Watch our pension webinars - Royal London (2024)

Hello and welcome to our show today on How Is My Pension Invested? Now, this is gonna be an exciting one. Really, really looking forward to this, to talk about this subject.

I'm joined by Paul from Nest. How are you?

I'm great. Great to be here.

Great to be here too. Ryan, where are you from?

I should have let you said your name, but anyway, Ryan, where are you from? Uh,

I'm from Royal London. Royal London. Royal London. And we've got the logos there, so you may recognise, um, the companies. So before we get into this, I wanted to say a big shout out to our partner this year.

Pay Your Pension some attention. It kicks off next week, a big, big campaign for around three months. Um, and that is for everybody to get involved in, and hopefully you'll find out more about your pension and you'll pay more attention to it. So look out for that coming soon.

So let's get to it. Well, my name's Johnny, and I've introduced myself.

My name's Johnny. I'm from Pension Geeks, the Pension Awareness Campaign.

This week we've got 15 shows coming to you. We're celebrating 10 years, 10 years of helping people with pension awareness. Pretty good.

That's why we've got the nice balloons. Very good. Um, but yeah, let's get straight into it. Let's get straight into it. So today, how is my pension invested? Looking forward to it. Okay.

Should we get started? James, do you wanna put the first graphic up? Paul, are you taking us away? Yeah,

So I, I'm gonna start off talking a little bit about, um, investment in, in general terms, and then we're, we're gonna hand over and go into a bit more detail. Okay. So the, the first thing to say is, you know, um, I'm, I'm from Nest.

We've got millions and millions of members, 12 million members, all of this money's coming in, and we've got choices about where that money goes. Okay. And traditionally, when people are saving for things, uh, they'd stick, they're stick it in the bank, or they might keep it in a jar. Um, um, what, what we want to talk about today is that's probably not great, uh, in terms of long-term saving.

Not shoving your money under the mattress. Not under the mattress, and the amount of money that people can build up over a savings career, your mattress is gonna be pretty, pretty bumpy. Okay?

So what we wanna do is put people's money to work so we can grow it much, much faster than you'd get in a savings account.

So we want to kind of stick it in companies, we wanna stick it in, um, buildings and, um, all sorts of kind of different projects, all with the aim of growing that money as fast as possible so people can get much higher incomes in retirement than if you just stuck it in a bank.

Nothing wrong with banks. Yep. For the short term, if you wanna access your money and you want it to be safe in the short term, great things to put your money in. But for long term savings, for, for pensions, investing’s the way forward, investments the way forward. Mm-hmm. Ryan, over to you.

So tell us where you are. You are, you are from then.

I'm, I'm from Royal London. Yeah. So I'm a senior investment development manager. Manager, yeah. At, at Royal London. Uh, probably the most meaningless title in the whole industry. You said that. I think it's a cool title. Well, I think it's a cool title. It can do. I mean, it's a title. It's, it's, it's a cool role.

So my role basically involves speaking to lots of different people across the industry. Yeah. So I get to speak to, uh, individuals like yourself, which is great. Yeah. Uh, financial advisers, uh, members, regulators. So that's all really, really good stuff. Yeah.

And I also get to have an input into the design of our pension investments as well. So very, very varied. And for me, I want a person like you and Paul doing that if you're actually speaking to people and know what people want and kind of got you ear to the ground room.

Absolutely. Absolutely. Very good.

Really good. Okay. Um, James, let's go to the next graphic.

The next slide. Okay.

We saw this slide before we came on air, and it scared me. It scared me. So, Ryan, take us away. What is this slide all about?

Okay, so this is, this is the investment patchwork quilt.

So everyone's got a patchwork quilt at home, and it, I can see where you got the name from. Uh, Is indeed. Says it. It doesn't, yeah.

And so investment patchwork quilt. So very, very basic.

What this is showing you is the last seven calendar years. Okay. Okay.

Last seven calendar years.

And what we're doing is we're ranking different investment types in order of performance. So the percentage number is the percentage return for each number.

Yes. Okay. Now each colour resembles a specific investment.

So these are all the different types of investments mm-hmm.

That you can invest in. So to give you a few examples, the orange box that's commodities, uh, the purple box, multi-asset.

So that is a blend of all of these different investments and, you know, if you are invested in the default investment solution. Yeah.

I, I'm, I'm, yeah. Exactly. Interested in that.

So that is representative of the journey you'll have had over the last seven calendar years. The, the, the purple box there. Now, whenever I talk through this quilt to people, there's, I always say there's two points that you can immediately draw just by glancing very, very quickly without reading the numbers.

The first one is that it looks truly horrific. Yeah. Uh, you know, it looks like one of my kids has swallowed some crayons and vomited everywhere.

Yeah. Um, but secondly, it really hammer on this point that it is very, very hard to pick a winner when it comes to investments, because you look at some of those investments and they're up and down like a, like a violent yo-yo all over the place. I can see that. I can see one, what was at the bottom is nearly at the top.

Exactly. Exactly. So, you know, you look at the purple, you look at multi-asset that is representative of the default fund's performance.

And I think the only thing you can see with certainty of looking at that is the consistency of that, you know, in terms of its ranking relative to other types of investments. Yeah. And, and that's not by any coincidence, because default funds and their very nature, they're very deliberate in their design. Okay. And, and I think one of the biggest tips that I would give to everyone watching today, you know, myself and Paul, we work in investments, we're consumed by noise all the time in investments. Mm-hmm.

My biggest tip would be ignore that short term noise. Yeah.

If you are invested in the default, trust the process and, you know, stay diversified, not having your eggs all in one basket. We've heard that phrase before. I've heard that one.

Absolutely. Absolutely. And that should deliver good outcomes. So we're seeing here, this, this purple solid, dark purple line. Um, well that is pretty much a line, isn't it? It's not powerful line yet. Is that, is that representing then the, the default, um, investments?

Absolutely. So as I said, you know, the, the, the multi-asset that is, that is a blend of all of those different types of investments. So obviously, you know, that's great people watching this, what may have come out the default.

They may have be self-selecting investments, which is fine if you've got the risk appetite to do that.

But for the majority of individuals, this will ensure more consistency over the long term.

Great. And maybe, uh, later on, um, we have got a chat function next to, uh, this video now where you can put, um, notes in the chat. But if you've got any questions, um, about investments pinging them, I said this since that pinging them over because Paul and Ryan will help in about 10, 15 minutes answer them. But that's really cool. That's really cool.

Um, she'll get to the next slide. Yes, indeed. Okay, James, next slide. Right.

I like this slide before you brought this slide up earlier and we're having to dress your rehearsal two favourite brands. I love Greg's and I love Disney.

Tell me more. Tell me more what I'm intrigued.

Okay. So I guess just before going into this, it's, it's worth pointing out, you know, Paul was talking about earlier about pensions not being, um, invested in a, a bank account. Yeah.

We actually did some research recently at Royal London. We, we spoke to 6,000 UK adults, and we found that one in 10 actually thought their pension was invested in a, in a bank account. Yeah.

That actually increases to 25% when you look specifically at that 18 to 24 age cohort. So I think all of us in the industry have, have, have got quite a job to do, I think, in terms of engaging the public.

I agree and educating agree.

And I think that's why these sessions this week I think are really good at doing that. Yeah, I agree. Uh, but in terms of this, obviously we, we've, we've just looked at that investment quilt, we've looked at some of the investments mm-hmm.

The different types of investments that, that go into that default and how they perform individually. Yeah. Um, you'll have seen some, some, um, tiles on that quilt specifically in relation to equities or stocks. I did,as we call 'em. I did. Absolutely. So you've got UK stocks, you've got overseas stocks, you've got emerging market stocks. Yeah.

It all sounds very, very scary. It does. I'm not gonna lie, it does sound scary, but

When you break it down, it's not because basically what equities or stocks are, is we're basically using pension money to purchase shares in companies on the stock market. And these are companies that everyone will recognize, you know, spanning a variety of different sectors. Okay.

So, so basically my pension, I love Disney, so I own a bit of Disney. Then with, with my pension, obviously

It depends where your pension is and obviously the, the companies will vary, but yeah. Very broad spread of companies.

It could do. It could, it could do. It could do.

Absolutely. And I was saying earlier, I love Greggs. So basically I'm doing this all a favour when I'm eating my sausage rolls, because yeah. Making everyone's family stronger. So with, with equities, you know, we generally categorise these as growth investments. So over the long term, these should ensure, uh, pretty good growth. Yeah.

But obviously with that it becomes a higher level of risk, so okay. What it generally means is the younger you are, so the further you away from retirement. Yeah.

The more exposure you'll have to these investments. Ah, okay. And, and we talked a little bit before about diversification yeah.

And not putting all your eggs in, in one basket. Yeah. I think with a lot of the default funds, nest, for example, when we give our members exposure to, uh, shares and companies, there's over 2,000 companies around the globe that, that we're investing in.

Yeah. So you, you, you're not necessarily gonna know which company's gonna be most successful for the next five, 10 years. Of course. Yeah.

But if you spread it out and invest in all sorts of different sectors of the economy and in different companies, even when some companies are doing kinda less well, you'll be invested in other companies that are doing really, really well.

So that idea of kind of default funds with well diversified, um, whether it's asset class or whether it's individually within asset classes, is really, really important to try and kind of deal with some of the ups and downs that you'll see over a long savings career. Mm-hmm.

Wow. Wow. Really interesting. Really interesting and exciting.

That to me makes pensions exciting, learning about that. Oh, absolutely. Yeah.

Rarely does. Okay, James, let's go to the next slide.

So we, we, we talked a little bit about companies. Yeah. And then increasingly what we are doing at Nest, um, because we we're, we're pretty big. Now we've got over 12 million members in the, in the UK. Wow. We're investing over £30 billion, and that's increasing by billions and billions.

30 billion, yeah.

Every year. Um, and that's grown massively since we started in, in 2010.

So we've started putting more and more money into kinda big projects like this kinda wind farm. So this wind farm, it's something that our members owe, and it's, it's off the coast of Lincoln Lincolnshire. It's not that far from, from here.

Well, I was gonna say, where the studio's based in Grimsby today. So this, this touches my heart when you were telling me, you know, not only are we invested in pensions, our pensions is like Disney and Greggs, but also locally to me. Yeah.

And, and, and this is great, this is a really good example of, of the sort of, um, some of the innovative things you can do once you start getting scale and getting lots of people bringing their money, money together. Yeah. So, so this, this wind farm is gonna generate loads of money for, for people's retirement.

Mm-hmm. But it's also supporting that essential transition from a world in which we, we generate electricity. Yeah.

From coal and gas to one where you're doing it from, um, renewables and, and, and clean, clean tech.

So we are getting our members kind of exposure to yeah. You know, the future in terms of how energy is kind of made. It's creating jobs locally.

Oh. A couple of my mates are working, doing, I dunno exactly what, but they've got jobs because of this.

It's huge. We, we, we took some of our members who, who are based in Grimsby, we took them out to, to see this wind farm so they can see their kind of like, their money in action's. Cool, cool. So, you know, not only are they generating, you know, cleaner electricity, it's also generating, um, income for them in retirement. Um, it's generating kind of, uh, more investment into local communities.

These are all kind of win-win for our membership.

That for me, when I'm thinking I'm putting money in my pension each month, it makes it even more exciting. Not only am I helping, you know, the area that I live in, grow and flourish, but also investing in technology and things like this that's gonna make the world hopefully a better place. And bring down energy bills as well. Yeah. All, all, all good stuff.

Even bringing that, yeah. You mentioned the thing, bringing bills down is good too. Yeah. Bring real down bills down is good too. Okay. Should we go to the next slide?

Yes, let's do that. Let's do that. Cool. Oh, very good. This is a very colourful slide,

So nice bit of a segue there. Um, what I want to talk about now is, is getting into the world of responsible investing. And, and I think the, the first point to make is that there are loads of different terms that have been branded around at the moment. And, you know, even the experts can't agree on what term to use in a lot of, a lot of instances. So what hope have we got? But that, that is nice,

Wouldn't it? Wouldn't the pensions industry?

It wouldn't if you couldn't make it complicated, wouldn't it? It wouldn't, it wouldn't. So, you know, people watching this video today, you know, you might have heard of ethical, you might have heard of ESG, you might have heard of sustainable and might heard of impact.

There's so many different terms out there. Yeah. Uh, but what I wanted to do is just, is just focus on the two terms you can see there. Um, ethical and ESG has actually become a bit of a catch for all term. Okay.

So we'll explore that in a moment. But if we think about ethical first, um, ethical funds or ethical investments, these are generally focused on excluding or screening out specific companies or specific sectors. So for example, uh, it might be funds that don't have any investment in companies involved in tobacco production, um, alcohol production, animal testing, etc, etc. Yeah. Um, ESG on the other hand, um, I mentioned that's become a bit of a catch for all term. Uh, it stands for environmental, social and governance. Okay. Now, in an investment perspective. So when we talk about ESG investing, what we're effectively doing is we're taking different environmental, social and governance considerations into account when we're making investment decisions. Oh, okay. So if you think about environmental, you know, that would be looking perhaps at a company's policies in relation to how it's tackling climate change mm-hmm. Waste management policies. Mm-hmm.

From a social perspective, it would be looking at the company's record on, on gender diversity Yeah. Labour rights. Yeah. And from a governance perspective, it's looking at things like boardroom diversity or how much executives are being paid, those type of things.

So it's been really proactive looking at those considerations and actually taking them into account when we make the investment decisions.

I like it. So going from, I was originally talking about our pensions being invested in like Disney and Greggs, then we're seeing, you know, we're actually doing good with it by off the coast of Grimsby, but then even have the power that we can change the way these companies are doing business and what they're doing. And we want to change.

If we're investing in them, we don't agree with them. We're moving our, our pension as where it's very powerful for.

Absolutely. Absolutely. And I think, you know, the next slide is, is on responsible investing. And you, you know, that again, has become a bit of a catch for all term, but when we talk about responsible investing, what we're generally meaning is taking ESG considerations into account within those investment decisions, as we've talked about. But also building on that point that Paul discussed earlier, in terms of, um, taking out active ownership seriously. Yeah. So things like, you know, the companies that we are invest in making sure that we vote at the AGM, we're changing decision changing decisions. Exactly. Making sure that we speak to the companies, engage with the companies, and try and influence positive change. That is a big, big thing.

And we can do this just by pensions. It's crazy. Absolutely. It's crazy. Okay.

Paul, we've got our last slide. Yeah. Take us away. So I was just gonna talk a little bit about what, what responsible investment means. Okay. Um, for Nest. And, and I think just building on those points, um, this is not about, you know, being moral or being ethical. Yeah.

This is all about better investment decisions to make more money for our members over the longer term. Of course. And I think the, the kind of key thing is our investment horizon.

So when we're thinking about long term, you know,

the markets often think one or two years in advance. Yeah. Our youngest members 16, you know, so we are thinking about an investment journey over the next 50 years.

So we can take these long-term views and think hard about how companies are gonna be successful over the long.

We're not telling companies how they should be running their business, but we are wanting to promote best practice. We want to talk about things like, um, fair pay or people being paid well, that's beneficial for our members.

It's beneficial for, for communities as well. But most importantly, this is about, um, a long-term, uh, sustainable in investment returns.

Wow. And one last point I'd make on this is, uh, we, we do have an ethical fund choice away from our default strategy.

And we talked earlier that defaults are horrible word.

It sounds really negative. Yeah. To us, the default fund is, you know,

it's a place where we're focusing all of our attention at Nest.

It's where most of our members are.

It's where we've got the most kind of economies of scale, and we can do the best job. Responsible investment is central to, to what we're trying to do, really for, for our members.

This is not something niche. Um, and increasingly we want to engage with our membership and hear about what they care about. Um, because that's a really, really powerful, when we go and talk to the CEOs or the chairs of these big companies we were talking about before, being able to say, well, you know, 12 million members, this is what they think about you. You, you should, you should take this seriously. These are your owners. Yeah. Um, it's not, you know, some abstract concept of who's owning the, it's, you know, UK workers are owning these companies.

Those companies should be operating in their interest, not, not somebody else's. I think that's the biggest thing for me.

The fact that responsible investment is standard within default solutions.

So for members, it's not a case that they're having to make active decisions and, you know, try and root out specific fund choices. And it's been done in the way, which isn't detrimental to financial return, risk, or cost.

So that is a huge plus.

So before this show started today, I, like I said, I'm in a default fund.

I thought I wouldn't be getting all 'em great things that you've spoke about today, being in a default fund. Well, you learn a lot, don't you? Absolute.

I know.

It's great. We need, we need better words though. Default is a, I know.

Let's change default. If we can do anything today, let's change the word from the default fund. Yeah. Okay. Well, we're gonna get your questions, um, to both Paul and Ryan in a moment.

But before we do, I wanted to show you, um, our Pension Awareness Day website. It's called Pension Awareness Day.

We started 10 years ago just doing this for a day, and it got so big of the campaign. We've been doing it, we do it for a week now.

Um, and we spoke to millions of people in that time, which is really exciting.

But for the campaign this week, we have 15 TV shows going on. Um, I wanted to show the webpage where you can book on two other shows.

So if you just slowly go, um, down the page, James, I can show you on the, the first page of the website. We've got a timetable. So yes, we've done two of the shows so far, but we've got 13 of the shows, uh, in the week that you can book onto, which are really, really good.

One of my personal favourites is we've got Steve Web guys come to the studio, um, to talk about the new State Pension, which is a very complex subject.

So we're happy you can click on that book on it, which is great. Um, but James, I wanted to show everybody, so we've had a lot of questions coming in.

If I can't see the show, well, if you haven't seen the show, you won't know about this.

But if you can't see your show or you've booked on other, any other shows, we're recording these TV shows. So you're allowed to go back and watch them at a later date, which is great.

They're gonna be on for the next 18 months or longer.

So you're allowed to keep watching there. Um, we've also got a, yes, it's in the Catchup video section on the site. Thank you, James, for showing that. You'll see the videos there this evening, around five o'clock.

You'll see both, both of you. Oh, really? For this video on there.

So you'll be watching that, I'm sure. And then we've got to, to compliment what, um, Paul and Ryan have said, we've got a useful, sort, uh, useful resource section with some great links in there to the government websites to moneyhelper, pension wise, um, and lots of other, um, useful links that will help through the shows that we have this week.

So make sure you go check that out.

Let's go to the q and as now I'm gonna get the iPad out.

You can get the iPad out, and let's see how this goes. Because Ryan, you're taking the wheel. I'm indeed.

I'm driving.

So we will see. We will see. So I'm gonna refresh the,

the iPad and we're gonna wait. Have we got any questions coming in, guys? Yeah, we have, we've got loads going in. Okay. Well, um, I'm not seeing them on the iPad. Oh, they're coming in. They're coming in. I knew we could. So, um, I'm gonna pass this over to, to Ryan. Ryan, fire away. What questions coming in first?

Okay, so first question coming in from Graham. Uh, so do Nest and Royal London offer the ability to invest in specific stocks? Also, are the funds actively managed by a fund manager? So I'll, I'll answer from a Royal London perspective, and then I'll, I'll hand over to Paul. So, uh, so Graham, um, what, what we're, what we're basically doing is we, we have specific funds within the default.

So the default investment solution is a, basically a basket of different funds.

Okay. So when we're going back to that investment quilt earlier, yeah.

You see the different investments. Um, each one of those was, was, was basically a specific fund. So you've got a head manager for each of those funds within that fund. Um, there will be a variety of different stocks.

So the fund manager is basically making the decision what to in, invest in.

Okay. And it's all basically compiled up.

Very good. Very good.

I'll, I'll just, yeah, quickly from, from their perspective, um, individuals can't invest in specific stocks, but what we do have in our default strategy, we've got these 50 target date funds. Okay. So there's one for every year that, that people, um, people could retire in. Um, and we invest in all sorts of different things in each of those target date funds. Okay. Plus, plus the fund choices.

And then we work with lots and lots of fund managers.

Some of the biggest ones around the world. Some of those are actively, uh, managing funds and some are tracking what are called indexes, where, you know, you just, you're just investing in the entire entire market. So, so it's a mixture depending on, um, what's best for particular asset classes, how we can get best value for, for our members. Brilliant.

Brilliant. Um, I, I'm sure this technology's gonna work.

And there's another question, I'm sure Ryan.

Oh, the flying. They're flying, they're flying through Johnny. Brilliant.

They flying through. Oh God. I had complete faith it was gonna work.

So, great question from Olivia next.

So when should you start investing in your pension? I'm 23. Not myself.

That's Olivia speaking. Okay. You're 24. So Olivia's 23.

And she wants to know when the best time to be investing in the pension would be.

Okay. Yeah. So I, I, I think we, I think we touched on, on this earlier definitely from, from, from my perspective, the, the earlier the better. Absolutely. I've heard that before. The earlier. Okay. Okay. Yeah. So why then what basically, in terms of the, the, the money that you put in the compound interest that you would get over, over the, over the long term? Yeah. Um, I mean, first of all, starting your pension journey at any age is a good thing. Yeah. Okay. You know, there might be some people watching who are in their forties and never started, so it's never too late to start. But what I would say is, the earlier you can start that

Is 23 Good age then. Good age. Yeah. And the, the other thing to add as well as part of the automatic enrolment reforms, uh, it's from age 22. Um mm-hmm. If, if you, if you stay within the pension scheme, you are, you are getting your money, um, you're getting loads of money from your employer and from, from the government through tax relief. Yep. So every year you miss out on that.

That's, you know, that's money you are missing out on, which is some people might think of it as deferred, deferred wages and stuff.

Yeah. Or to a certain extent it's free money. Yeah.

Brilliant.

And if people, I was gonna just say, if people wanted to know a bit more about how a pension works, the TV show we had this morning, uh, with Kate Smith, it talks about what is a pension and how does it work?

So you love to that again later in the catch up area. Um, yeah. Smash Smash, yep. They're still coming through. So, question here from James. Uh, Jeremy Hunt has proposed reforms that have the government taking 5% from default fund investments to invest in startup high risk companies. Okay. Um, is this happening?

So I think this is probably in relation to the mansion house compact. Yeah.

That, that, that was, that was recently announced. Yeah. Um, so this is all to, you know, I improve basically liquidity and get more money flowing into, you know, the unlisted type of types of companies. Yeah.

So there's different ways you, you can do that. So a lot of, um, companies signing up to that particular compact, some companies in terms of their default solutions are already doing that in other forms. Oh, right. But it's part of a general drive to really, you know, IM improve investment Yeah. Um, across the landscape in different things. Yeah.

So there's a lot going on. Yeah. I think it's, um, so, so we are investing a lot in private markets. So things like private equity, um, big equity infrastructure projects like the Wind Farm Show showed.

And the reason for that is it's, it's another source of return and we would expect to make more money for our members on, on that basis. Okay. Um, and, and government is trying to take away barriers for, for, for people to, to do that. So it's not, it's not quite right that the government's making pension schemes, uh, do something.

It's trying to encourage pension schemes to think about stuff beyond traditional investments like equities and, and bonds, which, you know, just is fairly sensible. I, I think from our perspective. Yeah.

Yeah. I mean, and that's the thing within default fund solutions, the, the good thing about 'em is that they are so diversified now in terms of the range of investments. You know, we've discussed quite a few of them today. Um, also commercial property. That's a, that's a great diversified. And again, you know, like Paul was talking about the, the, the wind forms earlier, it's another tangible type of investment. Yeah, yeah. You know, you see a build, you walk past a building Yeah. You, you know, you, you can relate to it.

I like that. Yeah. You know, again, in that basket with other types of investments. Yeah. It's great benefits.

No, great. Okay. Um, and how, I'm just looking for time, so Yeah.

We're still good for time. Okay. So there's a specific question that, that I'll take here because it's in relation to a Royal London strategy. Okay.

So I have a balanced lifestyle strategy with Royal London.

So that is the default. So we talk about default solutions. Yep. That is, that is the one, uh, Roland the state, that they regularly review this strategy to make sure it's performing as it should. How often do you review this? That's a good, and that is from Angela.

That's a very good question. Um, very well suited to answer that because I work in the team that is responsible for. Okay. Reviewing that. Okay.

Better be a good answer.

Yeah. So the, the, the answer is that it's ongoing. Okay. It's, we we're doing that all the time. There's a Oh, so it's not just a set time of the year. You do okay. No, no. So it's not like you get committed together once a year and you, you're put some sandwiches for them and yeah. You know, tick out is doing,

When we're talking pensions, and I am visualising what you just said, that would be the case, but it's not. Okay.

There, there is, you know, I you like any of this, you do have to have a formal governance structure in place. Yeah.

And there is some formal governance around that. Yeah.

In terms of quarterly meetings, but it's an ongoing process. Okay.

Now obviously pensions, as we've already talked about, are a long term investment. Yeah, absolutely. So, but we do have to monitor, we're monitoring short-term performance, we're monitoring long-term performance. Yeah. Uh, we're looking at customer outcomes.

So there's a lot that's going on in terms of that review process.

Brilliant. Brilliant. Well, great. It was Angela, was it? Who said that?

It was, it was. Good question.

Good question. Perfect. Okay. So another one here from, uh, Katie.

So on the topic of diversification yeah.

So would splitting my pension into investments that represent a global E T F tracker, e t f exchange traded fund. Okay. Um, so would that be enough, or do we need to diversify across asset classes too?

Um, and then in brackets asking as someone with 30 plus years till retirement, so that's from Katie. Katie

Is a proper pension geek, I would say here. She, she knows the stuff.

That's great.

Um, do you wanna take that or do you want me, shall I, um, I mean, I, I think the first thing is, you know, you we'd need to understand more details about kts kind risk appetite. Okay.

And, and things like that. Um, I think the things we were saying earlier on is a single asset class carries quite a lot of risk. Mm-hmm. Okay. Um, I mean, putting things into, on the whole equities over the last 150 years have massively outperformed things like bonds and, and cash. Yeah. But there'll be long, long periods where they, they'll underperform all, all sorts of things. Ah, okay. So when we started investing our members' money in 2010, there's this huge kind of equity rally where equities performed extremely well. Bonds performed pretty well as well.

But then the last couple of years it's been really, really poor. And before 2010, you had the global financial. Mm-hmm. So there, there is a lot of danger in sticking your eggs in, in one basket. And that term, again, don't sticking all in one basket, spread it about, I mean, even in two baskets. Because you look at, you look at last year, now, last year was a very strange, there was a lot of random stuff that affected markets. Yeah.

But it was a year that both equities and bonds fell.

And now, and that's what we saw in the news.

Yeah, absolutely. Absolutely. So that's very, that's pretty much due to, you know, inflation massively ramping up. And then there's, you know, the, the initial Russian invasion of Ukraine and all the market events and the political turmoil we had in the UK, the mini budget.

So a lot of particular scenarios that that contributed to that.

But I think it really does demonstrate why you need to have broad diversification. So not just your equities and bonds, but the other stuff that we've talked about earlier. You know, your commercial property and your real assets. Yeah, yeah, yeah. Yeah. Makes a lot of sense. And it was last, was it like a perfect storm? Was it once in the r a we saw it, was it 2010 we saw something like this? Did it all crash in 2010? Mm-hmm.

Is this, is this, were we expecting it? Or is it just a freak thing that this all happened last year, the last few years was with Covid and everything, you know, is it gonna get better or we gonna be like, it's

A, a lot of things came together at the, the same, at the same time. Okay.

The, the big challenge about kind of investment is that people don't know what's gonna happen year to year. Mm-hmm.

Which is why the whole kind of discussion about diversification, if you knew exactly what was gonna happen would be, uh, you wouldn't, you wouldn't be worrying about these things because you'll have perfectly predicted Perfect Plan.

Yeah. And then an element of diversification.

And I think it needs to be smart diversification. Yeah. Yeah.

It's not just spreading it out kind of everywhere. Yeah. Yeah.

Is recognising the inherent uncertainty about the future.

You don't know what's gonna happen Yeah. To China, US relations over the next 10 years.There all sorts of things, um, that they can play into it. But spreading your money in a sensible way, having a pension scheme, which is thinking really, really hard about how you can rebalance on, on a regular basis. Mm-hmm. Um, you don't just set it and forget about it. That that's, I think, the importance of having, um, pension funds who are really thinking hard about this. Yeah. Um, gives you a much better probability of doing much better than just sticking your money, uh, under the mattress. Mm-hmm.

No, I like it. I like it. So, um, any more questions? Yeah.

I've got a really, really good one actually from, uh, lc. Lc.

I dunno what lc stands for, but it's, it's from lc. Okay. Uh, so lc, uh,

I'm 30 and I've been saving into my pension for about 10 years. Okay.

I've always had my pension set at medium risk. Yeah.

Should I change this to high risk? And if so, for how long?

Soon as I'm still a way off retirement.

So that, that, that's a, that's a, that's a really good question.

So typically when we talk about default funds, default investment funds, uh, default funds are, are, are usually and typically set for a balanced attitude of risk for, for a balanced investor, middle, middle of the middle of the road. Um, but obviously, you know, everyone has a different attitude to risk.

Yes. I, yeah.

You know, even households.

Absolutely. Absolutely. So for some individuals, they will naturally have a, a higher attitude to risk, which will result in a more probably adventurous investment spot. I've got a high attitude to, to risk with my pension. I've, I've been Yeah.

Good, good. But equally, you know, someone might have a more cautious attitude. Attitude. My partner, she's got the off it to me, she's very cautious. Yeah, yeah, absolutely. That's good diversification in your household. Oh, well that's why we did it. Obviously. That's obviously why we did it.

So, I mean, it, it, it can, it can differ, but it's really, really important that we recognize the fact that all of us as individuals can have different attitudes to risk. So it's not to say, you know, just because you are you young, you're automatically gonna have a more adventurous attitude to risk.

You might well do. Um, what I will say is the, the younger you are, the more you can afford to take risk relative to someone being older and approaching

Their retirement. Because if the investments didn't do so well, you've got longer to recover. You can recover. Okay. You've got absolutely. And then if you're either end of the scale, if you're really risky Yeah.

Didn't do so well.

Absolutely. Yeah, it makes sense. But to, to go back to LCS point there, you know, if, if, if you really did want to check your, your attitude to risk, there are a number of tools to, to use out there. So for example, Royal London have one on our website. Okay. But you can go on there, you answer about 12 different questions. Brilliant.

And it'll actually tell you what your attitude to risk is.

And then that can perhaps be used to tailor to more of a, a suitable investment solution.

That would be good to know, because I just automatically went to, I'm a risky, I'm a, I'm a risk, I just, I automatically went that.

But probably doing them questions I might not be, I just assumed that I was. So it's more, it's a more of robust way of finding out, I guess. Yeah.

I like that. Very good. Very good. I, I like that question, Elsie. Very, very good. Um, any more? Yeah.

Okay. So we've got one here. So, does investments mean that potentially you could lose your entire pension? That is, if it's invested badly?

See, that is a, a question I've never thought of, but a blooming good one. Yep.

Okay. Do you wanna tackle before?

Um, you two are sweating a bit?

So, so, Well I think that the, the, the first thing to think about is, so, so at the moment we're living through quite a period of high inflation and cost of living crisis. If you were sticking your money in the bank, you would be losing money all the time. In, in kind of, kind of real, real terms. Um, if you are invested in really, really, really high risk things where you're putting everything into a single stock or, or a single kind of kind of asset class there, there's a possibility that company could go bust or, um, you know, if it was a single country, that country could default on it on, on its debt.

Um, so yeah, it is a possibility that you could lose, uh, a lot if not all, all of your money. Oh. So you can actually, you're not gonna say, guys, we're gonna pull the pluggage 'cause you're going to, we're gonna try and save you a little bit. It's if you've taken that decision.

Yeah.

Potentially. If, if you, if you've bought a government kind of debt, it's, Russia was a really good example. Mm-hmm. We, we stopped investing in Russia, um, because it was impossible to access any of that, any of that money. Um, so, so I, I think that just kind reinforces the point that if you stick everything in one thing, you are running a lot of risk. I mean, the return could be amazing, but are you prepared to, to take the downside, having a balanced portfolio where you invest in all sorts of different things and those, the balance of those investment change as you get older and you have different priorities, I think, um, I think we'd say that that's probably the sensible solution for most people most of the time. Yeah. Okay.

Okay. Yeah.

Okay. I've got a great line. I keep saying through these TV shows and everything that you are hearing today is guidance. It's not advice. So do not do anything that we say here, but the, the, the guidance that both of you're giving is brilliant.

Brilliant. Absolutely. Absolutely.

Great. Um, I'm just looking at the time. We've got 10 minutes left.

We've got 10 minutes. Okay.

So a questionnaire from kc, pretty generic one.

So regarding ESG and sustainable investments, et cetera, um, is there any way to know, uh, where and how my money is being invested?

So what I would say to that is obviously depends on what pension you're using, what, what default fund solution outside the default funds. Uh, but my, my advice there would be to look on the what company's website. Okay.

Look at their fact sheets. There's, there's plenty of stuff out there, uh, that's more engaging than your traditional old school fact sheet that wasn't very engaging. Okay.

But there's a lot of new stuff coming out in looking to really improve the transparency of where you're invested.

And there's been some great campaigns over the year as well that are trying to increase that transparency really. So, you know, people can actually look at not just what is the name of the default fund or name of the funds you're invested in, but lifting the bonnet up and actually looking at what type of companies and sectors in that. It's really cool. Long way to go, I think. But, you know, I think it's something that our industry is really trying to correct. So, so, so nest everybody in, um, in our default strategy can see all of the companies, uh, that they're invested in.

And we have like the descriptions of what that company does. Yeah.

What kind of sector they're in. So, so we are really, really keen that people understand. Yeah. Yeah. It's their money, you know?

Yeah. We, we are trying to do, um, people

Forget that sometimes that it, it is their money.

It is not the fund manager's money. It's not our money.

It's our member's money where we put it. You know, people, people want to know.

I mean, people, we, we, we are acting on their behalf. We should let people, we should be as transparent as possible to let people know where their money's going, and then we want hear from them. If, if people have, have concerns. It's really, for me, it's really refreshing today, hearing from both of you, coming from the pensions industry and be able to talk like this.

It kind of makes, pensions are very boring. No two ways about it.

But both of you today have made it, you know, they're very exciting. Yeah.

Really, really exciting. Yeah.

I, I, I think too, too often it's been investment and finance is something that are for other people. Yeah. And it's about, you know, people making an enormous amount of money for people who already have an enormous amount of money. Yeah, yeah, yeah. Yeah. Automatic enrolment. It's, it's a, it's been a revolution in this country in terms of, you know, over 80% of the population now has access to an occupational pension.

All of their money is going into all sorts of kind of things in this country and, and around the world. It's, it's, it's really important what happens to, to it because, 'cause it's important in a way that the economy would perhaps just happen to people in the past. Mm-hmm. Whereas now people are part of the economy.

They own the companies. Yeah. Um, it, it, I think, I think it's really powerful on, on that last bit about the, there's some stuff about kind of fossil fuels as well. Yeah.

There's lots of debate about should you be completely outta fossil fuels. Yeah.

And, um, our ethical fund, for example, there is no investment in, in fossil fuels for our default strategy. We are, um, we've tilted away from the highest emitters of, of carbon yeah.

And put more money towards, um, those companies which are kind of driving this transition to a, a sort of a net zero world, which, which needs to happen, um, for, for, for everybody.

We are not in a place where we think it makes sense to get out of every single kind of fossil fuel company.

A lot of those companies are gonna be part of that transition.

So we want to encourage them to go further and faster. Yeah.

And where those companies just aren't, you know, aren't, aren't stepping up to, to, to, to the plate. We will then exit from, from those, those companies.

So you are essentially putting pressure on them people to sort of like, we have to make more of an effort with this transition.

We're not just saying it. Yeah. We've got to do otherwise. Yeah.

Yeah. I mean, very good. You, you've, you've seen what's happened with, with the weather just here kind of, kind of recently. Yeah, yeah, yeah.

This is climate change is affecting, uh, you know, investments right now.

Yeah. How do we make sure our members, um, kinda money is, is managing that risk that, that they're facing and how do we, um, help those companies and, and kinda make more money from, from the transition to a green economy? I think it comes back to that point we were talking about earlier where responsible investing is now becoming standard. Yeah. You know, within, within, within default fund. So this isn't, you know, it isn't a case of having to self-select and go off and find your own investments that do this.

Which it was, uh, what was it a bit ago? Like that if you wanted to be a it's quite niche, I think.

Yeah. It's becoming more wide scale now. So Yeah. At, at Royal London, very, very similar to, to what, what Paul said actually as well. So we're, we're doing the tilting in terms of looking at companies in terms of carbon emissions, so tilting towards those with better credentials in that particular area, but not completely disinvesting from certain sectors because of the power of, you know, engaging with these companies and voting AGMs. It's a very powerful thing. Yeah. Yeah. And you do see, um, adverts, you would've seen like fossil fuel companies now when they put their TV ads on TV, the side of showing wind turbines that we see there, they're showing, you know, that was us then. This is us now. Yeah. We're on that. Yeah. Yeah.

That's, that's, that's a very powerful, uh, great question from Damien, which I think represents a, a particular issue at the moment or what we've had over the last year.

So Damien's question is, I am in a default low risk two years from retirement.

Mm-hmm. So two years to go till Damien's retirement age. Okay. Uh, the last two years my pot has collapsed and is now less than I put in.

Should I stay with it or move to a higher risk fund?

So I think the caveat there, obviously we can't give advice in terms of specific situations like

Yeah. We're just guidance

It. Exactly. Exactly. But I think what, what, what Damien is pulling out here is a, is a real issue that has happened particularly over the last year when I talked to the fact that it's so sad. Like it's an awful it is story. So, you know, we, we, you know, we've talked previously about pensions being long term yeah.

But for people with two years to go to their retirement, it's, it's not that that long term. Yeah. And what we've, what we've seen over the last 18 to 24 months is both equities and bonds fall at the same time, which really doesn't usually happen.

As I said, that was a very bizarre set of circ*mstances that, that, that, that led to that. Uh, what I will say is we, we, we are starting to see recovery in those different investments that, that have fallen over that, that the last 18 months. And again, in terms of that, that question about do we need to take more risk? Mm-hmm.

Yes. That's potential one route.

But I think individuals need to understand that, that there are different attitudes to risk out there. So for some, okay.

A high risk strategy won't be appropriate because, you know, as Paul mentioned earlier, we, we don't know what will happen next year and so forth.

Yeah. So it could be in a worse situation than

Now. Potentially now. Potentially.

Okay. Wow. Wow. Okay. Um, so we've got about three minutes left.

Should we squeeze in one last question if that's okay? Yep.

Okay. So this is, this is a good one. I think, um, quite a lot of individuals watching today might, might get a lot of benefit from, from this, but is there a website people can use to compare funds offered by pension providers? That's good, man.

So I recently changed how my pension is invested and there were similar funds, but with different fees. Yeah.

So I think what I will say on this is that there are a lot of tools and a lot of websites out there. Yeah. Um, the majority of which are aimed more at, I would say financial adviser audience. Okay.

For financial advisers to then dissect and digest all of that. Yeah. And, and, and really because it can get, it can get quite complex. Yeah. I can imagine.

When, when, when you're, when you're looking at different things, obviously when you go and provider websites, you know, you, you will get the range of different investment solutions there that you can offer. You can look at the charges, you can look at where they're invested, very, very transparent. Um, in terms of one website that has everything on it.

I'm not aware of one from, from sort of like the general public perspective in terms, in terms of looking on. But what I will say is it, it needs to happen going forward as an industry. Okay. So I think the more transparency we can show in this, well if, if people wanting it. Yeah.

Absolutely. Yeah. Yeah.

Absolutely. I mean the, the, the last bit of that question talks about fees.

Yeah. Um, and there's lots and lots of debates about kind costs of kind of pensions and costs of investing. Mm-hmm. And I think healthfully, the debate is moving much more about kind of value for money. Yeah. Yeah. We, we wanna move away from a kind of a race to the bottom to the cheapest is the best. At the same time it's very, very easy to be, be charged a lot for, um, for, for services that are, that aren't that great. Mm. Um, with the occupational pensions schemes that a lot of people will be in, um, there are caps on how much is spent, um, on, on, on the fees.

And that's a, um, 75 basis points. So it's, you know, it's pretty cheap compared to to to what it used to be. Okay.

But people like rural London and, and nest much, much, uh, kinda less than that. And we're still able to have investment strategies that are including all sorts of, you know, quite, you know, these are expensive asset classes, but through the kind of benefits of lots and lots of people coming together,

I'd say that you buy

And having a lot of, and having a lot of assets and stuff, we can drive costs and charges down across the industry.

So scale is really, really important in, in, in a lot of this.

That doesn't mean that small schemes can't, can't be successful, but it's harder to get access to some of the asset classes we've been, we've been talking about it's harder to do diversification as well. Um, so it's important to look at fees, but you need to look at lots of other things, uh, as well when, when, when making those decisions.

Brilliant. Well, I've learned so much today about how my pension is invested. I hope all of you I've learned as much as I have. I'm sure you have.

And enjoyed it. Paul, you've been fantastic. Paul from Nest,

Ryan from Royal London, you've both been brilliant. You did great with the, the question, I'm sweating there.

That's rolling. Well, it's good. It is good. And just to let you know, all the questions were sent in by Rachel and Noel in the background, so you guys had no clue. What we're gonna ask you today is all from you.

So thank you for joining us. We've got another session today at three.

If you haven't registered to it, you can go to the pension awareness day.com website where you can register for other. And that show there, thank you for joining us.

We've loved seeing you. We've seen both of you too. We'll see you soon. Bye.

Cheers.

Bye. Cheers. Thanks.