A] Prelude
For more information on pension systems, risk and coverage, feel free to visit our dedicated webpages:
https://expatpensionholland.nl/uk-expat-pensions
https://expatpensionholland.nl/global-pillars-systems
https://expatpensionholland.nl/global-investments-risks-0
https://expatpensionholland.nl/global-social-security-coverage
For even more information feel free to visit the following external sites:
https://www.thepensionsregulator.gov.uk/en/document-library/automatic-enrolment-detailed-guidance/4-pension-schemes-under-the-employer-duties
https://www.nestinsight.org.uk/wp-content/uploads/2022/10/Employer-pension-contributions-in-the-UK.pdf
https://getpenfold.com/employer-tools/uk-companies-provide-pension-scheme
B] The Issue
More than two-thirds (69%) of employers in the UK now offer a responsibly invested company pension, but less than half (44%) have it as their default option, research from Scottish Widows has revealed. The firm said this put the onus on employees to take action if they want to switch.
However, its Responsibly Invested Pensions report showed that nearly two-thirds (61%) of employees had “no idea” how to change their default, highlighting a growing need for employers and advisers to educate workers on this issue.
C] More Details
Scottish Widows’ research also found that more employees have become interested in how environmental, social and governance (ESG) ‘friendly’ their company pension scheme is, with 60% of employers reporting an increase in employees seeking to understand how sustainability was embedded in their pensions in the past year.
Almost one in five (17%) employees now class their pension’s environmental or social impact as a top priority, rising to a quarter (25%) among those aged 18-34. This trend was also reflected when employees were asked which responsible investment tools they believed were most effective for delivering long-term, sustainable returns.
Nearly half (45%) said they would invest in companies directly contributing to positive environmental or social outcomes in line with the UN Sustainable Development Goals (SDGs), while 38% would reduce exposure to companies or industries harming the environment or society.
D] Different Approaches
Scottish Widows said employers were taking various approaches to embedding responsible investment into their pensions. More than half (53%) were allocating pensions to specific sustainable funds, 46% said they were invested in impact strategies, and 45% were focused on investing in companies cutting carbon emissions.
Scottish Widows head of responsible investment, Eva Cairns, said employers have “an important role to play” in educating savers about responsibly invested pensions. “Providing workers with the opportunity to save for their retirement in a way that delivers financial and societal value in the long-term can only be viewed as positive,” she added.
However, Cairns described delivering growing pensions while also reflecting employees’ values as a “critical balancing act.” “This requires not just guidance but clear approaches, priorities and innovation – for example, through private markets, active ownership and investments that support transition leaders and the achievement of the UN Sustainable Development Goals.”
E] Finally
While employees prioritise responsible pensions, many still felt uncertain about their options. Key concerns included a lack of clarity around costs and benefits (25%), doubts about comparable returns (23%), and general uncertainty about funds labelled as ‘responsible’ (20%). The vast majority (91%) of employers said they offered guidance on responsible pensions, and 81% felt confident in their ability to do so effectively.
Cairns said the findings showed “transparency is key,” as workers seek assurances that their pensions are future-proof, both for their retirement and the future world they will retire into. “Meanwhile, employers must demonstrate how they have considered responsible investment in their workplace offering, especially their default that most employees will be in,” she concluded.