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Employees want to know where pensions are invested

Despite a lack of knowledge about pensions there is still an appetite to know where funds are being saved, finds Big Society Capital

Nearly three-quarters (72%) of employees think it is important to know where their pension pot is invested yet know little about it, according to research from ComRes commissioned by Big Society Capital.

The Pensions with Purpose report found that two in five (40%) employees with a defined contribution (DC) pension know little or nothing about it, with 46% of those aged 36 to 50 knowing little or nothing about their pension, and 35% aged 51 to 65 saying the same.

Despite this lack of knowledge, the research found an appetite for social investing, particularly among younger employees. More than half (55%) of Millennials said it was important that pensions were invested in organisations that reflect their social and environmental views, compared to 46% overall.

Four in 10 (40%) said they would want their pension money invested elsewhere if the investments didn’t match their values, and 35% stated they would want their employer to switch provider (rising to 40% for Millennials).

Paul Todd, director of investment development and delivery at the National Employment Savings Trust, highlighted differences in the way different generations save.

“This research adds to the growing body of evidence showing that far from being uninterested, most people care how their pensions are invested,” he said. “It also highlights an interesting generational split. Millennials in particular expect their savings to be invested in ways that both generate sustainable returns and reflect their values."

Simon Rowell, a senior director at Big Society Capital, called for a “new generation” of social pension funds. “Clearly people care about where their pensions are invested, but the current system is not working for many who are not engaging and not saving enough for their retirement,” he said. “A new generation of social pension funds could help people redirect their pensions to causes and companies they believe in. This could not only increase saving and engagement between employees, employers and pension providers, but help build a stronger society as well.”

Graham Precey, Legal and General's head of corporate responsibility and ethics, told HR magazine: "Millennials seem more switched on than previous generations when it comes to how their money is used. They would rather see it used to support social care, the housing shortage, renewable energy, and things to make their local area a better place."

Rowell also warned of the long-term impact of people not understanding their pensions. “The DC pensions revolution has been a great success for the government and industry so far, with millions of new pension savers,” he said. “However, there is a danger that we will fail to bring about the future retirement that savers are hoping for if individuals remain disconnected and disengaged from their pensions.”

The report found stark differences when it came to gender. Seven in 10 men (70%) claimed to know at least a fair amount about their pension, compared with just half (49%) of women. Similarly, two-thirds of men (66%) said they felt well-informed about where the money they put into their pension is invested, compared with half (52%) of women.