Can the pension I offer help to fight climate change?

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A lot of people don’t know where their pension contributions go when they pay them each month. Some think their money sits in their pension provider’s bank account, waiting for it to be withdrawn at retirement.

However, it’s actually invested in companies and funds which aim to earn more money than if the money was sitting in a bank account. As people are becoming more aware of how their savings products are being invested, many are demanding change.

What change are people demanding?

It’s no secret that people are trying to do as much as they can to be more sustainable and ethical in their day-to-day lives – this also applies to investments. Choosing sustainable investments that help to reduce the impact of climate change, improve diversity and inclusion, and eliminate modern slavery is at the front of people’s minds.

What exactly is sustainable investing?

Sustainable investing means that the aim is to generate financial returns on pension savings so that members can have a more comfortable retirement, and do so in a way that will positively impact society and our planet.

The industry term for this is ESG (Environmental, Social and Governance) investing. This means that when investing, they take into consideration factors ranging from the Environmental impact with the aim to protect the planet, Social impact – looking at issues affecting the fair treatment of people and Governance which considers the way companies are run.

So where are pension savings being invested?

In short, it depends on your workplace pension provider.

Every auto-enrolment pension scheme has to offer a Default Fund that member contributions are automatically invested in. Some providers give members little control over how their savings are invested, beyond the default fund, but other providers will give members the option to choose which funds they invest in.

For example, if you’ve signed up to Smart Pension because you’re a Barclays Business Banking customer, your employees will be able to choose from 17 self-select funds, including Shariah funds,  to complement the default fund that is provided by Barclays..

Sustainable investing is important to me and my employees

There is still a great deal of education and innovation left to do for sustainable investing particularly in the pension industry – but there are some providers that are dedicated to paving the way. For example, Smart Pension has partnered with Make My Money Matter to pledge to net zero well before 2050 and they are also trialling innovative sustainable investment tools with their members. Whilst offering self-select funds for members is a great option, the fact is that the majority of members will remain in the Default Fund, so Smart Pension’s approach is to change their Default Fund so that at least 76% of it will be invested in sustainable investments. They’re also currently researching and trialling a more in-depth tool that gives members a questionnaire to complete that provides them with information on which funds best suit their lifestyle choices based on their ethics and morals.

Where can I get help?

Barclays Business Banking has partnered with Smart Pension, which means customers can easily set up their workplace pension in a few simple steps. Visit our website to sign up, set up your employer account with Smart Pension, and add your employees. There is also information on The Pension Regulator’s website, or you can speak to an independent financial adviser.

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