My son and I had a working lunch with Newton Investment Management yesterday and very instructive that lunch was.
Olly said to me afterwards that the only way he (as a 21 year old first jobber) could get interested by pensions was in finding out where his money was invested and whether it was invested for a greener planet.
He admitted that – before he had started working at AgeWage, he had never considered pensions as investments and hadn’t connected the studying he did as an undergraduate geographer connected to the world I live in.
During the lunch it became clear that great work is going on in this area (by ESG teams such as Newton’s), but it is often undervalued. Take this cracking report that gets far too little publicity.
From my perspective, an important strand in the project to restore confidence in pensions is being ignored.
So why don’t we talk of pensions as investments?
All the paraphernalia of pension planning is about the mechanics of building up capital and then spending, it’s about tax and longevity and costs and charges, and the investment of money has been relegated to a second order issue.
This is crazy. We are telling people to engage with pensions but giving them nothing to engage with but the boring stuff (and in a boring way). This is a paraphrase of a talk that Lottie Meggitt gave to the PIA a couple of months ago and that talk changed my thinking.
If people like my son, and Newton’s Lottie Meggitt, who set up the lunch, are more interested in investment than pensions, why do we force them to think about pensions in terms of the paraphernalia? Why don’t we just cut to the chase, pension investment is about what happens to the money that leaves your pay between now and for ever.
It is several years ago since I sat in a room with Legal and General’s CEO, Nigel Wilson and heard him present to these slides.
If you flick through the deck you’ll see Wilson’s vision for auto-enrolment. He wanted it to be not just a means of investing capital for social good , but a way of engaging ordinary people in what their money was doing for them and for society.
Since then, L&G have taken steps to help us better understand our investments through funds that invest for a more sustainable Future World. It was good to hear Newton applauding L&G in this and praising too the governance work of rival fund management houses such as Hermes.
It struck me that if ordinary people had the priviledged access to the kind of information that we were given over lunch , they would find pensions a whole lot less boring.
Having a say.
We had a say – as ordinary people – in a discussion with a top ESG team. But it’s just not practical for everyone to have lunch with Newton’s ESG team.
But I do think it’s possible for everyone to have a say in how the money they invest for their retirement is managed.
But for this to happen, we have to give people something to get their teeth into. There has to be an entry point – where ordinary people can assess what is going on with the money they have given to somebody else (John Kay uses the phrase “other people’s money”)
We at AgeWage believe that a value for money score can be that hook, that a click on the score can lead to an explanation of who manages the money, how it’s managed and what options you as an investor have, if you’d like something different.
It doesn’t have to be any harder than that.
This is what IGCs and Trustees are trying to do and it’s why we want to work with IGCs and Trustees.
We want to help them by giving ordinary people the value of their money, not just in the score, but in the information they can glean by clicking through the score to the meat in the pie.
We want to turn the perception of a pension from boring to interesting by letting people into the secrets about how their money is managed and where it is invested.
We can do this today, because organisations like Morningstar and MSCI provide ratings of how funds are managed for ESG (Environmental, social and governance good). We want people to have access to the kind of research done by Newton who now rate companies not just on their current behaviours, but how those behaviours are changing. They score companies on a current and prospective basis (taking a 3-5 year view).
If people have access to really interesting ratings of the funds they invest in and the companies those funds invest in, then those investments become more real and vivid to them.
All of this is not new and I’ll leave you with a cracking video from Quietroom that spells this out. What is new is that we at AgeWage think we’ve found a way to get people interested enough in pensions to start asking the really important question about how their money is invested.
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