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IPE special report May 2018

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Employer pension schemes should match NEST's ESG standard, say UK investors

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  • Employer pension schemes should match NEST's ESG standard, say UK investors

EUROPE - A majority of people in the UK want next year's introduction of auto-enrolment to be linked to tough standards on responsible investment for qualifying schemes, according to new research from market research company YouGov.

In all, 58% of British adults believe employers' pension schemes should match or beat the standard set by the new NEST workplace pension scheme in their approach to managing social and environmental issues before they are allowed to qualify for auto-enrolment from October 2012, YouGov said.

Its survey also found that pension funds and financial advisers were failing to meet the demand for more information on areas such as responsible ownership.

The research - released as part of National Ethical Investment Week 2011 - found that 23% of British adults with investments felt their pension fund or financial adviser was doing too little to inform them of responsible ownership activities, rising to 30% among 45-54 year olds.

Penny Shepherd, chief executive at the sustainable investment and
finance association UKSIF, which coordinates National Ethical Investment Week 2011, said: "People clearly want to know more about how pension investment managers are acting as responsible owners on their behalf.

"It is a real sign of the times that almost a third of 45-54 year olds with investments think they are told too little. It is also clear NEST is setting a benchmark for the responsible investment practices that employees will expect from well-run pension schemes.

"This new research also shows how much the green and ethical investment market has grown up. From investments to insurance and Junior ISAs to pensions, there is now a wide breadth of green and ethical financial products available. A cross-section of society is investing in them, and there are many different ways to make a difference on social or environmental issues without sacrificing financial performance."

Shepherd added that ethical investment was "no longer all or nothing".

"One in 10 individual investors want to dip their toe in the water by adding green and ethical considerations to a small proportion of their investments, while a third want significantly more than this," she said.

"It's a great opportunity for the industry, and it must catch up to satisfy the demand that's out there. The research also shows individuals want to put the eco into the economic recovery.

"Over half of adults with investments believe responsible investment is an important factor in the long-term recovery of the UK economy."

YouGov's research also found that 42% of individual investors want to 'make money and make a difference', with 34% wanting at least 25% of their investments to include green and ethical considerations and a further 10% keen to dip their toe in the water by including green and ethical considerations in a smaller proportion of their investments.

More than half, 55%, said they did not clearly understand what their savings and investments support, while 53% of adults with investments believe financial products that take social and environmental issues into account have an important, or very important, part to play in the long-term growth of the UK economy.

Another report by Standard Life on auto-enrolment has prompted the corporate pensions provider to call for a number of initiatives to be considered by the UK government to maximise the positive impact of auto-enrolment.

According to the study, people want to save more, but need clear communication and guidance to help them.

The report - called 'Keep on Nudging', developed with academics from the University of Edinburgh - found that almost a third, 31%, of employees surveyed who plan to stay enrolled following auto-enrolment would be willing to pay more than the basic 4% contribution rate and to increase their contributions automatically whenever they received a pay rise.

The report revealed that auto-enrolment could create an additional 6m people saving, adding £12.5bn (€14.3bn) annually to retirement savings by 2017, while with the right communications opt-out rates could be as low as 18%.

Just under half of employees surveyed, 48%, said they would find it easy to save an additional £50 a month right now if they had to.

The report also found that possible extensions to auto-enrolment could each see employees saving an extra £13bn-14bn annually by 2025, doubling the impact of next year's reforms.

David Nish, chief executive at Standard Life, said: "Auto-enrolment can help re-introduce a savings culture in the UK and be an important first step in bridging the savings gap.

"By presenting information about auto-enrolment that is clear and effective, which provides a clear picture of the value of employer contributions and the tax advantages, our research found that 82% of people would remain enrolled in their pension scheme. This is a hugely encouraging finding."

A full copy of 'Keep on Nudging' can be downloaded here.

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