Confused About Pensions? There’s An Ethical Option For That

This post was sponsored by PensionBee. All thoughts my own.

Let’s get this over with first: reading about money isn’t always the most fun. I get it, money can be at best confusing and at worst completely anxiety inducing. There are some (many) of us that are living month to month, trying to get by, and I totally get that.

But if you aren’t one of these individuals, if you have a somewhat regular income and the ability to put some of it away, then let’s talk about saving. More specifically, pension saving.

While pensions may not seem like the most exciting thing to talk about, it is incredibly important that we understand them. It’s important to know about these things so we can make them work for us, and for the future of our planet. Many of us don’t even really know how a pension works, never mind the fact that there could be a sustainable option out there for us.

What is a pension?

Your pension is the money that makes up your income once you retire. In the UK during your working life most people will have two pensions: a state pension that the government pays into, and a private one that your workplace/you pay into. Both are basically like piggy banks that are locked until you reach a certain age (normally the private one is accessible first, but you have to be at least 55), and they also benefit from specific tax advantages that help your money grow. You save into these pensions through your life, and then when you retire they become your source of income instead. You save into state pensions via national insurance contributions, which are automatically taken out of your salary when you’re employed and, while there’s some variation to the amount, the state pension tends to look like receiving around £150 per week once you reach retirement age.

Since 2018 there have also been new laws in the UK when it comes to workplace pensions. By 2018 every employer in the UK must offer their employees access to a workplace pension; if you choose to pay into this your employer will deduct money from your salary each month and pay it into the pension scheme for you. Legally they are required to pay into your pension if you pay in, are over 22 and earn more than £10,000 each year. This money will be out of reach until you’re 55, and every year you should receive a pension statement which explains how much you’ve saved and how much this will provide once you’ve retired. There are rules guiding the minimum amount an employer will pay in, starting at 2% of your salary as of 2018 and rising to 3% as of 2019. When it comes to keeping your money secure, there are protections in place that keep your pension safe even if your employer goes through financial trouble, which are mainly managed by two agencies called the Pension Protection Fund (PPF) and the Financial Services Compensation Scheme (FSCS).

So basically your money’s safe and, while both the state and private pensions come out of your salary in different ways, you’re simply putting that money aside to enjoy life when you’re older.

What if I change jobs?

When you leave a job the amount of pension money you saved working there is protected and, while the value of those savings continues to grow as the underlying investments grow, you generally stop paying into that pension pot. You then usually open up a new pension plan with your new workplace, but should still receive an annual statement from your previous employer to keep you updated on how much money you have saved. As it grows increasingly common for individuals to work for a variety of companies throughout our lives, it also becomes more common to have multiple pension pots that continue to grow, which can get pretty confusing when you’re receiving multiple statements in the post each year. Many people choose to consolidate their various pension pots in one place, making it easier to manage and understand.

This is where PensionBee come in, both in terms of making life easier, but also in terms of choosing an eco-friendly pension scheme.

What PensionBee Does

When your pensions are spread over a variety of pots, it can be almost impossible to actually understand how much you’ll have waiting for you when you retire. On top of this, many pension providers have a habit of sending hefty paperwork that’s full of small print, jargon and hidden fees that reduce the value of your pension over time. After struggling to switch with traditional pension providers, PensionBee was set up in 2014 by CEO Romi Savova (shoutout for female CEOs) and CTO Jonathan Lister Parsons to make pensions easier for everyone.

PensionBee helps you easily manage your pension and keep on top of your retirement plans by consolidating it all into one easily manageable online account. You can see your current pot size, your projected retirement income, and set contributions (both one-off and regular) with a few clicks. There’s always personal help on hand from actual human beings, and their pension calculator can tell you whether you’re on track to meet any retirement goals. You just have one account to manage, PensionBee never send you confusing paperwork or post, and they’re fully transparent and fair in the fees they charge (for pensions under £100,000 you pay one annual fee of 0.5-0.95%, where others can charge over 2.5%. Once your pension grows larger than £100,000 they halve the fee on any savings you make over this amount).

And the most exciting part: they offer a specific ethical and sustainable saving option.

The Future World Plan

In late 2017 PensionBee launched their Future World Plan, a climate-conscious pension plan that aims to bring positive growth and change. Money is invested in around 2,000 various companies around the world, specifically prioritising those that understand the value of a low carbon world, resulting in a plan that still performs well, but is serious about the environment too.

At the same time Legal & General (who manage the fund) engage directly with the world’s largest companies, demanding that they change their policies, in the belief that these large corporations have to change if we’re to see real improvement in global sustainability. Moving to a low carbon strategy is both the environmentally and economically smart option, and if a company fails to make any improvements after direct engagement, then money in the pension funds are divested from these companies. While there is still a long way to go globally, changes have already begun. Direct engagement has resulted in Toyota announcing plans to make all cars electric or hybrid by 2025, and Australia’s Commonwealth Bank has committed to phase out its lending to coal plants. In this way the pension fund works to continually remind these corporations to move in the right direction with a clear, unified voice, and to highlight how important these decisions are to investors (aka, you).

To get started with joining the Future World Plan you simply select this plan when signing up with PensionBee, tell PensionBee about your old pensions to speed up the transfer process, and hit confirm. Your dedicated BeeKeeper (the person who helps you) will be on hand throughout, and they’ll tell you if they come across any exit fees over £10 or valuable benefits you should know about before you exit certain pension schemes. You can cancel this agreement for up to 30 days for free, and there’s no exit fee if you ever choose to leave PensionBee. As soon as your PensionBee plan is ready you’ll be notified, and you’ll be able to access your information easily online. It will look something like this:

All in one go you will have a pension that is easier to understand and manage without the hassle of paperwork, hidden fees or confusing terms. But at the same time, you have the option to use your pension schemes to invest in climate-conscious companies , and to clearly send a message to corporations who are ignoring the problems of climate change, even when sustainability is the economic option. It’s easier for you but it also encourages a culture of corporate accountability, because if we want to see real change, it has to be happening on this larger level too.

PensionBee is authorised and regulated by the Financial Conduct Authority. With pensions, your capital is at risk. The value of your pension with PensionBee can go down as well as up and you may get back less than you started with.

Continue reading: interested in making your public pension more sustainable? Check out why your local divestment campaign matters here.