Pension warning: DWP minister urges savers to review their pension funds – have you?

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Millions of savers can take action to address the climate crisis by paying more attention to their pensions, a Government minister has stated. Pensions Minister Guy Opperman has said people can support the transition to a Net Zero carbon economy by opting to invest their retirement savings in low-carbon businesses.

The Minister has said those who want to “play their part” in the Net Zero effort should “engage with their pensions and encourage sustainable investments”.

Mr Opperman made the comments as a contributor to a collection of essays, published by the Chartered Banker Institute and cross-party think-tank the Social Market Foundation, on green finance and the role financial services can play in delivering environmental goals.

Among the other writers in the collection are Scottish finance minister Kate Forbes and Professor Linda Yueh of Oxford University.

Banks and institutional investors such as pension funds are paying more and more attention to the environmental impact of the companies they invest in, and in his essay, Mr Opperman said individual savers should review their pension funds to see the options they have when it comes to their own financial investments.

Since 2012, the automatic enrolment of employees into pension schemes has led to more than 10 million new pension savers.

Back in 2018, British workers saved an astonishing £90billion into their pension schemes.

Now, Mr Opperman has said that this money could give pension savers a way to influence business decisions and to push firms towards low-carbon operations.

The Minister has also endorsed the Make My Money Matter campaign, which was set up by screenwriter Richard Curtis.

The campaign aims to engage savers with their pensions and to encourage “sustainable” investment.

“They are encouraging savers to engage with their pensions and encourage sustainable investments,” Mr Opperman said.

“That very much chimes with my priorities, and the priorities of the Department of Work and Pensions.

“It is a partnership with business that is the way to achieve the innovative change required.

“By investing in assets, trustees can nudge, cajole, and vote firms towards lower-carbon business practices.”

Simon Thompson, Chief Executive of the Chartered Banker Institute, said: “As contributors to our essay series rightly argue, mainstreaming green and sustainable finance requires a raft of substantial and significant changes right across our financial system, and indeed in business and society more broadly.

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“I am sure they will spark some interesting debate, but we need to move from talk to ambitious policy, regulatory and industry action in the 12 months from now to COP26.

“The finance profession and finance professionals must play key roles alongside governments in leading the systemic change we need to protect people and planet.”

James Kirkup, Director of the Social Market Foundation, said: “Getting to Net Zero will require some fundamental economic and social changes, changes that must be funded.

“Markets can play a vital role in that process, by raising and allocating money to support decarbonisation work.

“These essays show how everyone, from ordinary workers to financial policymakers, can help use the power of markets to deliver a low-carbon economy.”

The interactive investor Great British Retirement Survey 2020 found more than half (53 percent) of respondents said that they did not know whether their pension was invested in a way aligned with their moral values, with a further 28 percent saying they weren’t sure if it was aligned and 19 percent stating it was not.

Moira O’Neill, Head of Personal Finance, interactive investor, said: “The majority of us have no idea if our retirement nest egg is invested in a way that aligns with our moral values – let alone our pension carbon footprint.

“We all have a carbon footprint, so it’s a big ask of any pension to be completely carbon neutral – but there are things that you can do to make your pension not just more ethical generally, but more environmentally friendly.

“Morningstar publishes a carbon score for funds, ranging from 1-100 and the lower the score, the better from a carbon neutral perspective – anything below 10 is considered low. For example, Fundsmith Sustainable Equity, which is on our ACE 30 rated ethical investment list, has a carbon score of just 2.77 percent.

“These scores are not easy to find, and we would like to support Morningstar by making these scores more accessible to more people. But it is not the only story. It’s really important to look at funds and investment trusts on a case by case basis.”

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