A carbon
neutral future
How are members and trustees tackling the climate crisis?
62%
of workers from younger generations would welcome new portal offering a single view of their wealth managment.
Summary
Methodology
What do DC members want?
What are DC schemes doing?
Select an icon to choose an article
A carbon
neutral future
How are members and trustees tackling the climate crisis?
Introduction
However, pensions are currently only scratching the surface of the influence they can have on the green transition. To help address the barriers holding back the industry, Professional Pensions surveyed DC members, DC scheme staff and trustees.
The report uncovers a mismatch in the investment needs of DC members, who are speedily adopting a greener lifestyle, and an industry that is still expanding its sustainable investment offering.
Produced in association with Smart Pension, 'A Carbon Neutral Future' reveals exactly what members want from sustainably-invested pensions, why issues such as cost and returns may be irrelevant to them, and how trustees can remain at the forefront of the sustainable investment agenda.
This report sets out the key findings of two surveys conducted in Q4 2022.
One survey was aimed at trustees, and those in pension-related employer roles. It asked about their attitudes towards sustainable investing, their stance on net zero and their views on master trusts.
The survey was sent out to a nationally-representative sample of UK adults, and collected responses only from those who said they were members of DC schemes. It asked about a number of topics, including DC member attitudes and actions around sustainability in daily life, their views on sustainably investing their pension and the quality of life they predict for themselves in retirement.
In total, 146 individuals, including trustees, employee benefit consultants/directors and human resources directors, completed this survey, alongside 669 DC members.
Methodology
x
MMMM, Aviva, Rout2 research, July 2021.
Investing in a sustainable pension option is 21 times more effective at cutting carbon footprints than stopping flying, becoming a vegetarian, and moving to a renewable energy provider combined.
21
x
Turning ethics into investing:
What do DC members want?
What steps are you taking to reduce your carbon footprint?
Limiting your consumption of meat, water, or use of disposable plastic products?
While these are all positive steps to helping the planet, what many do not realise is that investing your pension sustainably can be the most impactful decision you make.
As more businesses set net zero goals for themselves, there is greater expectation that they meaningfully contribute to the green transition, and this is where sustainable pensions can help.
Introduction
What steps are you taking to reduce your carbon footprint?
Limiting your consumption of meat, water, or use of disposable plastic products?
While these are all positive steps to helping the planet, what many do not realise is that investing your pension sustainably can be the most impactful decision you make.
As more businesses set net zero goals for themselves, there is greater expectation that they meaningfully contribute to the green transition, and this is where sustainable pensions can help.
MMMM, Aviva, Rout2 research, July 2021.
Investing in a sustainable pension option is 21 times more effective at cutting carbon footprints than stopping flying, becoming a vegetarian, and moving to a renewable energy provider combined.
21
x
However, pensions are currently only scratching the surface of the influence they can have on the green transition. To help address the barriers holding back the industry, Professional Pensions surveyed DC members, DC scheme staff and trustees.
The report uncovers a mismatch in the investment needs of DC members, who are speedily adopting a greener lifestyle, and an industry that is still expanding its sustainable investment offering.
Produced in association with Smart Pension, 'A Carbon Neutral Future' reveals exactly what members want from sustainably-invested pensions, why issues such as cost and returns may be irrelevant to them, and how trustees can remain at the forefront of the sustainable investment agenda.
![](https://media-s3-us-east-1.ceros.com/hannah-s/images/2018/10/07/877efd181a817806077c3d427d9267e6/arrow-icon.svg)
Turning ethics into investing
What do DC members want?
Our research shows DC members care about sustainability, and it is growing in importance when it comes to their daily habits. For example, most members already recycle, use energy-efficient appliances and conserve water.
One Financial Director we surveyed said
Our research shows DC members care about sustainability, and it is growing in importance when it comes to their daily habits. For example, most members already recycle, use energy-efficient appliances and conserve water.
ESG options need to be offered on a plate to members.
Some members will prioritise lower costs to safeguard their retirement; others may prioritise sustainability or will want something in-between the two options. Either way, people will see the choice as a real value-add from their pension operator.
Back to homepage
Bridging the sustainability gap:
What are DC schemes doing?
73% use energy-efficient lightbulbs and appliances
Members are not checking their pension often enough and therefore are not aware of their investment options.
More than half of members (52%) are not even aware if their provider offers them the option to invest their pension sustainably.
This lack of engagement is holding members back, not only from making choices about how to invest their pension but also from ensuring that their investments reflect their sustainable lifestyle choices.
Choice is key
If members engage with their pension and are made aware of the sustainable options on offer, their inclination to invest sustainably increases.
65% of members said they would invest sustainably if options were available.
Is this a surprise? Not really.
We know member needs vary and the same applies to sustainability. Having a range of investment solutions that take differing sustainable elements into account is needed. A one-size-fits-all option is not the answer and is not going to help members or providers deliver on the green agenda.
Cost misconceptions
More than two-thirds of members have no idea how much they are paying in fees for their pension overall.
Beyond costs, some members fear that investing pensions sustainably will not deliver them financial comfort in retirement.
How much do you think you're paying in fees for every £1,000 saved into your pension?
68%
8%
5%
4%
4%
3%
2%
2%
£2 per month
£4 per month
£6 per month
£8 per month
£10 per month
£15 per month
More than £15 per month
Other
Don't know
4%
NEXT
1/2
PREV
A third of members (31%) feel that investing their pension fund sustainably would not give them enough money for a comfortable retirement
A further 57% say that they are either on the fence or didn’t know
This thinking is out of sync with hard facts. Many studies have been conducted to show sustainably invested funds are likely to perform on a par with, or even outperform, traditional counterparts on an annual basis.
Members’ lack of knowledge on this matter saw almost half of them cite they would not be prepared to accept a slightly lower return if it meant their pension was being invested sustainably – although one in four members (25%) would be prepared to accept a slightly lower return if it meant their pension was being invested sustainably.
Yet it needn’t be this way.
Highly efficient administration allows us to operate with a more generous investment budget than many other pension schemes. Our growing scale, and finding like-minded investment managers willing to be competitive on fees, has enabled us to make our default growth fund more sustainable without needing to increase the annual management charge.
Over the last decade there was no real reward for doing anything other than tracking the S&P 500. Now returns may be harder to come by, some sectors that are providing sustainable impact options are likely to generate a better return going forward.
Paul Bucksey, Chief Investment Officer at Smart Pension
Paul Bucksey, Chief Investment Officer at Smart Pension
Turning ethics into investing
Back to menu
What do DC members want?
In fact, members want their employers to be committed to sustainable business practices too, with 53% stating it is an important factor in choosing an employer.
When it comes to investments, DC members also believe in the business case of investing sustainably.
40% believe companies run sustainably are likely to be more profitable over the long term versus 15% that disagree with this statement
43% are likely to start investing their pension into sustainable funds
40%
43%
84% recycle household waste
81% take sustainability into consideration more now than they did in the past
32% eat less meat
57% take showers/fewer baths
47% take fewer long-haul flights
Upwards
trends
Yet, while enthusiasm for investing sustainably is evident, less than 10% of DC members are converting their ethics into material investment.
There are several reasons for this.
Engagement and awareness
Unsurprisingly, a similar percentage of members are confused on fees for sustainable investments – 42% do not know if the cost of sustainable investments are too high.
Yet, when we revealed to DC members that the average monthly fee they pay on their pension was £4 per £1,000 of pension assets, almost half of members (43%) said they'd be willing to pay more if they could invest their pension sustainably.
Therefore, a lack of awareness on costs is having a serious and detrimental impact on the number of people investing sustainably. Could this change if providers offer information to them in a clearer manner?
This question is particularly relevant as the rise in sustainable funds over the past five years has seen many investment managers reduce their fees significantly.
Indeed, Smart Pension’s own proprietary pension administration technology enables it to absorb a lot of the cost burden without passing any additional cost onto members.
Retirement fears
Paul Bucksey, Chief Investment Officer at Smart Pension
Over the last decade there was no real reward for doing anything other than tracking the S&P 500. Now returns may be harder to come by, some sectors that are providing sustainable impact options are likely to generate a better return going forward.
Summary
The research shows that DC members care about sustainability, with many wanting their employers to follow suit. However, this enthusiasm is not yet reflected in people's pensions. Issues of awareness, lack of choice, misconceptions about cost, and the impact of sustainable investing on retirement outcomes are holding members back from investing their pensions sustainably. DC schemes need to address these concerns if they aspire to convert member enthusiasm for saving the planet into sustainable investing.
NEXT
1/2
PREV
52%
28%
20%
Does your provider offer you the option to invest your pension sustainably?
Yes, they do
No, they do not
Don't know
Back to
Menu
73% use energy-efficient lightbulbs and appliances
84% recycle household waste
32% eat less meat
57% take showers/fewer baths
81% take sustainability into consideration more now than they did in the past
47% take fewer long-haul flights
Upwards
trends
40% believe companies run sustainably are likely to be more profitable over the long term vs 15% that disagree with this statement
40%
43% are likely to start investing their pension into sustainable funds
43%
In fact, members want their employers to be committed to sustainable business practices too, with 53% stating it is an important factor in choosing an employer.
When it comes to investments, DC members also believe in the business case of investing sustainably.
Yet, while enthusiasm for investing sustainably is evident, less than 10% of DC members are converting their ethics into material investment.
There are several reasons for this.
NEXT
1/2
PREV
52%
28%
20%
Does your provider offer you the option to invest your pension sustainably?
Yes, they do
No, they do not
Don't know
Members are not checking their pension often enough and therefore are not aware of their investment options.
More than half of members (52%) are not even aware if their provider offers them the option to invest their pension sustainably.
This lack of engagement is holding members back, not only from making choices about how to invest their pension but also from ensuring that their investments reflect their sustainable lifestyle choices.
Engagement and awareness
If members engage with their pension and are made aware of the sustainable options on offer, their inclination to invest sustainably increases.
65% of members said they would invest sustainably if options were available.
Is this a surprise? Not really.
We know member needs vary and the same applies to sustainability. Having a range of investment solutions that take differing sustainable elements into account is needed. A one-size-fits-all option is not the answer and is not going to help members or providers deliver on the green agenda.
Choice is key
Financial Director
ESG options need to be offered on a plate to members.
Some members will prioritise lower costs to safeguard their retirement; others may prioritise sustainability or will want something in-between the two options. Either way, people will see the choice as a real value-add from their pension operator.
More than two-thirds of members have no idea how much they are paying in fees for their pension overall.
Unsurprisingly, a similar percentage of members are confused on fees for sustainable investments – 42% do not know if the cost of sustainable investments are too high.
Cost misconceptions
NEXT
1/2
PREV
68%
8%
5%
2%
2%
3%
4%
4%
4%
How much do you think you're paying in fees for every £1,000 saved into your pension?
£2 per month
£4 per month
£6 per month
£8 per month
£10 per month
£15 per month
More than £15 per month
Other
Don't know
Highly efficient administration allows us to operate with a more generous investment budget than many other pension schemes. Our growing scale, and finding like-minded investment managers willing to be competitive on fees, has enabled us to make our default growth fund more sustainable without needing to increase the annual management charge.
Paul Bucksey, Chief Investment Officer at Smart Pension
A third of members (31%) feel that investing their pension fund sustainably would not give them enough money for a comfortable retirement
A further 57% say that they are either on the fence or didn’t know
Beyond costs, some members fear that investing pensions sustainably will not deliver them financial comfort in retirement.
Retirement fears
This thinking is out of sync with hard facts. Many studies have been conducted to show sustainably invested funds are likely to perform on a par with, or even outperform, traditional counterparts on an annual basis.
Members’ lack of knowledge on this matter saw almost half of them cite they would not be prepared to accept a slightly lower return if it meant their pension was being invested sustainably – although one in four members (25%) would be prepared to accept a slightly lower return if it meant their pension was being invested sustainably.
Yet it needn’t be this way.
Paul Bucksey, Chief Investment Officer at Smart Pension
Over the last decade there was no real reward for doing anything other than tracking the S&P 500. Now returns may be harder to come by, some sectors that are providing sustainable impact options are likely to generate a better return going forward.
Summary
The research shows that DC members care about sustainability, with many wanting their employers to follow suit. However, this enthusiasm is not yet reflected in people's pensions. Issues of awareness, lack of choice, misconceptions about cost, and the impact of sustainable investing on retirement outcomes are holding members back from investing their pensions sustainably. DC schemes need to address these concerns if they aspire to convert member enthusiasm for saving the planet into sustainable investing.
Back to homepage
Bridging the sustainability gap:
What are DC schemes doing?
Previous
Next
Yet, when we revealed to DC members that the average monthly fee they pay on their pension was £4 per £1,000 of pension assets, almost half of members (43%) said they'd be willing to pay more if they could invest their pension sustainably.
Therefore, a lack of awareness on costs is having a serious and detrimental impact on the number of people investing sustainably. Could this change if providers offer information to them in a clearer manner?
This question is particularly relevant as the rise in sustainable funds over the past five years has seen many investment managers reduce their fees significantly.
Indeed, Smart Pension’s own proprietary pension administration technology enables it to absorb a lot of the cost burden without passing any additional cost onto members.
Bridging the sustainability gap
What are DC schemes doing?
Some schemes feel disincentivised to share more investment options with their members because of concern of exposing themselves to regulatory risks.
In fact, more than 36% of trustees say a lack of distinction between providing guidance versus advice is a cause of concern for them.
While informing members of their options is one thing, recommending the use of certain products could be construed as advice and bring potential regulatory scrutiny – particularly if a member feels they lost money by investing in a particular option.
One Employee Benefits Director we surveyed said
Companies should not just be focusing on the price of the sustainable option, they should also be thinking about how a pension scheme’s investments impact the planet, climate and people, as well as other aspects about the scheme, such as the quality of service of the pension provider, to help their employees.
Back to menu
of trustees think that sustainable funds are likely to outperform over the long term versus 21% who disagree
of trustees think that sustainable funds are likely to be a lower risk over the long term versus 25% who disagree
48%
53%
of funds were invested sustainably three years ago, compared to 27% today and a predicted 44% three years from now
12%
The message from employers and trustees is clear – they want to lower carbon emissions, but in the right way.
They are not enthusiastic about carbon offsetting as they don’t see it preventing carbon emissions.
The majority of trustees and employers (63%) say carbon offsetting is a cynical means of tackling the pressing need to reduce carbon emissions.
“Carbon offsetting strategies are still contributing to climate change as they don’t stop carbon emissions. They are just pushing the offset down the road”
“We need to stop polluting, rather than get better at cleaning up some of our mess”
DC pension schemes understand the need to adapt as sustainable investing becomes more prevalent.
Many are reacting to the needs of their members and are offering more sustainable investment choices – trustees state that allocation to this segment of the market will increase to 44% within the next three years.
It is easy to see why. For most trustees, it makes business sense to offer more sustainable options. They are motivated by the potentially strong returns on offer and the lower risk profiles of investing in companies that have sustainability at their heart.
Communication challenges
Turning ethics into investing:
What do DC members want?
Summary
Employee Benefits Consultant
Pension Scheme Manager
The green migration
of trustees say a lack of distinction between providing guidance versus advice is a cause of concern for them
36%
This rose to 25% among schemes with between £100 million and £500 million in assets
25%
“Offsetting doesn't prevent the carbon being emitted. It is effectively a cheap way to bypass the issue and massage the figures”
Professional Trustee
Others believe conversations around sustainable investing with members remain rudimentary, and too closely focused on cost and returns. These views are validated by our research that shows members would happily pay more for sustainable investment funds if they were offered more choices in this area.
In fact, given that many members have already moved to a more sustainable lifestyle, aligning sustainable investment options with their wider environmental goals is likely to be better received and encourage more engagement with their pensions.
One employee benefit consultant went as far to state that looking at sustainable investment in terms of cost is an outdated view, and the focus should be more aligned with member concerns – which consider the impact on the planet and society much more broadly.
I am wary of promoting an ESG default fund to members because of the possibility of our guidance being taken as financial advice.
Employee benefits consultant
What are DC schemes doing?
Importantly, all of these factors appeal to their sustainably-conscious members who want better investment choices with return profiles that match traditional investments.
From a financial risk management perspective, it makes sense to invest sustainably. For long-term investors, sustainable options are likely to drive better returns. Moreover, if we see a global stock market crash, companies placing sustainability at the heart of their business are better-equipped to weather market forces and rebound as economies recover.
Employee benefits director
However, staying at the forefront of the sustainable investment curve is a challenge for many schemes. Currently, a lack of engagement and awareness, alongside too few sustainable investment options, are holding members back from investing sustainably.
Whilst more education and marketing to help increase engagement could fix this, schemes are wary of communicating about sustainable investment.
and 52% among the largest schemes
52%
Going green the right way
Delivering more sustainable options that match member needs comes with its own challenges. Offering choice is more expensive and time-consuming for schemes, and trustees are not always able to deliver them for members.
One way employers can better ensure their employees have access to the broadest range of sustainable pension investment options is via a master trust. Many employers are thinking about making this move or have already done so, our research shows.
Of the employers not already using a master trust, 56% said they would consider moving to one, including 18% who currently plan to make the move within the next year or two. And the key reason for doing so? The availability of sustainable pension investment options that will serve the needs of their employees better.
Master trusts – the solution?
To get better economies of scale
To give members more retirement options
To achieve administrative cost savings
To improve quality of member communications e.g. via mobile apps
To streamline governance workload
51%
54%
45%
51%
37%
22%
29%
34%
25%
22%
Part of master trust
Not part of master trust
More than two-thirds (71%) of respondents already in a master trust rate the availability of a sustainable default fund either five out of five or four out of five for importance, whilst 63% of respondents not currently in a master trust say the same.
There is a good reason for this. As well as offering a default fund, master trusts are known to be able to extend their sustainable allocation/strategies easily to other asset classes and engage with holdings to ensure real sustainable impact and change.
After all, stewardship of ESG factors is a crucial pillar of sustainable investing, but one that single employer trust schemes rarely have the time or capacity to implement themselves. Meanwhile, a master trust can help develop net zero targets and offer pension choices to deliver on these goals.
In a similar vein, it is the ability of master trust providers to streamline governance workload and offer more options to members that remain key draws for entering an arrangement with them.
In light of new sustainable regulations such as the Task Force on Climate-related Financial Disclosures (TCFD) which looks to improve and increase reporting of climate-related financial information, the need for an arrangement that focuses on such reporting is also becoming essential.
We find more and more smaller schemes moving to Smart Pension because employers haven’t got the time and resources to develop net zero targets and monitoring – whereas with the Smart Pension Master Trust, we do it all for them.
Paul Bucksey, Chief Investment Officer at Smart Pension
From a financial risk management perspective, it makes sense to invest sustainably. For long-term investors, sustainable options are likely to drive better returns. Moreover, if we see a global stock market crash, companies placing sustainability at the heart of their business are better-equipped to weather market forces and rebound as economies recover.
One Employee Benefits Director we surveyed said
One Employee Benefits Consultant we surveyed said
I am wary of promoting an ESG default fund to members because of the possibility of our guidance being taken as financial advice.
We find more and more single employer trust schemes moving to Smart Pension because employers haven’t got the time and resources to develop net zero targets and monitoring – whereas with the Smart Pension Master Trust, we do it all for them.
Paul Bucksey, Chief Investment Officer at Smart Pension
Summary
The views of DC schemes echo those of their members. They understand the business case for investing sustainably and the benefits from a return as well as a risk management perspective. What holds schemes back from communicating more with their members and offering greater investment choice are compliance worries and resource constraints (that particularly affect smaller schemes). Many schemes are addressing these issues by moving to master trusts, but there is still scope for many more to follow.
Among schemes with £100 million in assets or less, only 20% have a net zero target for their investments
20%
and 52% among the largest schemes
52%
This rose to 25% among schemes with between £100 million and £500 million in assets
25%
INVEST
Not all organisations have the same degree of resources. If smaller schemes want to set net zero goals but cost is a barrier, master trusts could be an effective solution.
This is unsurprising, given that the fixed costs of pursuing a net zero goal tend to fall more heavily on small schemes.
Size – smaller schemes lag behind
NEXT
1/2
PREV
44%
18%
38%
Is your DC scheme (or one of your DC schemes) part of a master trust?
No – but we are currently planning to move into a master trust in the next 12 – 24 months
No – but we would consider moving into a master trust
No – and we would not consider moving into a master trust
Back to
Menu
of trustees think that sustainable funds are likely to outperform over the long term vs 21% who disagree
of trustees think that sustainable funds are likely to be a lower risk over the long term vs 25% who disagree
48%
53%
of funds were invested sustainably three years ago, compared to 27% today and a predicted 44% three years from now
12%
DC pension schemes understand the need to adapt as sustainable investing becomes more prevalent.
Many are reacting to the needs of their members and are offering more sustainable investment choices – trustees state that allocation to this segment of the market will increase to 44% within the next three years.
It is easy to see why. For most trustees, it makes business sense to offer more sustainable options. They are motivated by the potentially strong returns on offer and the lower risk profiles of investing in companies that have sustainability at their heart.
Importantly, all of these factors appeal to their sustainably-conscious members who want better investment choices with return profiles that match traditional investments.
The green migration
However, staying at the forefront of the sustainable investment curve is a challenge for many schemes. Currently, a lack of engagement and awareness, alongside too few sustainable investment options, are holding members back from investing sustainably.
Whilst more education and marketing to help increase engagement could fix this, schemes are wary of communicating about sustainable investment.
From a financial risk management perspective, it makes sense to invest sustainably. For long-term investors, sustainable options are likely to drive better returns. Moreover, if we see a global stock market crash, companies placing sustainability at the heart of their business are better-equipped to weather market forces and rebound as economies recover.
Employee benefits director
of trustees say a lack of distinction between providing guidance versus advice is a cause of concern for them
36%
Some schemes feel disincentivised to share more investment options with their members because of concern of exposing themselves to regulatory risks.
In fact, more than 36% of trustees say a lack of distinction between providing guidance versus advice is a cause of concern for them.
While informing members of their options is one thing, recommending the use of certain products could be construed as advice and bring potential regulatory scrutiny – particularly if a member feels they lost money by investing in a particular option.
Others believe conversations around sustainable investing with members remain rudimentary, and too closely focused on cost and returns. These views are validated by our research that shows members would happily pay more for sustainable investment funds if they were offered more choices in this area.
In fact, given that many members have already moved to a more sustainable lifestyle, aligning sustainable investment options with their wider environmental goals is likely to be better received and encourage more engagement with their pensions.
One employee benefit consultant went as far to state that looking at sustainable investment in terms of cost is an outdated view, and the focus should be more aligned with member concerns – which consider the impact on the planet and society much more broadly.
Communication challenges
Employee benefits consultant
I am wary of promoting an ESG default fund to members because of the possibility of our guidance being taken as financial advice.
Employee benefits director
Companies should not just be focusing on the price of the sustainable option, they should also be thinking about how a pension scheme’s investments impact the planet, climate and people, as well as other aspects about the scheme, such as the quality of service of the pension provider, to help their employees.
The message from employers and trustees is clear – they want to lower carbon emissions, but in the right way.
They are not enthusiastic about carbon offsetting as they don’t see it preventing carbon emissions.
The majority of trustees and employers (63%) say carbon offsetting is a cynical means of tackling the pressing need to reduce carbon emissions.
Going green the right way
“Carbon offsetting strategies are still contributing to climate change as they don’t stop carbon emissions. They are just pushing the offset down the road”
Employee Benefits Consultant
“Offsetting doesn't prevent the carbon being emitted. It is effectively a cheap way to bypass the issue and massage the figures”
Professional Trustee
“We need to stop polluting, rather than get better at cleaning up some of our mess”
Pension Scheme Manager
Delivering more sustainable options that match member needs comes with its own challenges. Offering choice is more expensive and time-consuming for schemes, and trustees are not always able to deliver them for members.
One way employers can better ensure their employees have access to the broadest range of sustainable pension investment options is via a master trust. Many employers are thinking about making this move or have already done so, our research shows.
Of the employers not already using a master trust, 56% said they would consider moving to one, including 18% who currently plan to make the move within the next year or two. And the key reason for doing so? The availability of sustainable pension investment options that will serve the needs of their employees better.
More than two-thirds (71%) of respondents already in a master trust rate the availability of a sustainable default fund either five out of five or four out of five for importance, whilst 63% of respondents not currently in a master trust say the same.
There is a good reason for this. As well as offering a default fund, master trusts are known to be able to extend their sustainable allocation/strategies easily to other asset classes and engage with holdings to ensure real sustainable impact and change.
After all, stewardship of ESG factors is a crucial pillar of sustainable investing, but one that single employer trust schemes rarely have the time or capacity to implement themselves. Meanwhile, a master trust can help develop net zero targets and offer pension choices to deliver on these goals.
NEXT
1/2
PREV
44%
18%
38%
Is your DC scheme (or one of your DC schemes part of a master trust?
No – and we would not consider moving into a master trust
No – but we would consider moving into a master trust
No – but we are currently planning to move into a master trust in the next 12 – 24 months
Master trusts – the solution?
Among schemes with £100 million in assets or less, only 20% have a net zero target for their investments
20%
and 52% among the largest schemes
52%
This rose to 25% among schemes with between £100 million and £500 million in assets
25%
INVEST
Not all organisations have the same degree of resources. If smaller schemes want to set net zero goals but cost is a barrier, master trusts could be an effective solution.
This is unsurprising, given that the fixed costs of pursuing a net zero goal tend to fall more heavily on small schemes.
Size – smaller schemes lag behind
In a similar vein, it is the ability of master trust providers to streamline governance workload and offer more options to members that remain key draws for entering an arrangement with them.
In light of new sustainable regulations such as the Task Force on Climate-related Financial Disclosures (TCFD) which looks to improve and increase reporting of climate-related financial information, the need for an arrangement that focuses on such reporting is also becoming essential.
We find more and more single employer trust schemes moving to Smart Pension because employers haven’t got the time and resources to develop net zero targets and monitoring – whereas with the Smart Pension Master Trust, we do it all for them.
Paul Bucksey, Chief Investment Officer at Smart Pension
Summary
The views of DC schemes echo those of their members. They understand the business case for investing sustainably and the benefits from a return as well as a risk management perspective. What holds schemes back from communicating more with their members and offering greater investment choice are compliance worries and resource constraints (that particularly affect smaller schemes). Many schemes are addressing these issues by moving to master trusts, but there is still scope for many more to follow.
Turning ethics into investing:
What do DC members want?
Summary
![](https://media-s3-us-east-1.ceros.com/hannah-s/images/2020/11/11/3068b2890c750a3bc458431c585c3de1/pink.png)
Summary
From our research, it is clear there is a growing appetite for sustainable pension options among both members and trustees.
However, some challenges continue to hinder progress in this area. One of the biggest issues is communication, as many DC scheme members are still unsure about what sustainable investing means and how it can be achieved. There are also misconceptions about the cost and performance of sustainable investments, which can make people hesitant to choose them.
Providers like Smart Pension are already leading the way by offering a range of sustainable options and providing transparent information about the benefits of sustainable investing. These are crucial to breaking down the communication barriers and dispelling misconceptions that can hold people back from investing more sustainably.
The industry must follow suit and offer choices when it comes to sustainable investing. There is no one-size-fits-all solution, and people need to be able to select investments that align with their values and priorities.
Members need to ask important questions about their scheme’s ability to offer sustainable options and make progress on reducing emissions. If the answers are unsatisfactory, it may be time to consider moving to a master trust that can deliver on choice and help tackle the urgent issue of climate change.
Back to menu
From our research, it is clear there is a growing appetite for sustainable pension options among both members and trustees.
We all have a role to play in creating a greener future, and choosing sustainable pension options is a meaningful way to achieve our goals. The sooner we act, the better it will be for people’s retirements and the planet, too.
Paul Bucksey, Chief Investment Officer at Smart Pension
Connecting the sustainability dots – What are DC schemes doing?
Back to homepage
We all have a role to play in creating a greener future, and choosing sustainable pension options is a meaningful way to achieve our goals. The sooner we act, the better it will be for people’s retirements and the planet, too.
Paul Bucksey, Chief Investment Officer at Smart Pension
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However, some challenges continue to hinder progress in this area. One of the biggest issues is communication, as many DC scheme members are still unsure about what sustainable investing means and how it can be achieved. There are also misconceptions about the cost and performance of sustainable investments, which can make people hesitant to choose them.
Providers like Smart Pension are already leading the way by offering a range of sustainable options and providing transparent information about the benefits of sustainable investing. These are crucial to breaking down the communication barriers and dispelling misconceptions that can hold people back from investing more sustainably.
The industry must follow suit and offer choices when it comes to sustainable investing. There is no one-size-fits-all solution, and people need to be able to select investments that align with their values and priorities.
Members need to ask important questions about their scheme’s ability to offer sustainable options and make progress on reducing emissions. If the answers are unsatisfactory, it may be time to consider moving to a master trust that can deliver on choice and help tackle the urgent issue of climate change.
We all have a role to play in creating a greener future, and choosing sustainable pension options is a meaningful way to achieve our goals. The sooner we act, the better it will be for people’s retirements and the planet, too.
Paul Bucksey, Chief Investment Officer at Smart Pension
Connecting the sustainability dots – What are DC schemes doing?
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