Ethical pension

Posie27

Hello,

I am self-employed and want to start a new pension. I want to invest in 'ethical' funds and for me the main focus is on environmental issues - i.e. investing in renewable energy etc etc.

I know this limits my options of funds significantly so I'd come to the conclusion that I might have to go down the SIPPS route to allow me to access all the suitable funds. However, I'm a complete novice investor.

Anybody been in a similar position and can offer any pointers? I was hoping I might be able to save money and avoid using a financial adviser but would that be a very bad move?

Thanks all!

Your_Hero

You don't have to use a SIPP to access ethical funds. For a complete novice, you should be more cautious about using a SIPP in case in invest in the wrong things that carry higher risks (such as direct equities).

Anybody been in a similar position and can offer any pointers? I was hoping I might be able to save money and avoid using a financial adviser but would that be a very bad move?

Depends how much you are looking to save. It may not be economical for you or a financial adviser to even take on your case.

Linton

For a list see http://www.trustnet.com/Investments/EthicalFunds.aspx

A number of problems with ethical funds....

1) Your ethics may or may not match those of available funds
2) There are not many ethical funds and they tend to be somewhat limited. For example you can get global or European ethical funds but not as far as I can see US, Far East or Emerging Market ethical funds. I cant see any ethical Small Company funds. So diversification may be a problem.
3) They tend not to be particularly well performing - perhaps the devil has the best tunes or focusing on ethics implies less focus on performance.
4) Specific environmental investments, eg renewable energy, tend to be high risk as they are tend to be in new small companies. Most new small companies fail. I suspect that many people who start environmental companies are more concerned about the environment than making money. Laudable no doubt but not a good basis for a pension.

So your choice. How much are you prepared to pay for your ethics? Tough choice but that's what it comes down to.

PS I see that First State has an EM and a Far east fund in the Ethical list. Their investment principles are "The Fund invests in shares of companies whose business takes into account sustainability themes". Is that sufficient? Though I would have thought most companies could satisfy that criterion.

Posie27

Thanks for the replies. I am willing to accept that my pension may not perform as well as one where ethics (of whatever form) weren't taken into account.

I have £45,000 to invest and will be paying in £500 per month.

xylophone

http://www.ethicalconsumer.org/buyersguides/money/ethicalpensions.aspx

may be worth a look.

https://www.moneyadviceservice.org.uk/en/articles/your-first-pension-the-options

https://www.moneyadviceservice.org.uk/en/articles/pensions-for-the-self-employed

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

https://www.gov.uk/new-state-pension/overview