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Investment Choices For Your Pension Savings · A Little Bit Richer

• 0:02
  Kia: Hey, this is Kia. We love paying our pensioners some
• 0:05
  Kia: attention on this show. I want to make sure you're
• 0:08
  Kia: as passionate about pensions as I am, because it's so
• 0:10
  Kia: important to look after future you. Hopefully, spending your retirement
• 0:14
  Kia: on a sunny beach. Welcome to another episode of A
• 0:17
  Kia: Little Bit Richer, brought to you by my friends at
• 0:18
  Kia: Legal & General. We've done a few episodes on pensions. And
• 0:22
  Kia: today we're going deeper on investment choices, what types of
• 0:25
  Kia: organizations they're invested in, and the choices that you have.
• 0:28
  Kia: Anyone looking to align their investments with their values, this
• 0:31
  Kia: is the episode for you. Joining me to guide us
• 0:34
  Kia: through this is Jesal Mistry. He works in asset management
• 0:37
  Kia: at Legal & General, so he's part of the team who
• 0:39
  Kia: decides the best places to invest people's pension savings. Welcome,
• 0:45
  Kia: Jesal.
• 0:45
  Jesal Mistry: Hello, Kia.
• 0:46
  Kia: How are you?
• 0:47
  Jesal Mistry: I'm good, thank you.
• 0:48
  Kia: Good. I'm excited. As you heard, I love talking about
• 0:51
  Kia: pensions. One of my favorite topics, because it's not spoken
• 0:54
  Kia: about enough. Let's get into it. First thing's first. Could
• 0:57
  Kia: you explain what happens to pension savings and where the
• 1:01
  Kia: money actually gets invested?
• 1:03
  Jesal Mistry: The good news is that if you're in a pension
• 1:05
  Jesal Mistry: scheme already, then you're actually an investor. There are a
• 1:08
  Jesal Mistry: number of different investment options available. But if you haven't
• 1:11
  Jesal Mistry: already made a choice, then the pension provider is probably
• 1:14
  Jesal Mistry: doing that for you. In a workplace pension, that's called
• 1:17
  Jesal Mistry: a default option. They do this to grow your money
• 1:20
  Jesal Mistry: over time. It's really important that we grow your money,
• 1:23
  Jesal Mistry: because you need that at retirement to be able to
• 1:25
  Jesal Mistry: live off when you get to that point in time.
• 1:27
  Jesal Mistry: Now generally, the provider will invest your money in maybe
• 1:30
  Jesal Mistry: more higher risk investments earlier on. It's because you've got
• 1:32
  Jesal Mistry: a lot longer to go until you get to the
• 1:34
  Jesal Mistry: point of drawing your money out. It means that you
• 1:36
  Jesal Mistry: can see through all the ups and downs in investment
• 1:39
  Jesal Mistry: returns. Then in the default fund, what tends to happen
• 1:42
  Jesal Mistry: is that, as you get close to retirement, we reduce
• 1:44
  Jesal Mistry: that risk so that when you get to the point
• 1:45
  Jesal Mistry: of drawing your money out, your money's not moving around
• 1:47
  Jesal Mistry: in terms of its value. That means you can get more
• 1:49
  Jesal Mistry: certainty around what sort of value you might get at
• 1:51
  Jesal Mistry: retirement. But also, in the earlier years, there's lots of
• 1:55
  Jesal Mistry: different options available in where to invest your money. Some
• 1:58
  Jesal Mistry: of that might be in line with different risk profiles.
• 2:00
  Jesal Mistry: Some of that might be in line with more around
• 2:01
  Jesal Mistry: how you view investments and your own views.
• 2:04
  Kia: How does an investment manager like Legal & General decide what
• 2:07
  Kia: types of companies the money goes into? Are there specific
• 2:10
  Kia: industries or areas that you will avoid all together when
• 2:14
  Kia: it comes to pension funds?
• 2:15
  Jesal Mistry: There's lots and lots of different things that we have
• 2:17
  Jesal Mistry: to think about when we're looking to invest money on
• 2:20
  Jesal Mistry: behalf of savers that we look after. Things like regions
• 2:23
  Jesal Mistry: or countries to invest in. Whether that's in the US, whether
• 2:25
  Jesal Mistry: that's in emerging economies, those sorts of areas as well.
• 2:28
  Jesal Mistry: But also, we're thinking about savers' personal views. Many of
• 2:32
  Jesal Mistry: these are focused on things like investing responsibly. You might
• 2:35
  Jesal Mistry: hear the term ESG, which stands for environmental, social, and
• 2:39
  Jesal Mistry: governance issues. These are key things that we look at
• 2:42
  Jesal Mistry: with companies. You asked me about whether there are certain
• 2:44
  Jesal Mistry: things we avoid. Some of the options that we have
• 2:47
  Jesal Mistry: will avoid different types of companies, and that's called exclusion.
• 2:50
  Jesal Mistry: We apply exclusions to the funds that we have. These
• 2:53
  Jesal Mistry: might be companies that manufacture weapons, like land mines and
• 2:57
  Jesal Mistry: cluster munitions, for example. Companies that manufacture tobacco, those sorts
• 3:00
  Jesal Mistry: of areas. Companies involved in animal testing. And those that
• 3:04
  Jesal Mistry: commit human rights abuses. There's lots of other things that
• 3:07
  Jesal Mistry: we think about when we're removing companies. But different types
• 3:10
  Jesal Mistry: of funds have those different types of exclusions. It's really
• 3:13
  Jesal Mistry: important that you have a look at what types of
• 3:14
  Jesal Mistry: funds you've got, and really try to say whether they're
• 3:17
  Jesal Mistry: in line with your particular views, because each one of
• 3:19
  Jesal Mistry: us has a different way of thinking about our own
• 3:22
  Jesal Mistry: values and what we feel is appropriate for us. Now,
• 3:25
  Jesal Mistry: whilst exclusions might be considered to be a good thing,
• 3:28
  Jesal Mistry: in that you aren't supporting companies. In some ways, actually,
• 3:31
  Jesal Mistry: the flip side to that, because we own parts of
• 3:34
  Jesal Mistry: companies, we actually can influence how they operate and what
• 3:37
  Jesal Mistry: they do. By bringing all of that money together, we
• 3:40
  Jesal Mistry: have a greater influence on those companies. We can engage
• 3:43
  Jesal Mistry: with them, we can write to them, we can talk
• 3:45
  Jesal Mistry: to their management teams. And be able to say to them, "
• 3:48
  Jesal Mistry: Look, you need to operate more responsibly." You can have
• 3:51
  Jesal Mistry: a real influence on day- to- day activity within some
• 3:55
  Jesal Mistry: of these companies that really helps to move things forward.
• 3:57
  Jesal Mistry: By investing in companies, you can actually have a positive
• 4:00
  Jesal Mistry: influence over them. The other aspect to, I think, the
• 4:03
  Jesal Mistry: types of investments that we make is really trying to
• 4:06
  Jesal Mistry: invest in line with beliefs or particular faiths as well.
• 4:09
  Jesal Mistry: For example, we've arranged a Sharia compliant investment fund, so particularly
• 4:13
  Jesal Mistry: focused on supporting Muslims to save in their pension scheme.
• 4:17
  Jesal Mistry: Having those funds available means that they can actually join
• 4:20
  Jesal Mistry: the pension scheme and invest in line with their own
• 4:22
  Jesal Mistry: personal beliefs as well.
• 4:23
  Kia: Hearing that explanation about different things that pension providers are
• 4:27
  Kia: doing to make change, and the things that you can
• 4:30
  Kia: do as an investor by putting your money into companies
• 4:32
  Kia: to make changes, it makes you feel quite empowered.
• 4:35
  Jesal Mistry: Yeah.
• 4:36
  Kia: I feel very empowered right now, knowing that I've got
• 4:38
  Kia: pension savings that are being invested, and I'm actually making
• 4:41
  Kia: a difference. I think people knowing that and understanding that
• 4:44
  Kia: can really empower people to say, " Do you know what?
• 4:46
  Kia: I want to make a change, and I want to
• 4:47
  Kia: make an impact, and I want my money to go
• 4:49
  Kia: into things that I believe in," which is great, and
• 4:51
  Kia: I think that everyone should know and be aware of.
• 4:54
  Kia: Coming off the back of a little bit what you've
• 4:56
  Kia: touched on, what impact do pension fund providers have on
• 5:02
  Kia: organizations? I know you touched on it a little bit.
• 5:03
  Kia: But other impact do they have on organizations that they
• 5:06
  Kia: invest their money into?
• 5:08
  Jesal Mistry: We take our responsibility to look after people's savings very,
• 5:11
  Jesal Mistry: very seriously, and make sure that we're looking after them
• 5:13
  Jesal Mistry: in a responsible way. That means two things. That means
• 5:16
  Jesal Mistry: delivering the types of returns that people expect. But also,
• 5:19
  Jesal Mistry: investing in the types of companies that are investing responsibly,
• 5:23
  Jesal Mistry: run in a responsible way, and therefore then working with
• 5:26
  Jesal Mistry: them in that respect. We set some standards. That could
• 5:30
  Jesal Mistry: be anything from environmental or climate change type of standards,
• 5:33
  Jesal Mistry: all the way through to equality, gender equality, diversity within
• 5:37
  Jesal Mistry: organizations, and to how they should be run. We set
• 5:40
  Jesal Mistry: some standards with them. Then if they don't meet our
• 5:43
  Jesal Mistry: standards, we will vote against them. It's not all just
• 5:45
  Jesal Mistry: about voting. We actually then try to engage with them
• 5:48
  Jesal Mistry: a little bit more and support them. We have what
• 5:50
  Jesal Mistry: we call a Climate Impact Pledge. This is where we
• 5:53
  Jesal Mistry: are focused on the worst- offending companies across the world
• 5:58
  Jesal Mistry: from a climate perspective. We'll try to engage with those
• 6:00
  Jesal Mistry: and identify those that are most influential, that are maybe
• 6:03
  Jesal Mistry: not hitting the right areas, and work more closely with
• 6:06
  Jesal Mistry: them. We set up very clear minimum standards as to
• 6:09
  Jesal Mistry: what we expect from them, and where we expect them
• 6:11
  Jesal Mistry: to go moving forward. Within the Climate Impact Pledge, if
• 6:14
  Jesal Mistry: companies don't meet those minimum standards, we will remove them
• 6:17
  Jesal Mistry: from some of the funds that we invest in, and
• 6:19
  Jesal Mistry: we will vote against their management for everything else where
• 6:21
  Jesal Mistry: we can't remove them. It's not just smaller companies. These
• 6:24
  Jesal Mistry: are quite big, large, well- known names. ExxonMobil, the oil
• 6:28
  Jesal Mistry: and gas company. And the miner, Glencore, as well.
• 6:30
  Kia: I think often, we don't hear what things are going
• 6:34
  Kia: on behind the scenes, when it comes to our money and
• 6:36
  Kia: where it's going. There is a massive topic when it
• 6:40
  Kia: comes to investing, and I'll be remiss to not mention
• 6:42
  Kia: it. We see crypto everywhere.
• 6:46
  Jesal Mistry: Absolutely.
• 6:46
  Kia: Right. Everyone's all talking about crypto. A couple of years
• 6:49
  Kia: ago, we had a massive boom, where everyone was insistent
• 6:52
  Kia: that you'll become a millionaire overnight if you put money
• 6:54
  Kia: into crypto. When it comes to pension savings then, why
• 6:58
  Kia: isn't our money invested into crypto?
• 7:00
  Jesal Mistry: Yeah, that's a great question actually. It is exactly that
• 7:04
  Jesal Mistry: point, is that crypto investments have become really, really popular,
• 7:07
  Jesal Mistry: so we see lots of demand for them. But it's
• 7:09
  Jesal Mistry: also worth saying that crypto is very speculative, and actually
• 7:12
  Jesal Mistry: very risky. For those of you that have some experience
• 7:15
  Jesal Mistry: with it, will have seen how risky they can be,
• 7:17
  Jesal Mistry: and go up and down. It also means that because
• 7:20
  Jesal Mistry: they're not what we call regulated, so they're not overseen
• 7:23
  Jesal Mistry: by professional bodies out there, like other types of investments.
• 7:26
  Jesal Mistry: It also means that they're more open to things like
• 7:28
  Jesal Mistry: fraud and to criminal activity. What we want to ensure
• 7:31
  Jesal Mistry: is that the money that you put into your pension savings
• 7:34
  Jesal Mistry: are looked after and is there for you when you
• 7:36
  Jesal Mistry: need it, at the point of retirement.
• 7:38
  Kia: Off the back of that, we've mentioned a lot about
• 7:39
  Kia: different companies that your money can go into. How does
• 7:42
  Kia: someone check what companies and businesses they're money is being
• 7:46
  Kia: invested into with their pension?
• 7:47
  Jesal Mistry: Yeah. The best place to check any information about your
• 7:50
  Jesal Mistry: pension is actually to go online. Log in online, register for
• 7:53
  Jesal Mistry: your account, and check the information that's available. You can
• 7:56
  Jesal Mistry: do lots of great stuff on there. You can change
• 7:58
  Jesal Mistry: your address. You keep track of your pension, and you understand
• 8:00
  Jesal Mistry: how much it is, and you can see it grow.
• 8:02
  Jesal Mistry: Then within that online account, you can actually go to
• 8:05
  Jesal Mistry: the investment section and learn a little bit more about
• 8:07
  Jesal Mistry: your investments, and see where they're invested. There's also some
• 8:10
  Jesal Mistry: other further help that's there, in terms of the types
• 8:13
  Jesal Mistry: of investments you have. We talked about investing responsibly, and
• 8:16
  Jesal Mistry: I've covered some of the areas there, but there's more
• 8:17
  Jesal Mistry: detail on that side of things as well. Then within
• 8:20
  Jesal Mistry: that, there's what we call a Fund Fact Sheet. A
• 8:22
  Jesal Mistry: really good place to go and see all of the
• 8:24
  Jesal Mistry: information about your investments, all in that one place. It
• 8:28
  Jesal Mistry: lists out the top 10 investments, for example. It lists
• 8:30
  Jesal Mistry: out where it's invested, whether that's around the world, or
• 8:33
  Jesal Mistry: in the types of investment that it holds. You can
• 8:35
  Jesal Mistry: look at things like how well it's doing. And compare
• 8:38
  Jesal Mistry: it against what we call a benchmark, where you can
• 8:40
  Jesal Mistry: see how it's performing relative to other similar types of
• 8:43
  Jesal Mistry: funds or similar types of investments in that space. The
• 8:46
  Jesal Mistry: idea behind that fact sheet is a great starting point.
• 8:49
  Jesal Mistry: It also gives you some information about what the fund
• 8:51
  Jesal Mistry: is trying to achieve. Also online, you might see a
• 8:53
  Jesal Mistry: link for a thing called Tumelo. Now that's a tool
• 8:56
  Jesal Mistry: where you can see where you're invested, but it also
• 8:58
  Jesal Mistry: allows you to go and see what sort of votes
• 9:00
  Jesal Mistry: or what sort of resolutions are there that are available for you to
• 9:03
  Jesal Mistry: express your views on. When they're talking to those companies
• 9:06
  Jesal Mistry: or when they're voting, they can actually take into account
• 9:08
  Jesal Mistry: your views and then vote on your behalf as well.
• 9:11
  Jesal Mistry: Log in online and have a look at that, because
• 9:13
  Jesal Mistry: that is the best place to get the information from.
• 9:15
  Kia: I make it part of my financial habits. Every six
• 9:17
  Kia: months to a year, maybe, to check in on my
• 9:19
  Kia: pension.
• 9:19
  Jesal Mistry: Yeah.
• 9:20
  Kia: I find it quite interesting and quite fun. I know
• 9:21
  Kia: people don't always find those things fun, but I think
• 9:23
  Kia: it is quite fun just to see what's going on
• 9:25
  Kia: and keep on top of it.
• 9:27
  Jesal Mistry: Yeah.
• 9:27
  Kia: You mentioned that, when you get your pension, workplace pension,
• 9:32
  Kia: we often get put into the default fund.
• 9:34
  Jesal Mistry: Yes.
• 9:35
  Kia: If there is someone whose listening who says, " You know
• 9:37
  Kia: what, I've heard everything that you're saying, it sounds great.
• 9:39
  Kia: But I want to actually make a decision as to
• 9:41
  Kia: where my money goes," how easy is it for someone
• 9:44
  Kia: to choose their own investment funds for their pension savings?
• 9:47
  Jesal Mistry: It's actually relatively straightforward to actually choose your own investment
• 9:50
  Jesal Mistry: funds. The funds you have available to you will depend
• 9:53
  Jesal Mistry: on the type of pension savings that you have. In
• 9:55
  Jesal Mistry: a workplace pension, you generally have a range of funds
• 9:59
  Jesal Mistry: that are often overseen by your employer, or a group
• 10:02
  Jesal Mistry: of individuals called trustees who look after your interests in
• 10:05
  Jesal Mistry: a pension scheme. If you have your own personal pension,
• 10:07
  Jesal Mistry: then you tend to have a wider range of funds
• 10:09
  Jesal Mistry: that are available. Quite often, hundreds of funds, so it
• 10:11
  Jesal Mistry: can be more challenging to try to work out which
• 10:13
  Jesal Mistry: of them are most appropriate for you. But again, there
• 10:16
  Jesal Mistry: are tools available to help you understand different levels of
• 10:18
  Jesal Mistry: risk, or different types of investments. You can go in
• 10:20
  Jesal Mistry: there and filter that down, and start to look at
• 10:23
  Jesal Mistry: the ones that might matter to you the most. Then
• 10:25
  Jesal Mistry: finally, people who might have a SIPP, a self- invested
• 10:28
  Jesal Mistry: personal pension. That is something that offers an even wider range
• 10:32
  Jesal Mistry: of investments and can get quite complex in that respect.
• 10:35
  Jesal Mistry: There's different types of investment that's available to you. Workplace
• 10:38
  Jesal Mistry: pensions tend to include options designed to manage your savings
• 10:42
  Jesal Mistry: for you as you get close to retirement, as well
• 10:44
  Jesal Mistry: as individual funds. You've got the funds that are there in line
• 10:47
  Jesal Mistry: with your own personal beliefs, but also there's some ready-
• 10:50
  Jesal Mistry: made, for want of a better word, type of investment
• 10:52
  Jesal Mistry: options that are available to you. There are target date
• 10:55
  Jesal Mistry: fund range that change your investments as they get closer to
• 10:58
  Jesal Mistry: retirement. A little bit like a default, but you can
• 11:00
  Jesal Mistry: choose between different ones more in line with your own
• 11:02
  Jesal Mistry: beliefs. Look at the types of investments that are available
• 11:05
  Jesal Mistry: to you, and really go into that. I think it's
• 11:07
  Jesal Mistry: worth just saying that some of those types of investments
• 11:10
  Jesal Mistry: have different risk profiles. That's the most important thing to
• 11:13
  Jesal Mistry: think about is where you are on your journey. As
• 11:15
  Jesal Mistry: I mentioned earlier, the further you are away, the more
• 11:18
  Jesal Mistry: risk you can potentially take because you've got a long
• 11:20
  Jesal Mistry: way to go until you get a hold of your
• 11:21
  Jesal Mistry: money. But as you get closer to retirement, really think about
• 11:24
  Jesal Mistry: the risk you're taking because at the point you want
• 11:26
  Jesal Mistry: to access your money, you don't want to be taking
• 11:28
  Jesal Mistry: too much risk because it could fall in value.
• 11:29
  Kia: I feel like we've all got some homework to do today. We're all going to go,
• 11:32
  Kia: and log in, and check on our pension, and decide
• 11:36
  Kia: what you want to do with your money, if you
• 11:37
  Kia: did want to make a change.
• 11:37
  Jesal Mistry: I feel like a teacher giving you homework.
• 11:38
  Kia: Yeah, I feel like it's a teacher. But it's great. I feel like
• 11:40
  Kia: this homework is good for us to really engage with
• 11:42
  Kia: our pension and pay it some more attention. Jesal, you
• 11:45
  Kia: have shared some incredible tips. But just to round up
• 11:48
  Kia: this episode then, what are your top three tips for
• 11:51
  Kia: anyone who wants to be more proactive with their pension
• 11:53
  Kia: investment?
• 11:53
  Jesal Mistry: More homework, I think.
• 11:54
  Kia: More homework.
• 11:56
  Jesal Mistry: Yeah, absolutely. Get yourself up to speed with your pension,
• 11:59
  Jesal Mistry: understand how it works. Log in online, understand how much
• 12:02
  Jesal Mistry: money you've got, where you're invested, and what your options
• 12:05
  Jesal Mistry: might be. That's a great way to start to think
• 12:07
  Jesal Mistry: about where you can move. You can get lots of
• 12:10
  Jesal Mistry: information on websites and in your own accounts. Pension providers tend
• 12:14
  Jesal Mistry: to also produce things like annual reports and statements that
• 12:17
  Jesal Mistry: you can read, and it gives you a bit more of a
• 12:19
  Jesal Mistry: sense as to what's going on with your pension scheme.
• 12:21
  Jesal Mistry: So have a look at that. Secondary, just think about
• 12:24
  Jesal Mistry: the impact of moving your investments around. There is a
• 12:27
  Jesal Mistry: cost of buying and selling investments that just naturally happen.
• 12:30
  Jesal Mistry: You just got to think through that, in terms of
• 12:32
  Jesal Mistry: don't move it around too often. And also, just think
• 12:35
  Jesal Mistry: carefully around when you start to move your money, don't
• 12:38
  Jesal Mistry: make any jerk reactions. If you see the falling value
• 12:40
  Jesal Mistry: of your money in the short term, then don't panic.
• 12:43
  Jesal Mistry: Think carefully about how long you've got to wait until
• 12:46
  Jesal Mistry: retirement and how your money's moving. Because if you sell
• 12:49
  Jesal Mistry: at the bottom, you actually lock in those losses. We
• 12:52
  Jesal Mistry: want to avoid that. Really thinking about how you move
• 12:55
  Jesal Mistry: around your money and the options that you make. Finally,
• 12:58
  Jesal Mistry: if you're not sure, if you're in a workplace pension and you're
• 13:00
  Jesal Mistry: in a default option, that is something that tends to
• 13:03
  Jesal Mistry: be looked after for you on the longterm. But you
• 13:05
  Jesal Mistry: can actually go out there and get financial advice, and
• 13:07
  Jesal Mistry: there's lots of support, as I said earlier, to help
• 13:09
  Jesal Mistry: you with that. Saving into a pension is a really
• 13:12
  Jesal Mistry: good thing to do, a really positive thing to do.
• 13:14
  Jesal Mistry: Don't panic, stick with your pension, and really think about
• 13:17
  Jesal Mistry: the types of decisions you've got to make, because actually
• 13:19
  Jesal Mistry: this is a great saving vehicle for the longterm.
• 13:21
  Kia: That's a great way to end it. Don't panic, asses
• 13:24
  Kia: how much time you've got. And investment cycle waves, they
• 13:27
  Kia: can go up but they can go down, so just
• 13:28
  Kia: see if you weather out that storm, depending on how
• 13:30
  Kia: long you have until you draw down on your pension. Jesal, this has
• 13:33
  Kia: been an incredible episode. Thank you so much for sharing
• 13:37
  Kia: those gems, when it comes to pensions. I feel like
• 13:39
  Kia: every episode that we have on pensions, I become a
• 13:41
  Kia: little bit richer and a little bit wiser.
• 13:46
  Jesal Mistry: Thank you. It's been great.
• 13:47
  Kia: Thank you so much, Jesal. Lots of great information to help us understand
• 13:50
  Kia: pensions that bit more. Next time, we're talking weddings, how
• 13:54
  Kia: to manage the cost and be creative with budget with
• 13:56
  Kia: Ellie Austin Williams from This Gal Talks Money. I'd love
• 14:00
  Kia: it if you could review the podcast, spread the word,
• 14:03
  Kia: and help others get a little bit richer, too. Keep up
• 14:06
  Kia: with the show on TikTok and Instagram at @legalandgeneral. Thank you for listening.
• 14:09
  Kia: See you soon!