Ask most people where their pension is invested and the honest answer is a shrug. That is completely understandable β the whole point of a pension is that someone else manages it. But your pension is probably one of the largest pools of money with your name on it, and it is doing something in the world right now. It is worth knowing what.
Your pension is not sitting in a vault
Money paid into a pension does not wait quietly for you to retire. It is invested, usually across thousands of holdings: shares in listed companies, government and corporate bonds, commercial property, and infrastructure such as wind farms, hospitals and transport.
That scale is the point. Collectively, UK pension savers are among the most significant owners of British and global business. Ownership brings influence, and how that influence is used is what responsible investing is about.
What responsible investing actually means
The term covers several distinct activities that often get blurred together:
- Integration β factoring environmental, social and governance risks into ordinary investment analysis, because a company with a serious pollution liability or a dysfunctional board is a riskier holding.
- Stewardship β using the rights that come with ownership: voting at annual meetings and pressing management on strategy, executive pay, climate plans and workforce practices.
- Exclusion β declining to invest in certain activities altogether, such as controversial weapons.
- Positive allocation β deliberately directing capital towards solutions like renewable energy and social housing.
Engagement or exclusion?
There is a genuine and unresolved debate here, and we think it is better to explain it than to pretend otherwise.
Selling out of a high-emitting company removes it from your portfolio, but the company continues to exist β now owned by someone with less interest in changing it. Staying invested keeps a seat at the table and a vote to use, but means continuing to hold something many savers find uncomfortable.
Our general view is that engagement, backed by a credible willingness to divest when engagement fails, changes more in the real economy than walking away at the first difficulty. Reasonable people disagree, and you are entitled to know which approach your provider takes.
Does it cost you returns?
This is the question that matters most to anyone whose retirement depends on the pot. The evidence does not support the idea that responsible investing requires accepting lower returns as a matter of course.
Climate transition, resource scarcity, regulation and workforce practices are financial risks with real balance-sheet consequences. A manager ignoring them is not being hard-headed; they are ignoring information. Our duty is to deliver good long-term outcomes for our customers, and considering these factors is part of doing that job properly, not a departure from it.
How to find out where your money is
You can check this yourself in under an hour:
- Log in and identify your funds. Most people are in a default or lifestyle fund they never chose actively.
- Find the factsheet. It will list the largest holdings, the asset mix and the charges.
- Read the stewardship or voting report. This shows how your manager voted on real resolutions, which is far more revealing than a policy statement.
- Check the climate commitments. Look for interim targets with dates, not just a distant net zero pledge.
- Look at the alternatives. Most schemes offer sustainable or ethical fund options if the default does not fit your views.
Switching funds is a decision, not a gesture
If you do decide to move, do it deliberately. Check whether the alternative fund's risk profile suits your time horizon, compare the charges, and consider whether it still fits if you are close to retirement. A fund that matches your values but not your timeframe is not a good outcome.
Owned by customers, invested for customers
Royal London is a mutual. Because we answer to our customers rather than external shareholders, we can take the long view that responsible investing genuinely requires β measured in decades, which is exactly the timescale a pension works on.
Take a look at your funds this month. It is your money, and it is already out there working. You may as well know what it is doing.
This article is for general information and is not personal advice. The value of investments can fall as well as rise and you may get back less than you invested.