Sustainable Investing  

Savers stick to default funds despite ESG interest

Savers stick to default funds despite ESG interest

Despite showing an interest in investing their pensions ethically, only one in five workplace scheme savers have converted their investments into green funds, research shows.

According to analysis from Barnett Waddingham, which surveyed 2,002 individuals of which 1,230 had a workplace pension,  20 per cent agreed sustainable funds should be the default for workplace pensions - regardless of the return they provided. 

Meanwhile 26 per cent agreed they should be the default if their return was the same as non-sustainable funds.

Only 9 per cent of savers opposed environmental, social and governance funds being the default for workplace pensions while close to half, 45 per cent,  were indifferent. 

But despite this potential interest, the research also showed 80 per cent of those surveyed who had a workplace pension had never changed the funds their pension is invested in, while only 11 per cent of respondents made a change once. 

Amanda Latham, policy and strategy lead at Barnett Waddingham, said the UK was "battling a bad case of inertia", with savers displaying a lack of confidence, ability, or knowledge necessary to change their workplace pension investments.

She said: “But there’s no lack of appetite, and it’s the responsibility of the pensions industry to facilitate that appetite. The onus shouldn’t fall on individuals. 

“In a system designed around inertia, we need to see policymakers and employers offering better default strategies rather than relying on pension holders to come up with them themselves.”

Latham added: “If the UK is going to be a leader in a greener world, there’s no time to waste – we need to follow the money and do what it takes to make change happen.”

The age group least likely to change their investment strategy included members aged 55 and over, with 91 per cent of them claiming to be averse to change. 

Respondents between the ages of 18 and 34 were the most likely to review the funds invested, but only a third, 34 per cent, had carried out changes to their investments. 

When comparing investing trends along gender lines,the analysis revealed that 85 per cent of women were less likely to change their default funds in comparison with men, who came in at 75 per cent.

While the numbers highlight the lack of conversion to sustainable investing among respondents, it still remains unclear whether this is a result of a lack of appetite to change or if accessibility to workplace pensions is the issue, the consultancy stated. 

Confidence in investments carried out by trustees and governance committees could also be another factor for why workplace pension savers stick to default pensions, it added.

Fatima Benkhaled is an editorial intern at FTAdviser's sister publication Pensions Expert