It’s not news that we’re in the middle of a climate crisis. But did you know it could have an impact on your pension too? Far from being only an environmental problem, it could actually affect the pensions of millions of us who have money tied up in pension pots.
Up until now, coal, oil and gas have remained solid investment options for pension providers. Now, with many governments across the world scrambling to up their investment in green energy – solar energy, biofuels and wind farms for example – the theory is that renewables will continue to attract growing levels of investment from major schemes.
So what does this mean for you? Is having a pension invested into green energy the way to go to get the best out of your money?
This guide will explore what you need to know about ethical investing and the pros and cons of having a pension invested into green energy.
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We update all our guides regularly. If you are researching pension fraud and we haven’t got an exact guide that helps you, keep coming back as we update daily.
How Ethical Pension Investment Works
Some pension schemes allow you to have a say in where your money is invested. We’re seeing a growing trend of ethical investment where people put their money where their morals are and invest only in companies that do good for the community or the planet.
Moving funds away from high investment in fossil fuels and towards renewable, green energy sources is one example of more responsible investing on an industry-wide scale.
Mis Sold Pension compensation pay-outs where £40m in 2018 and likely to grow substantially over the next decade according to the FSCS.
Save for Retirement, Save the Planet?
While ethical investment is no doubt good for the health of the planet, there’s some evidence to suggest that it’s good for your pension pot too. Speaking at an Association of British Insurers’ (ABI) conference in 2019, then Pensions Minister Guy Opperman said:
“The financial risks from climate change are too important to ignore… Pension schemes can identify investment opportunities which will make market-beating returns for members as we move to a low-carbon economy.”
But according to research by ShareAction, there’s still a lot of work to do in this area. The vast majority of the largest UK pension schemes are falling short on climate change duties.
So if investing in green energy or more ethical sources is important to you, you might want to consider taking your pension investments into your own hands.
Which Pensions Can Be Invested Into Green Energy?
There are different types of pension – state pensions, workplace pensions and personal pensions. When it comes to your state and workplace pensions, you’ll likely have very little say over where your pension fund is invested. That decision is left to pension providers.
One place where you can control where your investments go is personal pensions, specifically self-invested personal pensions (SIPPs). These put a lot of investment power back into your hands. With a SIPP, you can choose where your pension funds are invested – including green energy schemes like solar panels, biofuels and wind farms if you choose.
Pros and Cons of a Pension Invested Into Green Energy
While investing in green energy might seem like a no-brainer in some respects, it’s important to be aware that it doesn’t come without its risks. Let’s weigh up the pros and cons of having your pension invested into green energy.
Pros of Investing Your Pension in Green Energy
- They do good for the planet. Many people genuinely care about environmental and climate issues and would prefer to support businesses that share those views. This makes investing in green energy companies more appealing as they’re trying to improve access to renewable energy and develop technology in the area.
- Potentially good long-term investment. Renewable energy being on the rise globally, especially with government initiatives such as the Paris Agreement, would suggest that green energy isn’t going anywhere any time soon. This makes it a potentially lucrative investment opportunity if the sector continues to grow over time.
Cons of Investing Your Pension in Green Energy
- Some green companies are less profit-driven than others. While this might be great ethically, it’s not so great for return on your investment. The success of a sector as a whole doesn’t guarantee the success of an individual company, and they’re what your money is ultimately being invested in. Make sure you do your research and choose companies that have stable operations and valuable assets if you do want to explore investing your pension (or any of your money) into green energy schemes.
- Green energy can be volatile and unpredictable. Green energy might be high reward, but it’s also notoriously high risk. The success of green energy companies relies on coal, oil and gas giants – when the prices of these fuels drop, green energy also becomes less competitive.This means the value of your pension could take a substantial hit at any time, and there’s nothing you can do about it.
- Your money isn’t always protected. Due to the lucrative high returns possible with green energy, scammers have jumped on this as a money-making scheme. Some scammers will advertise ‘guaranteed’ high returns if you transfer your pension over to investments in green energy, and many of these schemes are unauthorised by the FCA and not covered by the FSCS – if your money is lost, that’s it. It’s gone. Make sure you’re aware of how to spot a pension scam before making any decisions.
Green Energy SIPP Mis-Selling
Green energy pension investments aren’t for everyone. With the high level of risk associated with investing in green energy schemes, they’re generally only suitable for:
- People who have had all of the risks explained to them by an advisor
- People with experience managing their own high-risk investments
- People who meet the financial threshold for this kind of high-risk investment
So if you think you may have been mis-sold a pension product involving green energy investments or the risks weren’t properly explained to you, seek professional advice. You may be able to make a claim for compensation if you were a victim of pension mis-selling.
Your pension is no different from any other long-term saving or investment. Before you make any choices about your pension, it’s worth speaking to an independent financial advisor to help you choose an investment option suitable for your financial goals and ethical beliefs.
First to Market Does Not Always Make the Best Returns!
The world of investment is littered with new markets which emerged as a great concept but took some time to bed down. Some might argue that investment in green energy is a prime example of this scenario. As a consequence this begs the question, is an early-stage investment in green energy appropriate for a pension fund? Is it sufficiently liquid? Does it carry undue risk?
If You Agreed to Green Energy Investment in Your Pension Fund, Does That Make You Responsible?
No. If we assume that you took advice from your financial adviser then in the event this was an inappropriate investment, they may still be deemed negligent and open themselves up to compensation claims. It would be different if you invested in green energy on an execution only basis, i.e. you took responsibility, but if it was suggested by your adviser, this is a whole different scenario.
How Can You Claim Compensation of the Fraudsters and Scammers?
Unless you are deemed an expert in investment (and pension fund investment in particular) your pension fund investments should be monitored by a regulated pension advisor. Unfortunately, we have seen many scenarios in years gone by where fraudsters and scammers have disappeared often with millions of pounds of pension fund investment. In this scenario, it is difficult, if not impossible, to track down those responsible for the fraud/scam.
Therefore when seeking the compensation, you may need to take a step back and look at who advised you to consider green technology investments in the first place – in particular those which turned out to be fraudulent/scams.
So, if your financial adviser was the one who suggested a particular green technology investment, which turned out to be inappropriate, then you may be able to pursue them for compensation.
Should You Use the Services of a Claims Management Company?
Pension investment and pension administration are complicated at the best of times. When you have to gather evidence of at best an inappropriate investment, at worst a scam/fraud, it is essential that you collate as much paperwork as possible.
All investments, whether pension fund or outside of your pension fund, should have a paper trail that includes advice sought, advice given and the terms under which investments were carried out. Therefore, many people prefer to employ the services of a claims management company to assist with collating evidence, reviewing the case and hopefully pursuing compensation.
How Do You Appoint a Claims Management Company?
When you have collated as much evidence as possible to support your claim, it is time to approach a claims management company for a review of your case. They will give an independent assessment of your chances of success, and if deemed a minimum 60%, they will likely apply to take on your case. The majority of cases for financial damages are pursued on a “no win no fee” arrangement.
This effectively removes the claimant’s liability to cover costs incurred by the claims management company in pursuing the case. However, in exchange, they will look to negotiate what is known as a “success fee”.
How Do Claims Management Companies Receive Remuneration?
The first thing to remember is that with a “no win no fee” arrangement, claims management companies will only be remunerated if your case is successful. The “success fee” is an arrangement whereby your claims management company will receive a share of any compensation awarded.
In effect, this is their payment/reward for a successful claim and tends to be in the region of 25% of the compensation received. This figure can vary from case to case, company to company, but it shouldn’t be too far from this ballpark figure.
Quick Mis-Sold Pension FAQs
Many UK pension customers have lost money after investing in burial plot schemes. Compensation claims can be made, but they aren’t straight forward – it will depend on the initial advice you were given and whether it can be argued it was bad advice.
One of the most prominent cases of mis-sold pension investments for UK customers in the last few years is that of The Resort Group. This offered customers the chance to invest in a holiday property in Cape Verde – primarily the Llana Beach Hotel and the Dunas Beach Resort. The promised potential returns were outstanding – up to 10% a year. But this should’ve simply served as a red flag.
The Germany Property Group is an unregulated property investment scheme. That means that it’s a scheme you can choose to invest your pension fund in but, as it is unregulated, you are doing so at your own risk.
A SIPP is a Self-Invested Personal Pension. As with all pensions, there is some potential for SIPP products to be mis-sold. Victims of SIPP pension scams can report them and claim compensation.
If you’ve received bad pension advice, you could be entitled to compensation of up to £85,000. You’ll claim this from the Financial Services Compensation Scheme if you’re eligible. You’ll need to make a claim for bad pension advice you’ve received.
How Can Money Savings Advice Help You With Making a Mis-Sold Pension Claim?
Here at Money Savings Advice, we have partnered with some of the UK’s leading Financial Claims management companies. They have already helped thousands of people claim compensation for a mis-sold pension and they can do the same for you.
Choosing an independent claims management company means they won’t proceed with a claim unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these claim management companies who can help you make a compensation claim, then click on the below and answer the very simple questions.