Almost three out of four workers say it is important their employer offers a responsibly invested pension, according to research from Scottish Widows.
However despite this demand, the survey found that almost one in two (47 per cent) did not know how their workplace pension was invested, and whether it adopted ethical, environmental or responsible investment guidelines.
This Responsibly Invested Pensions Report surveyed more than 6,000 employees to understand their approach to Environmental, Social and Governance (ESG)-related issues.
It found that pension savers are concerned about the issues impacting the world into which they will retire — and this influences how they expect their pensions to be invested, and their employers’ role in this.
When asked about the biggest issues facing society today, the cost-of-living crisis topped the list for almost two-thirds (63 per cent) of employees, with 49 per cent believing this will be the biggest issue society faces five years from now.
Other concerns highlighted include climate change (cited by 44 per cent of respondents), plastic waste (37 per cent) and water pollution (33 per cent).
Social issues – including diversity, equity and inclusion – were also seen as a major challenge, particularly among younger respondents. This was cited by 29 per cent of those aged 18 and 34, compared to 18 per cent of those aged 55+.
As a result, 72 per cent of the 6,000 employees surveyed said it was important their employer offers a responsibly invested pension. In addition, 70 per cent said their employers’ social responsibility credentials or benefits were important in choosing their current role.
Younger employees place an even greater emphasis on responsibly invested pensions. Over three-quarters (79 per cent) said it is important for their employer to offer a responsibly invested pension, compared to 61 per cent of those aged over 55.
The report also highlights a lack of awareness about pension issues. As well as not understanding where their pension was investment, almost two-thirds (61 per cent) don’t know how to switch from their default pension to an alternative investment option, that may be better suited to meet their objectives.
But the survey shows the majority of employees are not concerned that taking a more responsible approach to investment will result in either higher fees or lower returns — with less than a quarter of employee saying there were worried about either outcome.
However, one in four (25 per cent) stated that they do not have enough information about responsible pensions to understand their cost and benefits – raising concerns that more needs to be done to educate and engage people with responsible pensions, and fulfil their investment demands.
Scottish Widows head of responsible investment Eva Cairns says: “Employees are increasingly seeking to make sure their investments – including pensions – deliver financial return while considering the impact on people and planet, and there is clear demand for more responsibly invested options.
“We know pension savers are concerned about financial security and believe that considering risks and opportunities related to ESG can help build more resilient investment portfolios – but it’s also about contributing to a more sustainable future, tackling some of the societal issues people care about.”
Cairns adds: “There’s still a big knowledge gap to tackle, and employers should not only offer responsible pensions, but also do more to empower employees with the information they need to make more informed decisions.
“We’re committed to helping bridge this knowledge gap and ensuring that every pension saver can invest with confidence in a way that reflects their priorities, whilst also delivering the best possible return on their investments to ensure they are financially set up for their retirement.”
