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Home Finance Myths and misunderstandings stop us investing our pensions responsibly

Myths and misunderstandings stop us investing our pensions responsibly

by Staff GBAF Publications Ltd
  • 52% of people say getting the best possible investment returns is more important to them than investing responsibly.
  • This was particularly the case with people coming up to retirement, with 64% of those aged 45-54 and 60% of 55-64-year olds prioritising investment returns.
  • When asked why responsible investment was not important to them, 35% of 55-64 year olds said they didn’t think they would make as much money if they invested responsibly.
  • One third of 65-74-year olds and 41% of those aged 75 said they helped the planet in other ways. This compares to 11% of 25-34-year olds.
  • Overall, 21% of people reject responsible investment because they think it’s just a fad. However, this falls to 12% among the 55-64 age group and to 14% among those aged 65-74.

Survey of 2,000 people by Opinium for HL in September 2021.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

“One in five people aren’t interested in responsible investment because they think it’s just a fad. Despite increased media coverage of issues such as climate change and corporate governance, these kinds of dangerous myths persist around responsible investment. As long as people believe they must give up investment returns if they are to invest responsibly it will always remain a niche part of investment, when it could be in the mainstream.

As people approach retirement, they want to know their pension investments are working as hard as possible and so they are unlikely to opt for an investment strategy that they think will give them less. The fact that so many older people said they help the planet in other ways shows these issues are important to them, but it would seem they don’t want to stake their retirement on it. However, there is no reason why anyone should have to accept lower investment returns as a result of investing responsibly and there is a growing body of research to back this up.

Other people highlighted that it was too difficult or expensive to invest responsibly, while some said they were too time pressed to do it. There remains a massive educational challenge to help those who wish to invest responsibly to be able to do so.”

Top tips:

  • When you join a pension scheme you will likely be auto-enrolled into the default fund. You don’t have to remain invested in this if you don’t want to. You can engage with your provider to see what responsible investment options they can offer you.
  • The term ‘responsible investment’ means different things to different people so it’s important to think about what you want to achieve. Some investors may want to exclude certain companies or industries from their investments while other investors may not. You should look at the approaches taken by different funds to make sure you really are investing in line with your values.
  • While some investors want to completely exclude certain companies, others will want to invest in funds that actively engage with these companies in a bid to help them improve -one example could be voting at AGMs. Think about what you want to achieve from your investment.
  • If you have very specific needs and struggle to find a fund that meets them then you could invest in the shares of individual companies. However, this will inevitably mean more research than investing in a fund.