What world is the average pension building?

The vast majority of people are automatically placed into what’s known as a default fund. Or don’t have any fund choices.

The problem with default options is that these funds typically invest your money into indexes. Indexes are big lists of companies. When your money’s invested in an index, you buy a bit of all of the companies in that index. Many indexes don’t check how a company does on the environment or how it treats its workers before letting them on the list. The most well-known index in the UK is the FTSE100, which simply lists our biggest public companies. Pretty much all default funds invest in this, so you almost certainly do. Some of the biggest companies they include are shown here.

It’s possible that over 10% of your pension is invested in fossil fuel companies.

As Good With Money have written in their Good Guide to Pensions,nine times out of ten, pension savings are going into the biggest companies in financial markets. And this means tobacco firms, oil and gas majors, mining, big pharma, big banks: social, climate and environmental breakdown, in other words.

How do I find out what world my pension is building?

1. Find out who your pension provider is

Do you know who your pension provider is and which fund you’re in? If yes, great – scroll on down. If no, then check with your employer or colleagues, or use this government webpage to find out who your pension provider is. You may have more than 1 pension pot if you’ve worked elsewhere, so look these up too.

2. Find out which fund you’re in

To find out the name of the fund you’re in, log into1 your online pension account. You should see the name of it there. If you can’t, or you haven’t got your log-in details, give your pension provider a call or send them an email.

3. Find out what companies your money’s investing in

Once you’ve found your provider and the name of the fund you’re in, you can go about finding out what your money is doing. Sadly it isn’t all that easy to find out exactly where your money is invested. Pension providers normally only release the top 10 investments per fund, and these aren’t always publicly available. Here are a couple of ways you can try and find out.

  • Some pension providers such as the People’s Pension and USS will list their investments on their website. Look up your providers’ website and do some digging. Start by searching terms like ‘investments’ or ‘fund factsheet’ and look at their annual reports. If you can’t find company names, keep an eye out for the names of any indexes the fund is investing in. If you search for indexes online, you can often find the names of the companies in them. 
  • Call your pension provider or send them an email.
  • Ask your employer to contact the provider for you – your employer chose the provider, so they’re their customer after all.
  • Find out the name of the fund you are in and search it on Trustnet, who provide up to date information on what some funds are investing in.

We’re investigating easier ways to find out all the companies your money is invested in. Sign up to our mailing list to get alerted when we manage to do so.

log into1 – To log in: when you were enrolled in your scheme, you should have received a letter with instructions. If you can’t find this speak to your employer or call your provider..

What happens when our pensions cause harm?

How good are the most commonly used pension providers?

In 2018, we ranked 10 of the most commonly used UK pension providers to find out which did best and worst on investing our money responsibly1 . We were pretty disappointed with their general performance. Only NEST did very well. 

Can you spot your pension provider?

Read the whole ranking here.

responsibly1 – An approach to investing that prioritises long-term sustainability over short-term return.

Our money has the potential to change everything. It has massive collective power. The total value of our pensions in the UK is £2.6 trillion. That’s a lot – more than enough to pay for everything produced in this country over a whole year. And it doesn’t stop at home. The amount of money saved up and invested through pensions across the world accounts for half of all the money in the world

Companies need our pension providers to invest in them. Of all the money invested1 in the UK, approximately half comes from our pension savings. If pension providers sell their company shares2 or don’t buy company bonds3 , life becomes a lot harder for companies as there are less buyers. Bonds finance new projects. If these don’t get bought, the projects may not happen. High share prices help them to raise new funds, takeover other businesses and keep hold of staff. This is all made a lot harder if our pension providers sell shares and the price drops.

Our pension investments need to make a return so that we have an income when we stop working, but they can make a return doing good rather than causing harm. In fact, they can make more money by doing good than by causing harm. Our pensions can be used to power social progress, such as being invested in companies working to limit global heating to 1.5 degrees or tackling gender inequality.

We believe pension providers have a responsibility to do good while ensuring we have enough to retire on. Do you?

Pension providers have 2 superpowers that they can use to invest your money responsibly and build a better world. Click to find out more about them.

invested1 – Not including government spending.

company shares2 – A type of investment where you buy part of a company.

company bonds3 – A type of investment where you lend a company or government money for a specific purpose.

Superpower 1: They can choose where to (and where not to) invest your money

They can choose to invest in companies that are doing good. For example, they could decide that they want to spend a tenth of our money on renewable energy. They can also choose to divest1 from companies that are doing harm. For instance, they could choose to take your money out of pornography, tobacco and fossil fuels. 

divest1 – Selling all of your shares in a company or those in a certain sector.

Superpower 2: They can have a say in how the companies we invest in are run

By investing in company shares, pension providers become owners of those companies. As owners they have a range of opportunities to influence a company’s actions. This is called engagement or stewardship. They can do this by meeting with them, by asking questions1 and by voting on company matters2 at their annual general meetings. They can also file3 and vote on shareholder resolutions that force companies (or advise in some countries) to do certain things. 

By sharing a room with companies they own a piece of, they can drive them to build a better world. Our pensions can have a huge impact in getting the biggest companies to do better as well as just investing in companies that do good already.

This is why some responsible pension providers hold shares in companies that are doing lots of harm. Because they are trying to change their practices. However this has to be meaningful, using all of the options to hold them account mentioned. And it has to come with the threat that they’ll take all of their money out if the company doesn’t change.

questions1 – Shareholders can ask company boards questions at their annual general meeting.

voting on company matters2 – Shareholders can vote on company matters such as the election of board members at their annual general meeting.

file3 – Shareholders can file votes that, if passed, force a company to do something.

Here are some examples of pension providers showing that they can do good with our money:

Investing in renewable energy

The Environment Agency pension scheme has committed to invest at least 25% of the fund in clean technology and sustainable solutions. So they’re investing in things such as renewable energy and energy efficiency. 

Empowering women

The Transport for London pension scheme have invested in Bandhan – a Indian bank which helps millions of rural customers, nearly entirely women, to secure access to loans that they would otherwise not have received. With these loans, many of them have been able to build and grow their own businesses.

Stopping increased coal mining

A coalition of investors including lots of pension providers used their power to engage with Glencore – the biggest mining company in the world. They got Glencore to commit to not producing more coal in the future than they are doing already. A big step considering Glencore has been expanding its coal operations over recent years.

Highlighting workers’ rights

A coalition of investors including lots of pension providers have come together behind a ShareAction campaign – the Workforce Disclosure Initiative – engaging companies to disclose information on how they treat their workers. This includes how workers in supply chains are treated, whether there’s any difference in how workers are treated based on their gender, and how well workers are paid.