News
Workers stick to default pension funds rather than green options
Research found that although savers show enthusiasm for ‘green’ pensions, most people saving into a workplace pension are investing in default funds.
A study by consultancy Barnett Waddingham found that very few of the 18 million people currently auto-enrolled into workplace schemes have moved their investments to sustainable funds.
When asked whether ESG (environmental, social and governance) funds should be the default option for workplace pensions, one in five savers (20%) said yes regardless of return, and a further 26% said yes so long as the return is the same as a non-ESG fund.
Just under half (45%) of people with a workplace pension were indifferent, leaving a mere 9% who believed the default fund should not be ESG-focussed.
According to the research, 80% of people with a workplace pension have never made any changes to the funds they invest in, and a further 11% have only made a change once.
Older members aged 55 and above are particularly apt to stick to their original fund choices (91%). Those aged 18 to 34 are more likely to review selections but still only a third (34%) have ever made changes to their investments. Women are far more likely than men to have stayed in their default fund, at 85% compared to 75%.
Barnett Waddingham said it’s unclear whether members of workplace pension schemes stick to default funds because they are unsure how to access their pension, or because they are disinclined to adapt fund selections. It warned that sticking with the default could potentially leave them in funds which no longer match their risk appetite and investment preferences, or aren’t equipped to make the most of market conditions.
Amanda Latham, policy and strategy lead at Barnett Waddingham, said: “The UK is battling a bad case of inertia, with UK savers displaying a lack of confidence, ability, or knowledge around changing their workplace pension investments.
“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.”
