The secret life of pensions

It’s no secret most people know little about their workplace pension.

Our recent research shows 66% of pension holders admit to having little or no knowledge about pensions.

Plus, more than a quarter of workplace pension customers have no idea what happens to their pension money, or think it's saved in a bank account*.

Our Secret life of pensions content aims to engage, educate and inspire our workplace pension customers to know more about their pensions and covers key topics:

Where does my pension go?

When pension money leaves your employees' pay it quickly finds its way into carefully chosen companies, property, bonds and cash. It’s invested, in other words, which makes all our pension customers investors.

But our research revealed only 26% of workplace pension customers consider themselves to be an investor*. So, we created this short video to help our pension customers understand their pension is an investment.

Have you ever wondered what happens to your pension money when it leaves your pay packet?

It doesn’t just sit quietly in a pot somewhere.

It’s used to buy bits of companies, buildings and bonds.

Over time if these grow and do well, your pension does too.

So when you start taking your pension

... you’ll hopefully end up with enough money...

... to pay for the lifestyle you want.

But there’s another part of your pension’s life that you might not know about.

When Royal London invests your pension money in a company,

... you and other Royal London customers own a share in that company...

That means that we can influence how those companies are run on your behalf.

We can encourage them to operate in a fair and responsible way...

... and to look after their employees,

... their communities, and the environment.

So, your pension money doesn’t just work and grow for you.

It also gives you power to help change the world for the better. Who knew?

* Source: Royal London research, September 2020 – based on sample of 2,065 UK adults

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Why is my pension invested?

Investing gives pension money a fighting chance to grow in value over time. If the money was only held in cash savings, inflation could eat away at its value, over time.

We created the video below to help your employees understand the key differences between a savings account and a pension.

Do you know what makes your pension different to a savings account?

A pension is like a savings account you can’t touch for decades, right? Not quite. Pensions and savings are worlds apart.

For starters, when you pay money into your workplace pension, your employer tops it up too. And the Government pays in as well… yes, that’s free money!

All designed to reward you for doing the right thing by setting money aside for your future.

Unlike a savings account, where your money sits around doing not very much, your pension cash is invested.

And because you can’t use this money until you are at least 55, it has plenty of time to grow.

So, you may feel you can take more risk with your pension and invest in things that could give you a higher return than a savings account… like company shares.  

This is important, because if your money stays in savings, the chances are it won’t grow as much as it could in your pension.

It could even lose value if inflation is higher than interest rates. Let us explain what we mean by that…

Inflation is a general rise in prices over time, which can be bad news for your savings because as prices rise, the things you buy cost more. If this happens more quickly than the rate of growth of your savings, you won’t be able to buy as much.

Whereas investing in a pension gives your savings the chance to at least keep up with inflation, with the possibility of some extra growth on top.

That way, when you’re ready to stop working, your pension could have the power to pay for the lifestyle you want… what’s not to like?

Remember, investments can go down as well as up and you might not get back all the money you paid in.

If your employees invest little and often for many years, they could build up a surprisingly big pot. It’s a win for society if people have saved enough for their own retirements, too.

How is my pension invested?

There’s more to investing a pension than meets the eye. There are three “Rs” governing Royal London’s decisions over how we invest pension money: risk, return and responsibility.

We want to reduce risk, achieve decent long term returns and do it all in a responsible way. We created this short video to help your employees understand more about how we balance these aims. 

Would you like to know what Royal London does with your pension contributions?

Behind the scenes, there are teams of people working hard to grow your money into the retirement pot you want.

If you signed up to your pension through your employer,…

...chances are it’s invested in what’s called the ‘default’ option. The default is carefully designed to suit the needs of most people.

Your money is put to work and invested in a range of ‘assets’, things like company shares, cash, bonds and property.

Asset managers are in charge of how much money goes into each.

They look at how each asset class is performing in the short term,...

...as well as how they think they’ll perform in the future.

They make sure you’re invested in a wide range of assets – this is called ‘diversification’.

It helps to reduce risk, so if one particular investment is performing poorly you shouldn’t be so badly affected.

Another way to spread risk and aims to keep things growing is to invest in funds rather than directly in companies.

When our asset managers use your money to buy company shares, they put it in a fund, which often invests in several other funds.

These funds hold shares in a number of different companies.

The Royal London default option also gradually reduces risk in your final 15 years before retirement, to avoid unwanted drops in value and help you to plan.

This means shifting your money gradually out of riskier assets (like company shares)...

…and into more defensive assets as your chosen pension date approaches.

Nice to know your pension is as busy as you are, isn’t it?

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Is my pension invested responsibly?

At Royal London we don’t just think about returns.

When considering where to invest our customers’ pension money, we also think about what the companies that benefit from their pensions are doing in the real world - and how they’re doing it.

Our short video explains more about our approach to responsible investment.

At Royal London we are committed to be a Responsible Investor.

And that means looking at the bigger picture.

It’s about looking at Environmental, Social and Governance factors, or ‘ESG’ for short.

For example, we might look at a company’s position on environmental responsibility, cyber security, or boardroom diversity.

As part of this commitment, we’re asking all our asset managers to consider financially material ESG risks and opportunities when they make investment decisions.

And to be good stewards by voting and engaging with companies to improve the way they’re run.

We fully expect all asset managers who we choose to work with to be putting these principles into place.

To us, Responsible Investing isn’t about choosing values over value - it’s about managing risk, making better investment decisions, and generating better long-term results for our customers.

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How do you make my money responsible?

So that we can meet our commitment to responsible investing, we ‘engage’ with the companies our workplace customers invest in through their pension.

This involves discussing, questioning and helping to shape their policies on real world issues - things like CO2 emissions, global poverty or executive pay.

Responsible investment in action

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL.