Ethical Pensions: What are they?
If you want to set up a simple pension, where you know you’re money will be invested ethically then the chances are an ethical stakeholder plan may fit your needs. Anyone buying into an ethical fund will find there are fewer choices than if they were to select from the mainstream market.
As an individual you can choose to invest in an ethical fund with the option of supporting a charity in the process. Awareness of ethical investment has never been so high and around 60% of ethical pension business is for Stakeholder pensions. People are looking at 20 years or so more down the line and are buying now, taking advantage of the cheap price of pensions.
Five Ethical Indices
However, the Ethical Investment Research Services found five ethical indices it created proved approximately equivalent to the FTSE all share index. For example, the Charities Avoidance Index excludes the majority of companies involved in tobacco, gambling, alcohol, military sales and pornography but was just 0.38% better off than the FTSE all share.
If you are part of a large company scheme, you can still encourage ethical investment as members united in their views are a powerful force and should be able to put pressure on fund managers to invest ethically.
A big advantage of ethical pensions is that it allows you the ability to save for the future without compromising on ethical and environmental issues. However, you may find that the return on some ethical pensions is lower and there also may be a limited choice of investments due to the nature of ethical pensions.
With pension funds contributing to a third of the UK funds an outcry over a company’s dealings can affect their business plans. One example is oil companies, who are now trying more than ever to promote the fact that they are looking at less harmful ways to produce energy.
If you are determined to invest your money ethically while at the same time not compromising the earning potential of your investments – it could be a very good idea to consult an IFA (independent financial advisor).