Three positive outcomes when investing pensions in the UK

The UK government is focused on recalibrating the pensions investment landscape but what are the changes and implications for employers?

Over the past year or so, there’s been lots of news around the government wanting to get more pension monies invested in the UK.

That would clearly be a good thing for the UK economy, pumping more capital into homegrown industries and businesses, but what does it mean for savers?

In particular, what does it mean for employers who offer workplace pensions and the employees who save into them?

Three positive outcomes

As one of the signatories to the government’s Mansion House Compact, which set a voluntary target for pensions to invest more in private UK growth assets, we at NatWest Cushon are definitely behind this.

We see three big potential wins for pension savers:

Investing more in the UK helps create a better economy and society for investors to retire into.
Investing in private companies offers potentially better returns and member outcomes than publicly available assets.
Investing in UK assets can create emotional connections between a pension saver and their investments which creates more value for employers and savers.

This third point is what really excites us.

Although it’s rarely talked about, it’s the main reason we got on board and possibly the biggest real-world benefit to employees and employers.

Emotional connections create a virtuous circle

What happens when you help employees forge emotional connections with your workplace pension scheme?

They’re more likely to engage.

When members are better engaged with their pensions they are more likely to take action like increasing contributions, which means a greater commitment and interest in their pension savings.

And all of that together means better outcomes for employees, both in terms of their own pension pot and the society they retire into.

It’s a virtuous circle of improved savings habits, increased financial resilience and better preparation for retirement and the future.

Engagement is the key to unlocking value in your workplace pension scheme.

Employees get more out of the benefit you provide and appreciate you more for providing it.

And the more we can give people a sense of ownership and pride in their pension, the better the return on investment for your business.

UK investments are particularly good at sparking interest

Emotional connections can most easily be created in earnest where the assets members are investing in can be demonstrably proven to impact their lives and be a force for good.

It makes logical sense that tangible UK assets – like a pepper farm in Suffolk or wind farm off the Lincolnshire coast – engage people more.

When the infrastructure, products and services you’re investing in are on your doorstep, it’s much easier to recognise the value you’re creating and benefiting from.

And if you can see, touch or even taste an asset, like with the pepper farm example from our own portfolio, it makes that emotional connection even more vivid!

Is your pension provider investing in UK growth assets?

Not all pension providers are including these investments in their portfolios.

If you’re interested in the engagement potential and don’t want to miss out, why not ask your provider for more information on how they invest.

Being able to complete that virtuous circle for employees, from emotional connections with their pensions to better outcomes in the long run, will be so empowering for them, the government and UK society as a whole.

See also: Smart pension investments can supercharge employee engagement.