How many times do you think your employees have thought about their pension this week? I’m guessing most haven’t given it a thought once.
They may well have checked their bank accounts on their phone in the last 24 hours, but I bet they haven’t checked their pension online. Perhaps they can’t do that, even if they wanted to.
The fact is that for the majority of people pensions just don’t feature in their everyday thinking and they’re certainly not viewed as an issue to worry about – especially if you’re young. The economy (52%), health (46%) and the environment (40%) are the three areas 18-24-year-olds care the most about.
Given the ongoing Covid-19 pandemic, it is hardly surprising that the economy and health are seen as the most important issues, however, the environment still factors highly on the chart. So why is it that, as a society, we are failing to see the significance of pensions and their impact on creating a sustainable future?
There is great potential in getting more people engaged with their finances from the moment they begin working and see the value in talking about the inextricable link between pensions and climate change.
Pension pots represent a huge ‘blind spot’ for people – and companies – when it comes to assessing their impact on the environment. Each year, the average UK pension member unwittingly finances 23 tonnes of CO2 emissions through the businesses in which their pension invests.
That’s the equivalent of running either nine family cars each year; using 940 gas propane cylinders; or burning 1,100 coal fires annually, simply as a by-product of saving for retirement. To counteract this, you would need to recycle for 19 years, or plant 30 acres of new forest.
While the UK population has actively manged to reduce the average carbon emissions per capita from 9.3 tonnes to 5.9 tonnes over the last 25 years, the way pension pots are invested remains relatively unchanged, despite being equal to nearly four times personal emissions.
These figures are undoubtedly alarming – and the fact that our own research shows less than 1% of people are aware of the extent of environmental damage their pension pot may be doing is a cause for grave concern. But this presents an opportunity for employers and the wider pensions industry to ignite young people’s interest in saving for retirement by drawing attention to the huge impact their pensions are having on climate change.
Let’s face it, the pension industry doesn’t always help itself – there is all too often a lack of transparency about pension pots, how they work, how they’re managed and what they’re made up of. The industry has also been slow to adopt new technology that banks have been using seamlessly for years – something that Cushon is addressing through our app – and complicated jargon around pensions can baffle employees and make them feel unconfident. We think it’s about time that all changed.
In the whitepaper, Pension Funds and the Climate Crisis we’ve set out some simple ways companies can start taking action to improve both employee engagement with pensions, and the impact on the environment:
- Demand increased transparency from pension provider over investments – data on underlying funds’ CO2 emissions needs to be shared with both employers and pension scheme members. This would allow employers to make informed decisions about which pension provider they should be using and let employees know how their pensions are affecting the environment.
- Find out where your pension provider is at with eliminating CO2 emissions – some pension providers are further along than others – for instance Cushon has recently launched the world’s first net zero now pension – but all providers should have a plan. It’s important that employers understand the plan so that they can decide if this is acceptable or not and benchmark against other providers so they can move to an alternative if not.
- Look to provide pensions that can be managed using a smartphone app – employees, particularly those in the hard to reach 16- to 24-year-old group, will engage more with pensions that can be managed ‘on the go’. But not only will this increase engagement – it will also significantly reduce the amount of documentation being needlessly delivered to members’ homes each year, cutting down on paper waste and its impact on the environment.
While businesses may well be focusing more and more on sustainability, through dedicated ESG teams, strategies and plans, the employee pension plan and its impact on the climate is often overlooked or simply not taken into consideration – despite it being the second biggest employee cost to payroll. Investigating whether or not the pension is environmentally sustainable is almost entirely a forgotten area.
Focusing on this has potential to bring huge benefits – not only in terms of helping to address the issue of climate change, but also by increasing people’s engagement with saving for retirement, particularly among the youngest age groups.
After beginning his career as an actuary, Ben started Cushon after a difficult experience setting up an ISA. Cushon’s achievements so far, including attracting more than 87,000 customers, securing over £300m AUM, bringing innovation to workplace savings, and the recent launch of the net zero now pension. Ben is passionate about tacking the climate emergency and bringing the issues involved in pensions to light.