst your pension provider may offer an ethical fund to choose from, it might not align with your values. As a result, you may have to compromise.

Second, considering ethics is a growing trend among businesses, but you will be limiting investment opportunities. This may mean that returns are lower due to choosing ethical investments.

Finally, validating some claims companies make in their corporate social responsibility (CSR) reports can be difficult, as can measuring the positive impact of investments.

As demand for ethical investment continues to grow, it’s likely these issues will become smaller. However, they are worth considering if you’re interested in investing your pension ethically. Remember, your pension should provide you with an income throughout retirement. Other factors need to be considered alongside ethics too.

Investing your pension ethically

If you decide you want to invest your pension ethically, how you do so will depend on the type of pension you have.

  • If you have a Workplace Pension, you’ll be automatically enrolled in the default fund. However, many providers now offer an ethical option that you can easily switch to, often through logging in online. Here, you should be able to see the ESG criteria set out, as well as historic performance.
  • A Personal Pension typically works in the same way as a Workplace Pension, except you can choose which provider you want to use. As a result, you can screen out those that don’t offer an ethical fund.
  • If you have a SIPP, you can either choose investments personally or select a fund, giving you far more control over the ESG elements you want your investment to incorporate.
  • With a Defined Benefit pension, you don’t have control over how your pension is invested. However, many have begun to embed some ESG practices into their investing principles and some have responded to action from members to do so.

If you’d like to discuss how your pension is invested and the income it’s projected to deliver at retirement, please contact us.

Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the 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.

We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.

    Subscribe to our newsletter