Book a free discovery meeting

call: 01422 349 131

email: info@iftwm.com

Month: February 2022

Create a better world to live and retire in

Pension investments to harness a more sustainable planet.

Few people are aware of what their workplace pension invests in, let alone how their pension provider incorporates environmental, social and governance (ESG) matters into the process.

Almost two-thirds (64%) of UK pension holders say that didn’t know their pension could be invested in ways to help fight climate change. One in six (17%) of UK pension holders currently invest their pension responsibly, but 41% say they would like their pension to be invested responsibly, new research has revealed[1].

Collective power

Over three quarters (77%) of UK adults class themselves as ‘climate conscious.’ Three out of five (59%) UK adults are familiar with the term ‘responsible investment,’ but only 26 per cent actually know what it means and understand its collective power to protect the planet. Men are more likely to be familiar with the term responsible investment than women (69% vs 50%).

More than half (56%) of pension holders said they would consider investing a portion of their pension responsibly. Around a quarter (23%) were willing for at least half their pension to be invested responsibly. With one in ten (11%) wanting between 90% and 100% of their pension invested responsibly.

Protecting the environment

With over half (57%) of 18-24-year-olds wanting their pension investments to harness a more sustainable planet, compared to just over a quarter (29%) of 65-year-olds and over, it’s clear there is still more that can be done to build a better understanding of inter-generational financial resilience for the future.

Pension holders were also asked what criteria they would like a responsibly invested pension to consider, with climate change and protecting the environment (42%) being highly rated. Social factors such as health and safety (29%) and use of plastic (28%) followed closely behind. The research also found more than half (53%) of pension holders do not know how their pension funds are invested.

Source data:

[1] Royal London commissioned survey by Opinium between 18th to 22nd October 2021 with a sample of 2,000 nationally representative UK adults.

Time to bring your pensions together?

3.6 million Britons have lost track of their pension savings.

The more old pensions you do have, the easier it is to end up losing one. Tracing pensions from years ago can be a hassle. Over 3.6 million Britons admit they have no idea how many pensions they have and risk paying more in fees than necessary, according to new research[1].

The number of workers with small pension pots of under £1,000 has surged dramatically in recent years, as auto enrolment has allowed millions of people to benefit from workplace pensions for the first time.

Paying fees to multiple providers

However, with the average employee now changing jobs 11 times[2] in their working life, people are increasingly building up many small pots and are often losing track, misplacing paperwork or forgetting about previous schemes they are invested in.

The Pensions Policy Institute (PPI) predicts the number of small pots will triple by 2035 to 27 million[3]. Although the Government’s Pension Dashboard will allow people to see all of their pensions in one place when it comes into effect in a few years’ time, it will not solve the problem of savers paying fees to multiple providers across all their pensions.

Consolidate small pension pots

While savers already have the option of combining their pensions, one in 10 (10%) have no idea how to do this, while 12% say it’s just too much hassle. As a result, more than two-fifths (44%) say they’ve never bothered to track down savings from a previous employer.

Almost three quarters (72%) of Britons now support the introduction of a new system that would automatically consolidate small pension pots as they move jobs, reinforcing strong support from the industry for the change. This would make it easier for people to manage and keep track of their retirement savings, while making the system more efficient and effective for the UK’s 33 million[4] pension holders.

Compare the features and benefits

Even if you have not had that many jobs, you may still have a number of different pensions to keep track of. Pensions can be confusing, but there is an alternative way to help keep on top of them. Pension consolidation may allow you to combine some or all of your defined contribution pensions in one place.

Consolidating your pension means fewer statements to keep an eye on, along with fewer and potentially lower management charges. However, not all pension types can or should be transferred. It’s important that you know and compare the features and benefits of the plan(s) you are thinking of transferring. It can be a complex decision to work out whether you would be better or worse off combining your pensions, so it’s essential to obtain professional financial advice.

Source data:

[1] The research was carried out online by Opinium across a total of 5,010 adults aged 18+. Data is weighted to be representative of the GB population. Fieldwork was carried out between 12th to 18th March 2021.

[2] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/945319/s mall-pots-working-group-report.pdf

[3] https://www.pensionspolicyinstitute.org.uk/media/3545/20200723-deferred-members-final-report-for-the- website.pdf

[4] Finder,Pension Statistics 2021

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

Beyond profit

How green is your pension?

The consequences of inaction on climate change are now impossible to ignore. Every company has an impact on the world around us. And by investing in them, so do we.

From devastating wildfires ripping through several countries, the aftermath of Storm Ida that caused unimaginable flooding across the northeast of the US, storm Arwen that brought disruption to the UK in November and last August’s 7.2 magnitude hurricane in Haiti – are all examples of natural disasters due to climate change.

Increasingly more and more pension savers are asking where their funds are invested. Many people are no longer just concerned about getting the best returns, they also want their money to be used in a way that helps society and the planet.

Climate risks

A survey finds a third of pension schemes have already set targets to reduce their exposure to climate related risk[1]. 61% of schemes have considered setting a target to reduce their exposure to climate risks, but 4 in 10 schemes have yet to consider climate risk targets and 28% say they will not be setting a target.

Of the 33% of schemes that have set or are in the process of setting a target, half have included an emissions-based target with the majority (70%) of these being a ‘net zero’ target.

Pensions industry

UK pension schemes are a massive influence on the financial services industry including how the climate related risks and opportunities are identified, assessed and managed. This survey shows that the pensions industry is rising to the defining challenge of our age.

In another survey, two-thirds (67%) of consumers surveyed believe that it is important to consider Environmental, Social, and Corporate Governance (ESG) factors before investing and this figure rises to almost three in four (72%) for those respondents with a pension[2].

Responsible investing

ESG is an evaluation of a firm’s collective conscientiousness for social and environmental factors. Interestingly, females are more likely to consider ESG investing at 70.4% than males at 63.9% and its importance is broadly similar across all age cohorts.

Whilst 51% of those with pensions would like to increase their investment in companies that are tackling climate change, some 70% of those respondents acknowledged the need to better understand the benefits of responsible investing, highlighting the fact that there is an onus on the industry participants to educate consumers in this space.

Investment decision

More than half (53%) of those surveyed believe that it is important that a company has a positive record of social responsibility and good corporate governance, rising to 60% of those with a pension.

The survey also explored the factors that are important to consumers when considering investing sustainably. Most respondents (75%) indicated that they would need good financial advice before making their investment decision, rising to 78% for those with a pension.

Pension sustainably

Two-thirds (67%) said they would only invest their pension sustainably if the returns were the same or better, (71% of pension holders) and 64% said they would only consider doing so if they are not paying higher fees and charges (68% for pension holders.

Some 51% of those pension holders surveyed said they would like to increase their pension savings into companies helping to combat climate change and only 20% of all respondents (17% of those with a pension) said that investing sustainably is more important than investment returns.

Source data:

[1] The Association of Consulting Actuaries 2021 Pension trends survey was conducted in the summer of 2021 and attracted 212 responses from employers of all sizes, running over 400 different schemes

[2] Aviva Life & Pensions Ireland DAC (Aviva), research of the 1,200 people surveyed 20.08.21

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

Improve your financial life

Setting a financial New Year’s resolution you’ll actually keep.

Heading into the New Year, it’s the perfect time to take stock of your budget, liabilities and investments—and check them against your financial goals. The New Year brings an opportunity to reflect on the past year and to set new goals for the year ahead.

But before setting financial goals, it helps to understand your financial priorities, and understand your overall plan to achieve the financial life you want. Think about your financial plan, and what you are hoping to accomplish, not only this year, but in years to come. Think about what you can do this year to help reach your longer-term goals.

Secure your financial future

Whatever situation you find yourself in, it’s important to be realistic about your goals. We all have different financial goals and aspirations in life. Yet often, these goals can seem out of reach. In today’s complex financial environment and the challenges of the COVID-19 pandemic, achieving our financial goals may not be that straightforward. This is where financial planning is essential to help secure your financial future.

The benefits of setting financial goals all work together to boost your financial health. You’ll gain more confidence in your money management decisions and significantly decrease money-related stress. If you want to take control of your money and create more security, you need to set some financial goals.

Keep your goals realistic

A financial plan seeks to identify your financial goals, prioritise them, and then outline the exact steps that you need to take to achieve your goals. Figuring out your objectives and matching them with timelines are the keys to setting financial goals. Your financial goals are specific and unique to a number of factors related to you, like your age, your interests, current financial situation and your aspirations.

Based on these, you need to develop your goals and establish a plan to achieve them. Any goal (let alone financial) without a clear objective is nothing more than a pipe dream, and this couldn’t be more true when setting financial goals. However, it’s important to keep your goals realistic as it will help you stay the course and keep you motivated throughout your journey until you get to your destination.

Monetary value to that goal

You need to be crystal clear about why you are doing what you’re doing. This could be planning for your children’s education, your retirement, that dream holiday, or a property purchase.

Once the objective is clear, you need to put a monetary value to that goal and the time frame you want to achieve it by. The important point is to list all of your goal objectives, however small they may be, that you foresee in the future and put a value to them.

Short, medium and long-term

Now you need to plan for where you want to get to, which will likely involve looking at how much you need to save and invest to achieve your goals. The approach towards achieving every financial goal will not be the same, which is why you need to divide your goals in to short, medium and long-term time horizons.

As a rule of thumb, any financial goal which is due within a five-year period should be considered short-term. Medium-term goals are typically based on a five-year to ten-year time horizon, and over ten years, these goals are classed as long-term.

Developing a clear picture

This division of goals into short, medium and long-term will help in choosing the right savings and investments approach to help you achieve them, and it will also make them crystal clear. This will involve looking at what large purchases you expect to make such as purchasing property or renovating your home, as well as considering the later stages of your life and when you’ll eventually retire.

Creating and implementing a comprehensive financial plan will help you develop a clear picture of your current financial situation by reviewing your income, assets and liabilities. Other elements to consider will typically include putting in place a Will to protect your family, thinking about how your family will manage without your income should you fall ill or die prematurely, or creating a more efficient tax strategy.

Iterations as life changes

There is little point in setting goals and never returning to them. You should expect to make iterations as life changes. Set a formal yearly review at the very least to check you are on track to meeting your goals.

We will help you to monitor your plan, making adjustments as your goals, time frames or circumstances change. Discussing your goals with us is highly beneficial as we can provide an objective third-party view, as well as the expertise to help advise you with financial planning issues.

Finally, make sure your financial goals are SMART thinking about ‘SMART’ goals can help give direction to your financial aspirations and make those goals more achievable.

Specific –

Rather than pledging to ‘save money’ or ‘reduce debt’, thoroughly analysing finances and targeting specific areas for improvement could boost your chances of reaching your end goal.

Measurable –

Having benchmarks can help you track your progress, letting you make changes if you need to.

Attainable –

Setting a realistic goal can help keep your confidence up as you feel the achievement of getting close to your desired result.

Relevant –

Ensuring your goals are appropriate to what you are trying to achieve can help you avoid wasting time.

Time Sensitive –

If you know when you want to achieve your goal, this can allow you to pace savings and ensure you put the right amount of money aside.