Last week I attended one of the premier events in the pensions calendar (I know, I know): The Pensions and Lifetime Savings Association (PLSA) conference in Manchester. Now I’ve been around a while and I know the pensions industry isn’t exactly the avant garde of finance, but I didn’t expect to see quite how far behind it is on sustainable investment, nor how wildly out of touch with young people it is.
Taking the latter point first, the flagship launch of the event was the Retirement Living Standards, These are a set of retirement ‘salaries’ that the PLSA has put together with Loughborough University that try to help savers visualise what retired life might look like. The result makes for interesting reading:
If you are below the age of 40, you have likely spotted the gaping hole in this: no housing costs. The above assumes that when you retire you own your own home, outright. As a paid up member of Generation Rent, paying 60% of my income on rent in London, with zero hope of ever getting on the housing ladder without a rich partner or an early family death, you can imagine my reaction.
But it’s not just young people like me that are excluded from the above. Indeed, when I questioned a PLSA spokesperson on the above – sweat visibly accumulating on his top lip as I went – I pointed out that my grandmother, a former factory worker from Poplar, East London, was paying rent in her retirement. Moreover, as we had heard earlier in the conference, hundreds of thousands of Britons are soon expected to retire with huge housing debt thanks to interest only mortgages. Keen eyes will also observe that the Standards do not represent life in London, either: so that’s another 8 million Britons excluded.
So who are these Retirement Standards relevant to, then? “Well, at the moment around half of the population owns their own home….” mumbled said sweaty PLSA spokesperson. “Great,” I chuckled. “So this is relevant to half the population NOW, then?” Some collar pulling ensued: “Erm, yes well, we hope to regularly update them as things change….” For now, though, they are for the crowd that dominated the conference: white middle-class baby boomers.
Sustainable investment sluggards
Perhaps unsurprisingly, this same crowd was not too keen on acknowledging the rising tide of climate awareness and appetite for sustainable investment that is seeing young people all over the globe finally start looking into where there money is going, and not liking the results. In-fact, on day two of the conference we were warned that Extinction Rebellion had targeted us for a protest, just as they had done at the Manchester pension fund – which invests £500 million in Royal Dutch Shell alone.
“I think people overestimate how much young people care about ethical and sustainable investment” said the industry-endorsed representative of ‘Young Money’ at the end of the conference, supported by one of the industry’s other leading money journalists and the ex-pensions minister at the final debate of the week.
You could have knocked me over with a feather. I wondered if they had seen the piles and piles of evidence showing young people, in-fact, care deeply about sustainable investment and ensuring their money isn’t harming people and the planet (I will be compiling a definitive list of this soon).
The latest, and biggest, is a survey of 6,000 people by the Department for International Development that showed 71% of millennials are interested in responsible and sustainable investment versus 56% for the broader group, while 56% of respondents said they would opt for a fully or partially sustainable pension if they were given the choice.
Then there’s the one from Franklin Templeton that showed that 45% of those aged 22-38 would save more into their pensions if they knew they were invested responsibly and – MORE FRICKIN OBVIOUSLY – the millions of people MARCHING-ACROSS-THE-WORLD. Despite all this, though, they reckon this sustainable investment lark is still just a marketing gimmick for a select few.
It’s the climate, dummy
Now, to be fair, parts of the industry itself – particularly the investing side of it – is light years ahead of these dinosaurs. BNP Paribas, for example, already manages all of its investments with climate and environmental risks in mind and has just taken over some of the investing for one of the country’s biggest pension funds – Nest – which itself is a climate leader. Speaking at the beginning of the conference about how the industry might get young people engaged, Helen Dean, chief executive of Nest suggested that ‘climate’ might be one topic.
Again, for anyone outside of the industry this is such common sense it will seem incredible. Equally, for anyone outside the industry the idea that a pension fund would invest in tobacco stocks seems ridiculous – TRULY ridiculous considering we have had a smoking ban in place in the UK since 2005. Invest in tobacco they do, though. Indeed, Nest is the only national pension fund to pledge to divest from tobacco.
Having looked in detail at an excruciating number of pension funds in the UK I can say, with almost 100% certainty that – unless you or your employer has actively chosen an ethical, Shariah or sustainable fund option (and only about 2% of us do) – you are invested in tobacco companies, as well as fossil fuels even in the ethical, Shariah and often the sustainable investment or ‘environmental, social and governance’ (ESG) options. And, broadly, the industry thinks that’s ok – that most people don’t care about it. Are they right?