15 September 2023

Eco pension tidy-up

It was a calm summers evening on a sleepy weekday in Bristol. The still air dappled with the distant parp of train horns from nearby Temple Meads station and the gentle clanging of d-locks knocking against bike racks as the punters gathered for another Tech4Good Meetup.

I entered the Engine Shed to be greeted by enthusiastic smiles, sensible shoes and muted colours. These people are all tech-savy and they all care about the environment. Their heads are mines of information and I have never attended one of these events and not left with some knew knowledge.

This time my head was occupied with one subject.... How can I improve the energy efficiency of my new home? Is better to live in an efficient rural new build and accept being car-dependant or remain car-free in the city and retrofit a Victorian terrace?

It's quite natural for any conversation about reducing your individual carbon footprint to result in many "Oh, but have you considered this?" moments. You may be car free but do you fly? What about an electric car? Do you eat meat and if so, is it pasture-raised locally? And it was one of these questions that came at me from the mouth of a lawyer, a smartly-dressed woman who asked with a matter-of-fact tone "Have you moved your pension yet?". She dropped a statistic that the majority of the World's wealth is in pension funds so if everyone switched to a fund that invested in green technology it would be an immediate and monumental shift in industry. Insulating your home is important but it takes a lot of effort, time and cash. Don't bother doing that until you've done the thing that just takes a phone call.

Her words triggered a familiar feeling from a long standing to-do list item. I had been putting off tidying up my pensions for a few years. Like anyone these days I've got multiple plans floating around from several former employments and I didn't have a clue which were investing in deforestation, oil drilling and goal-fuelled power plants. So I did the research...

The research

I had paperwork for 4 pension plans:

  • 1 from a job way back in 2007. It converted to a personal plan when I moved on and I just left the monthly direct debit running ever since.
  • 1 with a different provider from an agency I worked for in 2017.
  • 1 with a different provider from a job in 2020.
  • And finally my current employment-linked one which is actually with the same provider as the one from 2017.

So 3 providers, but 4 separate plan numbers, each with roughly the same value. Now to work out how they are all investing my money....

First thing I did was read the list of ethical pension funds on ethicalconsumer.org and familiarise myself with the brands and funds and what criteria that website uses to score them. I soon noticed that some familiar provider names appeared multiple times in the list offering a fund that scored high for environmental protection but also offering funds that score low. This is because some pension providers allow you to control how your pension is invested. So it's not as simple as just checking your provider, you need to check the fund too.

So now to get organised. This looks like a job for a spreadsheet. I looked up all my plans, listed the providers and plan numbers on 4 rows, registered for online access and looked up the current value and if available, the funds they were investing in. This was harder than I expected! I clicked my way down long 4-level deep breadcrumb trails to then find a keyword search page which returned results with PDF downloads which would finally reveal the fund, the breakdown of investments, the fund manager's name and a text summary of the aims of the fund (eg. Is my role to make you as much money as possible from oversees conflicts, oil drilling and deforestation or to invest in wind energy, solar projects and insulating homes)

I have to admit, I nearly quit during that stage. They had worked so hard to obfuscate the truth and given all the funds bland vaguely positive-sounding names such as "Balanced Lifestyle" or "Balanced Growth". They look so non-threatening that I felt the lulling temptation to just accepting the happy label and go watch cat videos on Instagram. But I did resist and eventually I found information sheets for funds with titles that matched the ones on my annual statements and using the data from ethicalconsumer.org I could now mark the 4 rows on my spreadsheet as follows:

  • My first ever pension (the one I still pay into via direct debit) was not currently investing in an environmentally-conscious fund however there was an option to switch.
  • The one from 2020 was already ethically aligned, which was a pleasant surprise.
  • The provider of both my dormant plan from 2017 and my current employer plan was a dark horse. They do not disclose fund information nor does their public literature include any clear commitment to ethical investment, so it is assumed they would score badly if data was available.

So there we had it, 1 plan doesn't need to change, 1 plan cannot change, but the spreadsheet shows a clear optimisation that I can make today...

The changes I made

Step 1: Switched 1 pension plan to the ethical fund. I phoned the provider, answered a few security questions and requested that my pension be invested in the Environmental fund. She asked me to confirm what percentage of my fund, I confirmed 100%.

Step 2: Transfer 1 pension away from the provider who does not disclose info. This took a little longer. In order to transfer that old dormant plan from 2017 into my now eco-conscious pension I had to state the exact balance, this required another phone call to the current provider. Then I could go through the rather wordy 30 minute phone call and – for my own protection – agree to about 8 statements in order to begin the transfer process which apparently can take 4-6 weeks.

The whole process starting from ignorance, moving through slightly confused and eventually arriving in organised clarity took a couple of hours and required the kind of concentration I do at work. But I am glad I've done it. I now know that I have diverted the price of a small family car away from environmentally damaging companies.

The icing on the cake

Surprisingly, once I had the 2 factsheets side-by-side and compared the 5-year financial performance of the default fund to the environmentally conscious one. The latter actually performed better! I was prepared to take the hit and live with a slightly worst performing fund but according to their data, 4 of the 5 years between 2018 to 2023, the environmental fund performed better. Especially in 2022/2023 where it actually growing by the same percentage that the other one shrunk!

The cherry on the cake

Although this blog post has been about pensions, I am also in the process of remortgaging and I happened to notice as I was browsing ethical consumer that the bank who I had secured a new deal with were landing in the top 5 for all the bad categories. So I have also decided to cancel that deal and instead apply for a mortgage that will admittedly cost me £20 a month more but will be with a lender who will not invest my £6,000 annual interest payments and invest them in cluster munitions, deforestation, illegal settlements, oil, gas and fracking.