Pension: Expert gives advice on preparing for retirement
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The interest from savers in ensuring their pensions are invested in more ethical and sustainable funds has increased in recent years, which has brought a new set of challenges. Andy Harris, Commercial Director of The Sustainable Pension Company, spoke exclusively to Express.co.uk to explain the problems many people are facing as they seek to invest their pension more responsibly.
Mr Harris said: “I’ve spent many years advising clients and running financial advisory firms, so I’m acutely aware of the increasing interest in ethical investments over recent years.”
In his experience, Mr Harris said clients have historically been far more interested in the return on their investments than they have been in saving the planet.
“That’s changing in a very, very big way”, he said.
“People have become far more knowledgeable and aware of the problems that we face.”
As it stands, many people’s pensions could well be invested in fossil fuel businesses and oil companies.
Switching to a more sustainable method of pension investment could have a seismic impact on the planet.
In fact, moving a pension away from harmful funds into harmless funds could cut someone’s carbon 21 times as much as becoming vegetarian, giving up flying and switching energy providers, according to Make My Money Matter.
However, an increased interest in sustainable pension investment has brought problems in terms of identifying which funds are genuinely sustainable, as ‘greenwashing’ has become prevalent.
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Greenwashing is a process whereby a company gives a false impression of being more environmentally sound than they really are.
Financial services company Morningstar recently dropped 1,200 funds from its sustainable list, after discovering they were not in fact as sustainable as they claimed to be.
Mr Harris said: “What chance has Joe Public got if the likes of Morningstar can’t get it right the first time?
“Hundreds of thousands of pounds will have been invested in those funds and now the investors are finding out that they are not particularly sustainable after all.”
He described how many fund managers have simply “rebadged” funds to jump on the bandwagon.
“In some cases, nothing’s changed within the funds,” he said.
“There’s no way of telling what’s changed. And yet they’ve been able to call it sustainable. It’s just madness.”
Mr Harris continued: “Morningstar states that £37billion went into ESG funds last year, how much of that was literally just funds being rebadged?”
He explained that it is almost impossible for the average person to tell if a fund is sustainable.
“Even people with experience of investing will struggle with this one because it’s a pretty new concept,” he said.
“It’s incredibly subjective, there are no definitions, no rules.”
Mr Harris urged people who are concerned about where their pension may be invested to seek specialist advice.
He concluded: “They’ve got to take specialist advice, they can’t do it themselves. Even without the sustainable badge, the task of consolidating pensions is an absolute nightmare anyway.
Express.co.uk has contacted Morningstar asking for comment.
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