Marvin OnumonuScottish Widows has found that 69% of employers offered responsibly invested pensions, but fewer than half, at 44%, used it as the default option.
Research revealed that 61% of employees were unsure how to make such a switch, indicating a need for more education on pension choices.
Interest in how ‘ESG-friendly’ pension schemes has grown, with 60% of employers noting an increase in employees wanting to understand sustainability within their pensions.
Employees prioritised long-term value growth (63%) and financial risk management (41%) in pension investments.
Around 17% of employees regarded the environmental or social impact as important, with this figure rising to 25% for those aged 18 to 34.
In their responsible investment approaches, 45% of employees supported investing in companies contributing positively to the UN’s Sustainable Development Goals, while 38% preferred reducing exposure to harmful industries.
Employers have responded by allocating pensions to sustainable funds (53%), investing in impact strategies (46%), and focussing on companies reducing carbon emissions (45%).
Active engagement with investee companies and voting was preferred (36%) over exclusion policies (20%).
Eva Cairns, head of responsible investment at Scottish Widows, said: “Providing workers with the opportunity to save for their retirement in a way that delivers financial and societal value in the long-term can only be viewed as positive and we have an important role to play in educating savers about responsibly invested pensions.”
“Employers and advisers are now tasked with navigating a critical balancing act: delivering pensions that grow while also reflecting employees’ values.
“This requires not just guidance but clear approaches, priorities and innovation – for example through private markets, active ownership and investments that support transition leaders and the achievement of the UN Sustainable Development Goals.”
Cairns added: “These are some of the levers available to achieve long-term financial returns with positive sustainability outcomes.”
According to Scottish Widows employees are keen on responsible pensions but remain uncertain about their options.
Concerns include clarity on costs and benefits (25%), doubts about comparable returns (23%), and uncertainty about ‘responsible’ fund labels (20%).
Most employers, about 91%, offered guidance on responsible pensions, and 81% felt confident in doing so.
Although 38% of advisers noted client doubts about the impact of these pensions, 80% felt ready to advise on them, and 70% were actively providing this advice.
However, only 11% of advisers reported receiving enquiries about responsible pensions.
Cairns said: “Transparency is key; workers want assurance that their pensions are future-proof, both for their retirement and the future world they will retire into.
“Meanwhile, employers must demonstrate how they have considered responsible investment in their workplace offering, especially their default that the majority of employees will be in.
“These should be key considerations for employers and advisers as they engage and meet employees’ and savers’ expectations.”
