Kia: Hey, this is Kia. We love paying our pensioners some
Kia: attention on this show. I want to make sure you're
Kia: as passionate about pensions as I am, because it's so
Kia: important to look after future you. Hopefully, spending your retirement
Kia: on a sunny beach. Welcome to another episode of A
Kia: Little Bit Richer, brought to you by my friends at
Kia: Legal & General. We've done a few episodes on pensions. And
Kia: today we're going deeper on investment choices, what types of
Kia: organizations they're invested in, and the choices that you have.
Kia: Anyone looking to align their investments with their values, this
Kia: is the episode for you. Joining me to guide us
Kia: through this is Jesal Mistry. He works in asset management
Kia: at Legal & General, so he's part of the team who
Kia: decides the best places to invest people's pension savings. Welcome,
Kia: Jesal.
Jesal Mistry: Hello, Kia.
Kia: How are you?
Jesal Mistry: I'm good, thank you.
Kia: Good. I'm excited. As you heard, I love talking about
Kia: pensions. One of my favorite topics, because it's not spoken
Kia: about enough. Let's get into it. First thing's first. Could
Kia: you explain what happens to pension savings and where the
Kia: money actually gets invested?
Jesal Mistry: The good news is that if you're in a pension
Jesal Mistry: scheme already, then you're actually an investor. There are a
Jesal Mistry: number of different investment options available. But if you haven't
Jesal Mistry: already made a choice, then the pension provider is probably
Jesal Mistry: doing that for you. In a workplace pension, that's called
Jesal Mistry: a default option. They do this to grow your money
Jesal Mistry: over time. It's really important that we grow your money,
Jesal Mistry: because you need that at retirement to be able to
Jesal Mistry: live off when you get to that point in time.
Jesal Mistry: Now generally, the provider will invest your money in maybe
Jesal Mistry: more higher risk investments earlier on. It's because you've got
Jesal Mistry: a lot longer to go until you get to the
Jesal Mistry: point of drawing your money out. It means that you
Jesal Mistry: can see through all the ups and downs in investment
Jesal Mistry: returns. Then in the default fund, what tends to happen
Jesal Mistry: is that, as you get close to retirement, we reduce
Jesal Mistry: that risk so that when you get to the point
Jesal Mistry: of drawing your money out, your money's not moving around
Jesal Mistry: in terms of its value. That means you can get more
Jesal Mistry: certainty around what sort of value you might get at
Jesal Mistry: retirement. But also, in the earlier years, there's lots of
Jesal Mistry: different options available in where to invest your money. Some
Jesal Mistry: of that might be in line with different risk profiles.
Jesal Mistry: Some of that might be in line with more around
Jesal Mistry: how you view investments and your own views.
Kia: How does an investment manager like Legal & General decide what
Kia: types of companies the money goes into? Are there specific
Kia: industries or areas that you will avoid all together when
Kia: it comes to pension funds?
Jesal Mistry: There's lots and lots of different things that we have
Jesal Mistry: to think about when we're looking to invest money on
Jesal Mistry: behalf of savers that we look after. Things like regions
Jesal Mistry: or countries to invest in. Whether that's in the US, whether
Jesal Mistry: that's in emerging economies, those sorts of areas as well.
Jesal Mistry: But also, we're thinking about savers' personal views. Many of
Jesal Mistry: these are focused on things like investing responsibly. You might
Jesal Mistry: hear the term ESG, which stands for environmental, social, and
Jesal Mistry: governance issues. These are key things that we look at
Jesal Mistry: with companies. You asked me about whether there are certain
Jesal Mistry: things we avoid. Some of the options that we have
Jesal Mistry: will avoid different types of companies, and that's called exclusion.
Jesal Mistry: We apply exclusions to the funds that we have. These
Jesal Mistry: might be companies that manufacture weapons, like land mines and
Jesal Mistry: cluster munitions, for example. Companies that manufacture tobacco, those sorts
Jesal Mistry: of areas. Companies involved in animal testing. And those that
Jesal Mistry: commit human rights abuses. There's lots of other things that
Jesal Mistry: we think about when we're removing companies. But different types
Jesal Mistry: of funds have those different types of exclusions. It's really
Jesal Mistry: important that you have a look at what types of
Jesal Mistry: funds you've got, and really try to say whether they're
Jesal Mistry: in line with your particular views, because each one of
Jesal Mistry: us has a different way of thinking about our own
Jesal Mistry: values and what we feel is appropriate for us. Now,
Jesal Mistry: whilst exclusions might be considered to be a good thing,
Jesal Mistry: in that you aren't supporting companies. In some ways, actually,
Jesal Mistry: the flip side to that, because we own parts of
Jesal Mistry: companies, we actually can influence how they operate and what
Jesal Mistry: they do. By bringing all of that money together, we
Jesal Mistry: have a greater influence on those companies. We can engage
Jesal Mistry: with them, we can write to them, we can talk
Jesal Mistry: to their management teams. And be able to say to them, "
Jesal Mistry: Look, you need to operate more responsibly." You can have
Jesal Mistry: a real influence on day- to- day activity within some
Jesal Mistry: of these companies that really helps to move things forward.
Jesal Mistry: By investing in companies, you can actually have a positive
Jesal Mistry: influence over them. The other aspect to, I think, the
Jesal Mistry: types of investments that we make is really trying to
Jesal Mistry: invest in line with beliefs or particular faiths as well.
Jesal Mistry: For example, we've arranged a Sharia compliant investment fund, so particularly
Jesal Mistry: focused on supporting Muslims to save in their pension scheme.
Jesal Mistry: Having those funds available means that they can actually join
Jesal Mistry: the pension scheme and invest in line with their own
Jesal Mistry: personal beliefs as well.
Kia: Hearing that explanation about different things that pension providers are
Kia: doing to make change, and the things that you can
Kia: do as an investor by putting your money into companies
Kia: to make changes, it makes you feel quite empowered.
Jesal Mistry: Yeah.
Kia: I feel very empowered right now, knowing that I've got
Kia: pension savings that are being invested, and I'm actually making
Kia: a difference. I think people knowing that and understanding that
Kia: can really empower people to say, " Do you know what?
Kia: I want to make a change, and I want to
Kia: make an impact, and I want my money to go
Kia: into things that I believe in," which is great, and
Kia: I think that everyone should know and be aware of.
Kia: Coming off the back of a little bit what you've
Kia: touched on, what impact do pension fund providers have on
Kia: organizations? I know you touched on it a little bit.
Kia: But other impact do they have on organizations that they
Kia: invest their money into?
Jesal Mistry: We take our responsibility to look after people's savings very,
Jesal Mistry: very seriously, and make sure that we're looking after them
Jesal Mistry: in a responsible way. That means two things. That means
Jesal Mistry: delivering the types of returns that people expect. But also,
Jesal Mistry: investing in the types of companies that are investing responsibly,
Jesal Mistry: run in a responsible way, and therefore then working with
Jesal Mistry: them in that respect. We set some standards. That could
Jesal Mistry: be anything from environmental or climate change type of standards,
Jesal Mistry: all the way through to equality, gender equality, diversity within
Jesal Mistry: organizations, and to how they should be run. We set
Jesal Mistry: some standards with them. Then if they don't meet our
Jesal Mistry: standards, we will vote against them. It's not all just
Jesal Mistry: about voting. We actually then try to engage with them
Jesal Mistry: a little bit more and support them. We have what
Jesal Mistry: we call a Climate Impact Pledge. This is where we
Jesal Mistry: are focused on the worst- offending companies across the world
Jesal Mistry: from a climate perspective. We'll try to engage with those
Jesal Mistry: and identify those that are most influential, that are maybe
Jesal Mistry: not hitting the right areas, and work more closely with
Jesal Mistry: them. We set up very clear minimum standards as to
Jesal Mistry: what we expect from them, and where we expect them
Jesal Mistry: to go moving forward. Within the Climate Impact Pledge, if
Jesal Mistry: companies don't meet those minimum standards, we will remove them
Jesal Mistry: from some of the funds that we invest in, and
Jesal Mistry: we will vote against their management for everything else where
Jesal Mistry: we can't remove them. It's not just smaller companies. These
Jesal Mistry: are quite big, large, well- known names. ExxonMobil, the oil
Jesal Mistry: and gas company. And the miner, Glencore, as well.
Kia: I think often, we don't hear what things are going
Kia: on behind the scenes, when it comes to our money and
Kia: where it's going. There is a massive topic when it
Kia: comes to investing, and I'll be remiss to not mention
Kia: it. We see crypto everywhere.
Jesal Mistry: Absolutely.
Kia: Right. Everyone's all talking about crypto. A couple of years
Kia: ago, we had a massive boom, where everyone was insistent
Kia: that you'll become a millionaire overnight if you put money
Kia: into crypto. When it comes to pension savings then, why
Kia: isn't our money invested into crypto?
Jesal Mistry: Yeah, that's a great question actually. It is exactly that
Jesal Mistry: point, is that crypto investments have become really, really popular,
Jesal Mistry: so we see lots of demand for them. But it's
Jesal Mistry: also worth saying that crypto is very speculative, and actually
Jesal Mistry: very risky. For those of you that have some experience
Jesal Mistry: with it, will have seen how risky they can be,
Jesal Mistry: and go up and down. It also means that because
Jesal Mistry: they're not what we call regulated, so they're not overseen
Jesal Mistry: by professional bodies out there, like other types of investments.
Jesal Mistry: It also means that they're more open to things like
Jesal Mistry: fraud and to criminal activity. What we want to ensure
Jesal Mistry: is that the money that you put into your pension savings
Jesal Mistry: are looked after and is there for you when you
Jesal Mistry: need it, at the point of retirement.
Kia: Off the back of that, we've mentioned a lot about
Kia: different companies that your money can go into. How does
Kia: someone check what companies and businesses they're money is being
Kia: invested into with their pension?
Jesal Mistry: Yeah. The best place to check any information about your
Jesal Mistry: pension is actually to go online. Log in online, register for
Jesal Mistry: your account, and check the information that's available. You can
Jesal Mistry: do lots of great stuff on there. You can change
Jesal Mistry: your address. You keep track of your pension, and you understand
Jesal Mistry: how much it is, and you can see it grow.
Jesal Mistry: Then within that online account, you can actually go to
Jesal Mistry: the investment section and learn a little bit more about
Jesal Mistry: your investments, and see where they're invested. There's also some
Jesal Mistry: other further help that's there, in terms of the types
Jesal Mistry: of investments you have. We talked about investing responsibly, and
Jesal Mistry: I've covered some of the areas there, but there's more
Jesal Mistry: detail on that side of things as well. Then within
Jesal Mistry: that, there's what we call a Fund Fact Sheet. A
Jesal Mistry: really good place to go and see all of the
Jesal Mistry: information about your investments, all in that one place. It
Jesal Mistry: lists out the top 10 investments, for example. It lists
Jesal Mistry: out where it's invested, whether that's around the world, or
Jesal Mistry: in the types of investment that it holds. You can
Jesal Mistry: look at things like how well it's doing. And compare
Jesal Mistry: it against what we call a benchmark, where you can
Jesal Mistry: see how it's performing relative to other similar types of
Jesal Mistry: funds or similar types of investments in that space. The
Jesal Mistry: idea behind that fact sheet is a great starting point.
Jesal Mistry: It also gives you some information about what the fund
Jesal Mistry: is trying to achieve. Also online, you might see a
Jesal Mistry: link for a thing called Tumelo. Now that's a tool
Jesal Mistry: where you can see where you're invested, but it also
Jesal Mistry: allows you to go and see what sort of votes
Jesal Mistry: or what sort of resolutions are there that are available for you to
Jesal Mistry: express your views on. When they're talking to those companies
Jesal Mistry: or when they're voting, they can actually take into account
Jesal Mistry: your views and then vote on your behalf as well.
Jesal Mistry: Log in online and have a look at that, because
Jesal Mistry: that is the best place to get the information from.
Kia: I make it part of my financial habits. Every six
Kia: months to a year, maybe, to check in on my
Kia: pension.
Jesal Mistry: Yeah.
Kia: I find it quite interesting and quite fun. I know
Kia: people don't always find those things fun, but I think
Kia: it is quite fun just to see what's going on
Kia: and keep on top of it.
Jesal Mistry: Yeah.
Kia: You mentioned that, when you get your pension, workplace pension,
Kia: we often get put into the default fund.
Jesal Mistry: Yes.
Kia: If there is someone whose listening who says, " You know
Kia: what, I've heard everything that you're saying, it sounds great.
Kia: But I want to actually make a decision as to
Kia: where my money goes," how easy is it for someone
Kia: to choose their own investment funds for their pension savings?
Jesal Mistry: It's actually relatively straightforward to actually choose your own investment
Jesal Mistry: funds. The funds you have available to you will depend
Jesal Mistry: on the type of pension savings that you have. In
Jesal Mistry: a workplace pension, you generally have a range of funds
Jesal Mistry: that are often overseen by your employer, or a group
Jesal Mistry: of individuals called trustees who look after your interests in
Jesal Mistry: a pension scheme. If you have your own personal pension,
Jesal Mistry: then you tend to have a wider range of funds
Jesal Mistry: that are available. Quite often, hundreds of funds, so it
Jesal Mistry: can be more challenging to try to work out which
Jesal Mistry: of them are most appropriate for you. But again, there
Jesal Mistry: are tools available to help you understand different levels of
Jesal Mistry: risk, or different types of investments. You can go in
Jesal Mistry: there and filter that down, and start to look at
Jesal Mistry: the ones that might matter to you the most. Then
Jesal Mistry: finally, people who might have a SIPP, a self- invested
Jesal Mistry: personal pension. That is something that offers an even wider range
Jesal Mistry: of investments and can get quite complex in that respect.
Jesal Mistry: There's different types of investment that's available to you. Workplace
Jesal Mistry: pensions tend to include options designed to manage your savings
Jesal Mistry: for you as you get close to retirement, as well
Jesal Mistry: as individual funds. You've got the funds that are there in line
Jesal Mistry: with your own personal beliefs, but also there's some ready-
Jesal Mistry: made, for want of a better word, type of investment
Jesal Mistry: options that are available to you. There are target date
Jesal Mistry: fund range that change your investments as they get closer to
Jesal Mistry: retirement. A little bit like a default, but you can
Jesal Mistry: choose between different ones more in line with your own
Jesal Mistry: beliefs. Look at the types of investments that are available
Jesal Mistry: to you, and really go into that. I think it's
Jesal Mistry: worth just saying that some of those types of investments
Jesal Mistry: have different risk profiles. That's the most important thing to
Jesal Mistry: think about is where you are on your journey. As
Jesal Mistry: I mentioned earlier, the further you are away, the more
Jesal Mistry: risk you can potentially take because you've got a long
Jesal Mistry: way to go until you get a hold of your
Jesal Mistry: money. But as you get closer to retirement, really think about
Jesal Mistry: the risk you're taking because at the point you want
Jesal Mistry: to access your money, you don't want to be taking
Jesal Mistry: too much risk because it could fall in value.
Kia: I feel like we've all got some homework to do today. We're all going to go,
Kia: and log in, and check on our pension, and decide
Kia: what you want to do with your money, if you
Kia: did want to make a change.
Jesal Mistry: I feel like a teacher giving you homework.
Kia: Yeah, I feel like it's a teacher. But it's great. I feel like
Kia: this homework is good for us to really engage with
Kia: our pension and pay it some more attention. Jesal, you
Kia: have shared some incredible tips. But just to round up
Kia: this episode then, what are your top three tips for
Kia: anyone who wants to be more proactive with their pension
Kia: investment?
Jesal Mistry: More homework, I think.
Kia: More homework.
Jesal Mistry: Yeah, absolutely. Get yourself up to speed with your pension,
Jesal Mistry: understand how it works. Log in online, understand how much
Jesal Mistry: money you've got, where you're invested, and what your options
Jesal Mistry: might be. That's a great way to start to think
Jesal Mistry: about where you can move. You can get lots of
Jesal Mistry: information on websites and in your own accounts. Pension providers tend
Jesal Mistry: to also produce things like annual reports and statements that
Jesal Mistry: you can read, and it gives you a bit more of a
Jesal Mistry: sense as to what's going on with your pension scheme.
Jesal Mistry: So have a look at that. Secondary, just think about
Jesal Mistry: the impact of moving your investments around. There is a
Jesal Mistry: cost of buying and selling investments that just naturally happen.
Jesal Mistry: You just got to think through that, in terms of
Jesal Mistry: don't move it around too often. And also, just think
Jesal Mistry: carefully around when you start to move your money, don't
Jesal Mistry: make any jerk reactions. If you see the falling value
Jesal Mistry: of your money in the short term, then don't panic.
Jesal Mistry: Think carefully about how long you've got to wait until
Jesal Mistry: retirement and how your money's moving. Because if you sell
Jesal Mistry: at the bottom, you actually lock in those losses. We
Jesal Mistry: want to avoid that. Really thinking about how you move
Jesal Mistry: around your money and the options that you make. Finally,
Jesal Mistry: if you're not sure, if you're in a workplace pension and you're
Jesal Mistry: in a default option, that is something that tends to
Jesal Mistry: be looked after for you on the longterm. But you
Jesal Mistry: can actually go out there and get financial advice, and
Jesal Mistry: there's lots of support, as I said earlier, to help
Jesal Mistry: you with that. Saving into a pension is a really
Jesal Mistry: good thing to do, a really positive thing to do.
Jesal Mistry: Don't panic, stick with your pension, and really think about
Jesal Mistry: the types of decisions you've got to make, because actually
Jesal Mistry: this is a great saving vehicle for the longterm.
Kia: That's a great way to end it. Don't panic, asses
Kia: how much time you've got. And investment cycle waves, they
Kia: can go up but they can go down, so just
Kia: see if you weather out that storm, depending on how
Kia: long you have until you draw down on your pension. Jesal, this has
Kia: been an incredible episode. Thank you so much for sharing
Kia: those gems, when it comes to pensions. I feel like
Kia: every episode that we have on pensions, I become a
Kia: little bit richer and a little bit wiser.
Jesal Mistry: Thank you. It's been great.
Kia: Thank you so much, Jesal. Lots of great information to help us understand
Kia: pensions that bit more. Next time, we're talking weddings, how
Kia: to manage the cost and be creative with budget with
Kia: Ellie Austin Williams from This Gal Talks Money. I'd love
Kia: it if you could review the podcast, spread the word,
Kia: and help others get a little bit richer, too. Keep up
Kia: with the show on TikTok and Instagram at @legalandgeneral. Thank you for listening.
Kia: See you soon!