Nearly three-quarters (72%) of UK employees believe it is important for their employer to offer a responsibly invested pension. However, almost half (47%) are unaware of whether their workplace pension is actually invested responsibly.
The findings come from the Scottish Widows Responsibly Invested Pensions Report, which surveyed over 6,000 employees, employers, and financial advisers to understand attitudes towards Environmental, Social and Governance (ESG) issues in pension investments. The report highlights a growing demand for responsible pensions, alongside a knowledge gap that may be preventing employees from making informed investment decisions.
ESG concerns are shaping pension expectations, with respondents identifying key societal and environmental challenges that influence how they want their pensions to be managed. The cost-of-living crisis was the most pressing issue, with 63% of employees ranking it as their top concern, followed by climate change (44%), plastic waste (37%), and water pollution (33%). Younger workers in particular prioritise social issues such as diversity, equity, and inclusion, with 29% of those aged 18-34 highlighting these as major concerns, compared to 18% of those aged over 55.
Younger Employees Drive Demand for ESG Pensions
The expectation for responsibly invested pensions is particularly strong among younger workers. While 72% of employees overall consider it important, this figure rises to 79% among those aged 18-34, compared to 61% of those aged over 55. Additionally, 70% of employees say that an employer’s social responsibility credentials or benefits influenced their decision to take their current role.
The research also indicates that employees want to see action from their employers, not just rhetoric. Two-thirds (64%) expect their employer’s environmental and social responsibility commitments to be reflected in the pension schemes offered. This aligns with a wider shift towards ESG-led investment strategies, with pension savers increasingly looking for their money to deliver financial returns while also contributing to a sustainable future.
Knowledge Gaps and Barriers to Adoption
Despite strong demand for responsible pensions, lack of awareness remains a key barrier. Almost two-thirds (61%) of employees do not know how to switch from their default pension to an alternative investment option that may better align with their values.
A quarter (25%) feel they do not have enough information to understand the costs and benefits of responsible pensions, while some employees remain uncertain about financial returns. Fewer than a quarter (23%) express concerns over whether responsible pensions can achieve the same returns as traditional investments, and 21% worry about potential additional costs.
Eva Cairns, Head of Responsible Investment at Scottish Widows, emphasises the need for greater education on the subject. “Employees are increasingly seeking to make sure their investments – including pensions – deliver financial return while considering the impact on people and planet, and there is clear demand for more responsibly invested options,” she explains.
“We know pension savers are concerned about financial security and believe that considering risks and opportunities related to ESG can help build more resilient investment portfolios – but it’s also about contributing to a more sustainable future, tackling some of the societal issues people care about. There’s still a big knowledge gap to tackle, and employers should not only offer responsible pensions but also do more to empower employees with the information they need to make more informed decisions.”
