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Many of us are taking action to tread a little more lightly on our planet and try to address the very real threat that climate change poses. We may make efforts to avoid plastic where possible, cycle or walk to more places, buy second hand, eat less meat and try to avoid food waste.
Many people already make choices in their spending that reflect their values, such as avoiding buying from companies with a poor record as a polluter, or choosing organic food.
But what about growing our money? Is there a way to make more environmentally friendly choices when considering how we invest and save? Fortunately, you can now opt for a greener pension, in the form of PensionBee’s new Fossil Free Pension Plan.
Why you need a pension
Everyone should have a pension. It is a way of saving for your later years to ensure you have a regular income. An added bonus is that your contributions aren’t taxed, so it’s the best way of saving for your retirement.
In the UK, we contribute to the state pension via our National Insurance contributions. However, relying on your state pension as your only form of income in retirement will see you struggling. Check out this Gov.UK article Your State Pension Explained, which has a link to a calculator so that you can work out exactly how much state pension you will receive.
PensionBee also has a calculator, where you can input your required annual income at retirement to find out how much you should be saving. Check it out here.
If you want to enjoy your golden years without worrying about money, it’s vital to save into an alternative pension scheme on top of your state contributions.
A greener pension
If you have a personal pension, you are already looking after your future interests. But did you know that many pensions rely on investments that might not align with your own beliefs and values?
You could inadvertently be investing in oil companies, weapons manufacturers, tobacco companies and persistent violators of the UN Global Compact. Ensuring your pension is invested ethically and opting for a greener pension is a key element in a sustainable and ethical lifestyle.
PensionBee’s new Fossil Fuel Free Plan is one of the first mainstream funds of its kind to completely exclude all companies with proven or probable reserves of oil, gas or coal, as well as manufacturers of weapons and tobacco. It invests more of its savers’ money in companies that are aligned with the Paris agreement, by tracking an index called the FTSE All-World TPI Transition ex Fossil Fuel ex Tobacco ex Controversies Index. This has been designed in collaboration with the Transition Pathway Initiative, FTSE Russell and the Church of England.
Listening to its customers
The launch was made possible by pledges of support from existing customers, who were enthused at the possibility of a greener pension and committed to switch to the new Fossil Fuel Free Plan as soon as it became available.
A 2020 survey by PensionBee of clients investing in their Future World Plan found that over a third of the investors thought it was time to exclude oil from their pension, even if this meant a potential reduction in the profitability of their pension plan.
Clare Reilly, Chief Engagement Officer at PensionBee, commented: “We’re delighted to be launching our new Fossil Fuel Free Plan with the help and support of our customers. It’s our customers who have made this possible every step of the way, first by telling us they wanted a product that completely excludes companies with oil, gas and coal reserves from their investments, and secondly, by pledging to invest in the fund ahead of its launch.
“We believe sustainable investing is the future of engagement with pensions and that everyone should have the option of using their investments for good. We hope this is just the start of all savers using their investment power to transform the world they live in – for the better of the planet, society and their retirement.”
Does a greener pension cost more?
PensionBee needed to secure a commitment of £100 million from its customers in order to launch this greener pension plan at the highly competitive all-in fee of 0.75% (with a reduced fee of 0.38% on any savings over £100,000).
To achieve this, the fund is passively rather than actively managed, which is more cost effective. Active management means that your money managers are picking stocks on a weekly or monthly basis, and this can be very expensive. The Fossil Fuel Free plan benefits from a more passive approach, by tracking the market performance of a select group of fossil fuel free companies within the index.
To find out more about the new pension plan, for a list of the companies that are invested in, plus the FAQs, PensionBee’s website will give you more information.
Important: With investments, your capital is at risk. Pensions can go down in value as well as up, so you could get back less than you invest.