Nearly three-quarters (72%) of UK employees say it is important that their employer offers a responsibly invested pension, according to research from pensions provider Scottish Widows published today (13 February).
A responsibly invested pension is a pension fund that incorporates environmental, social, and governance (ESG) factors into its investment decisions, meaning it prioritises companies with strong sustainability practices while aiming to achieve competitive financial returns alongside positive social impact.
Younger employees place an even greater emphasis on responsibly invested pensions: 79% of younger people report that it is important for their employer to offer a responsibly invested pension, compared to 61% of people aged over 55.
Lily Megson, policy director at pension consultancy My Pension Expert, said that this trend is part of a wider shift towards social and environmental awareness.
She told HR magazine: “It’s not surprising that there is a shift in attitudes, especially among younger generations, towards the role money can play in driving positive change.
“For Gen Z, financial decisions are increasingly viewed through the lens of social and environmental impact. This generation has grown up with heightened awareness of issues like climate change.”
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“As a result, they are more likely to seek out pension schemes that align with their personal values.”
Scottish Widows’ research also revealed that 47% don’t know whether their workplace pension is invested responsibly. A quarter (25%) said that they do not have enough information about responsible pensions to understand their cost and benefits.
The research also highlighted that 61% don’t know how to switch from their default pension to an alternative investment option that may be better suited to meet their objectives.
“Pensions, by their nature, can be complex. Long-term financial planning often feels overwhelming, and many people struggle to understand how their money is invested,” said Megson, adding: “This lack of transparency and clarity can make it difficult for individuals to engage fully with the responsible investing options available to them.”
The survey found that 23% of employees have concerns about whether responsible pensions have comparable returns to traditional investing and 21% have concerns about whether they cost more.
Another barrier to implementing responsible pensions is the concern that investments will not be as profitable, she said: “There may be lingering misconceptions that sustainable investments underperform compared to traditional funds.
“Overcoming these perceptions requires both education and clear, accessible information.”
Read more: Can pensions align with ESG goals?
In order to better communicate pensions information, employers should use a multi-channel approach, according to Patrick Enright, senior investment analyst at financial services consultancy Broadstone.
He told HR magazine: “A multi-channel approach is essential for engaging a diverse workforce. Pensions are a key part of employee financial wellbeing throughout their careers, so employers should tailor messaging to address both short and long-term priorities.
“Providing accessible financial education, digital tools, and targeted support can help employees better understand and engage with their pensions.”