Are you investing unethically – without actually realising?

Many employees are subscribed to their workplace pension, managed by investment firms like Royal London or Legal & General.

In the case of Royal London, unless you have requested any different (either personally or via a financial advisor) you will likely be paying into a default investment.

Whilst this default investment is somewhat complex and changes over time, the specific details of your pension investment requires a bit more digging. For example, if you are 15 or more years from retirement, your pension will be invested predominantly in stocks & shares (72.5% of total sum) in something called RLP Global Managed.

RLP Global Managed is a fund made up of hundreds of individual stocks & shares, of which the top 10 holdings are published via the fund fact sheet. This fact sheet reveals that your pension is directly invested in BP (1.45%) and Royal Dutch Shell (1.31%) which might not be suitable for your stance on sustainability.

Furthermore, depending on your personal ethical investment preferences, other investments in the RLP Global Managed fund might raise an eyebrow too.

What to do about it

It is possible to switch funds and move your pension investments into different markets, either directly with Royal London, or as a partial transfer to a self invested pension portfolio (SIPP). A partial transfer allows you to ‘withdraw’ up to 90% of your current pension and transfer into a SIPP of your choice.

SIPPs are a great option if you can devote a few hours to research, and can actually increase the value of your pension by paying less fees to your provider. For example, Royal London’s managed workplace pension carries a 0.75% ongoing fee, where a SIPP can be as low as 0.15%.

This might not seem like a significant saving, but over a 30 year period this can add up to thousands of pounds due to the wonders of compound interest.

Ethical SIPP providers

There are a number of SIPP providers in the UK, many of which offer free accounts with low ongoing charges. Check out our top recommended sustainable SIPPs in the UK for 2022.

Most SIPP providers offer a recommended ethical investment portfolio, or you can build your own if you’re up for it. A few SIPP providers:

• Penfold – pension provider with a dedicated sustainable portfolio. Popular in the UK for self employed people, but anyone can open a pension with Penfold. Get £25 free when you sign up with this link!
• YouInvest (AJ Bell) – popular UK platform with your choice of investments. Check out the AJ Bell Responsible Growth fund which is really all you need.
• Vanguard – 2020 witnessed the long awaited launch of the Vanguard SIPP – now the UK’s cheapest platform at the super low cost of 0.15%. This is restricted to Vanguard funds only, but they have recently launched some ESG funds and in Decemebr 2021 a new range of sustainable funds.
• Interactive Investor – great ethical investing tool to help plan your own investments.
• Cavendish Online – one of the cheapest SIPPs available in the UK at 0.25% with your choice of investments.

Alternatively, you can consult a financial advisor who will likely charge for the pleasure.

Please note this is not considered financial advice. It is however a widely recognised option for people all over the UK.

Update: Wealthsimple UK notifed customers in December 2021 of its withdrawal from the British market. They still operate in other countries, but all 16,000 UK customers have now been moved to Moneyfarm.