Retirement savers keen to help slow climate change are being offered an opportunity to put their money into a ground-breaking “net zero” pension.
Cushon, a UK-based fintech, will from next week offer what it says is the world’s first net zero pension, accelerating a drive by the industry to green investment portfolios and reduce holdings in polluting industries.
But most larger pension fund companies that have committed to targets have pledged to reach net zero — and be neutral on carbon emissions — only by 2030 or even 2050.
“We know that people want their retirement savings to help tackle climate change without sacrificing returns,” said Cushon. “We wanted to find a very real way of making this work by delivering a pension that is net zero now. Not in 30 years, not in 15 years, but now.”
Experts said the Cushon pension breaks new ground at a time of growing demand for greener pensions. “This is a novel approach which we have not seen in the UK before,” said Joe Dabrowski, of the Pensions and Lifetime Savings Association, which represents workplace pension schemes.
“We’ve seen quite a big change over the last couple of years with schemes starting to introduce climate-friendly funds into their pensions, in response to their members, with most of the market heading in this direction one way or another.”
Film writer Richard Curtis, co-founder of Make My Money Matter, which has been campaigning for pension funds to commit to net zero from today, said the new Cushon pension would be the first of its kind.
The pension scheme hits the market after Aegon, a large UK pension provider, this week committed to achieve net zero carbon emissions across its default pension fund ranges — the main pensions for millions of workers — by 2050.
”The launch of a pension that is net zero now — not later — shows what is possible from the pensions industry when tackling the climate emergency is taken seriously,” said Mr Curtis.
Currently, £90bn a year is paid into workplace pensions in the UK. Most of that money goes into retirement funds that hold investments in businesses such as oil and gas companies, which pay regular dividends but contribute to global warming through carbon emissions.
Cushon was founded in 2017 by Ben Pollard, an actuary, and is backed by Unum, a US insurer. Starting by offering workplace Isas, Cushon now has 87,000 customers with £300m of assets under management.
The net-zero pension will initially only be available to workplace pension savers via employers, but net zero pensions will be offered to direct investors this year.
Cushon’s pension does not eliminate carbon-emitting investments. It achieves net zero by holding climate-aware funds and neutralising any investments responsible for carbon emissions by purchasing carbon offsets.
Cushon pension fund members’ charges, will which be set by deals with employers, will typically range from 0.29 per cent to 0.55 per cent of the pension pot. This compares with the average workplace pension charge of 0.48 per cent, according to the Department for Work and Pensions.
Cushon said that over the 12 months to January 11 this year, its investment strategy delivered 10.42 per cent growth for its existing net zero fund.
Savers who want greener pensions can also consider constructing their own green portfolio. “Self-invested personal pensions allow you to DIY your own net zero pension at any time – you don’t have to wait for your workplace to offer it,” said Becky O’Connor, head of pensions and savings for Interactive Investor, an investment platform provider.