This month, we’ve made significant updates to our plan information to help you better understand your pension.

This article was last updated on 16/10/2024

It’s our mission to build pension confidence and create a world where everyone can enjoy a happy retirement. This month, we’ve made significant updates to our plan information to help you better understand your pension.

Your Annual Statement is ready!

Have you seen your annual statement for the 2023/24 tax year? You can find it by logging into your account otherwise known as your “BeeHive”, clicking on ‘Account’ and then clicking on the ‘Resources’ tab. Your Annual Statement includes your current pension savings, projected retirement income and your annual management fee. You can read, download and save your statement straight from your BeeHive.

If you have any questions, please reach out to your BeeKeeper.

Keep reading to find out about this month’s product updates.

Fund performance chart and table

We’ve introduced two new plan performance graphs in our customers’ BeeHives’. These changes are designed to give you a better understanding of how our plans work. This way you can have greater confidence the plan you’re invested in works best for you. You can check them out today by logging into your BeeHive online, selecting ‘Account’ and then ‘My Plan’ or in the app by tapping ‘Account’ then ‘Plan information’

How pension investments work

Both the performance chart and table show how the fund your pension is invested in has grown over time. However, each provides a different way to understand that performance. Before explaining what the chart shows, let’s take a moment to look at how investing your money works.

Like all pensions, when you invest in one of our plans your money’s used to buy units in it. If you own 100 units in your plan and each unit is worth £1.25, then your pension balance is ^{_lower_earnings_limit}. However, the unit price changes daily and reflects your plan’s performance and value on that day.

The unit price itself is made up of the value of the underlying company shares in your plan. For example, if your plan invests in an index which includes Apple and the value of Apple falls, this impacts the unit price of the plan. So, if the unit price drops to £1.10 and you have 100 units, your pension balance becomes £110. Unit prices go up and down, and reflect how the market is doing on any given day. Essentially, if the value of the companies in your plan goes up or down, the units your money’s invested in also go up or down and as a result, the value of your pension balance will reflect this.

The fund performance chart

The chart shows what would have happened to ^{_money_purchase_annual_allowance} if you invested that money in one of our plans five years ago. As you interact with the performance chart, you’re seeing how much the initial ^{_money_purchase_annual_allowance} worth of units was worth at that point in time.

The time frame covers five consecutive 12-month periods. These run to the end of the most recent quarter of the year. As time goes on, the chart will update to show performance information to the end of the recent quarter when that data becomes available.

What’s included in the fund performance?

It’s important to note that the fund value shown may include embedded fund fees that are part of the plan’s annual management fee. These are costs paid to the fund manager to invest your money and manage the fund. The fund value excludes any personal contributions or government top ups made to your pension.

How does the chart work?

You can hover your cursor over the chart to see the value of a fund at different points in time over the past five years. As you move across it, the date, fund value and percentage will automatically update.

The fund performance table

This table gives a simple percentage of how much the fund made or lost in a given calendar year. The figures shown are after any fund charges and taxes have already been deducted. This enables you to compare the fund’s performance to any years before or after.

Please note, there’s limited historical data for our Impact Plan or our Fossil Fuel Free Plan due to when these plans launched and the available data.

Benefits of performance information

Increased confidence

We’ve made important information about our funds’ performance more accessible to help you understand the impact on your pension balance.

Past performance isn’t an indicator of future performance. However, seeing how a fund’s performed historically may offer insight into how it could perform in future. Showing performance over a five-year period should be long enough to see how the fund performed throughout different market conditions.

Performance and your plan’s objective

Different pension plans have different investment objectives. It’s important to remember that a plan’s performance shouldn’t simply be compared to other plans but also to its own objectives. For example, the objective of our Preserve Plan is to preserve the value of your pension balance rather than grow it. It may be most suitable for anyone approaching retirement and planning to make substantial withdrawals from their pension in the near future. It aims to preserve your money by investing in assets like bonds which are lower-risk but are also expected to return less compared to assets like equities. This means this plan’s growth at one point in time may have been less than a plan that invests with a different objective. Whilst the Preserve Plan may still see growth, that’s not its main objective.

Where to find the plan performance information

You can find the performance chart in our app or by logging into your account through our website. When logging in online click on ‘Account’ then ‘My Plan’ or through the app by tapping ‘Account’ then ‘Plan information’. To see the performance chart for our other plans, scroll to the bottom of your plan page and select ‘View plans’ then ‘Plan info’.

Let us know what you think

We want to continue improving our plan information where possible to empower our customers to invest in a pension that’s right for them. This year, we’ll be tackling other aspects of our plans information to make it easier to find key details and understand what they mean. If you have any thoughts about our latest changes or ways we can improve the rest of our plan pages, we’d love to hear from you. Let us know what you think by emailing feedback@pensionbee.com.

Future product news

Keep your eye out for our next product blog or catch up on previous posts. We’re looking forward to spotlighting more of our handy features and free financial tools plus we’ve got lots of great new updates in the works we’re looking forward to bringing you this year. We’ll let you know what they are, how they can help you save for a happy retirement and how to get started.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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Is the Shariah Plan right for you? Here's what you need to know

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Is the rising cost of living impacting pension saving?

What's the real impact of the cost of living crisis on our pension savings?

How to top up your State Pension

Find out how making extra National Insurance contributions could increase your State Pension.

This article was last updated on 21/02/2025

Did you know you could increase the amount of the State Pension you receive by making extra National Insurance (NI) contributions? When the ‘new’ State Pension was introduced in 2016, the government announced that you could plug gaps all the way back to 2006. The deadline has been extended three times since the announcement, and you now have until 5 April 2025 to top up.

How does this top up work and would it help you?

The current full State Pension is £221.20 a week (2024/25) and to receive the full amount, you’ll need 35 qualifying years of NI contributions. However, if you’ve taken time out of the workplace, for example to raise a family or care for older relatives, you might have gaps in your NI contribution history. If you have missing contributions from 2006-2016 you can plug the gaps by making extra NI payments.

Bear in mind that if you’re over the age of 73, you’ll be receiving or eligible for the ‘old’ State Pension so you won’t need to top up.

How much does it cost?

Making up for one year of missed NI contributions will cost you up to £907.40 (2024/25), which will add about £302.64 per year (£5.82 per week) to your pre-tax State Pension. There might be occasions where you don’t need to pay the full amount. For example, if you only have two months of missing contributions, you’ll only pay £151.20 (2024/25) to make up the full year.

However, the rate you pay depends on which year you’re topping up:

Tax year	Rate
2006/07 - 2019/20 (inclusive)	£824.20 (£15.85/week)
2020/21	£795.60 (£15.30/week)
2021/22	£800.80 (£15.40/week)
^{_tax_year_minus_three}	£824.20 (£15.85/week)
2023/24	£907.40 (£17.45/week)
2024/25	£907.40 (£17.45/week)

If you don’t top up your State Pension you’ll get an amount proportionate to the number of years you have full NI contributions for. For example, if you have 30 years of NI contributions, then you’d get an amount worth 86% of the full State Pension. This works out at £190.23 per week (2024/25).

How do I top-up my National Insurance?

You can top up your NI in two ways via the gov.uk website:

It’s worth noting that you can’t pay to increase your State Pension beyond the maximum of £221.20 per week (2024/25).

Do I need to top up my State Pension?

Find out if you have any NI contribution gaps by checking your National Insurance record on the DWP website. Even if you have missing years, you may still qualify for a full State Pension. You can check this by using the government’s State Pension forecast calculator.

When not to top up your State Pension

Certain benefits automatically come with NI credits, so you may find that there are no gaps in your NI contribution record, even though you weren’t working. If you were in receipt of these benefits you may not need to top up your State Pension. Examples include:

if you were on Child Benefit;
if you were a grandparent looking after children;
if you were on maternity, paternity or adoption pay;
if you were on statutory sick pay; or
if you were unemployed and actively looking for work.

If you were ‘contracted out’ of the Additional State Pension, before the changes came into effect in 2016, then you’ll need to check whether topping up can help. You can find out more information on the gov.uk website.

Samantha Downes is a financial journalist and has written for most national newspapers and women’s magazines. She is also the author of two finance guides and has set up the Substack PumpkinPensions to help guide people looking to save more towards their future.

Risk warning

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How to save for the future on an unpredictable income

Saving for the future with an unpredictable income might seem tricky, but with flexible pensions, smart tech tools, and a solid plan, it’s easier than you think – and your future self will thank you!

How to deal with a gap in your pension savings

Learn about the implications of not saving enough for retirement and find out how you can plug the gap.

This article was last updated on 01/10/2024

Saving for retirement is a long-term goal, so plenty can happen during your lifetime that might cause you to fall behind on your pension savings.

If you find yourself with a pension shortfall - when the amount you’re currently saving isn’t enough to reach your retirement goal - you’ll want to get back on track as soon as possible.

Do you have a pension income shortfall?

First, you’ll want to check if you’re on track to reach your retirement goal. The easiest way to do this is to use our pension calculator.

You’ll need to provide:

retirement income goal;
current age;
expected retirement age;
current pension pot value; and
current level of contributions.

If the projected income figure is less than your goal, then you’ve got a pension income shortfall.

How much do you need to save to catch up?

If you’ve used our pension calculator, learning how much you need to increase your contributions to meet your retirement income goal is simple.

Simply adjust the ‘personal monthly contribution’ slider until the projected figure meets your goal figure.

Here are some possible scenarios.

Your age	20	30	40	50
Retirement goal	£17,000/yr	£17,000/yr	£17,000/yr	£17,000/yr
Current pension pot	^{_tax_free_childcare}	^{_isa_allowance}	£40,000	£80,000
Current contributions	£150/mo	£200/mo	£250/mo	£300/mo
Shortfall	£2,8^{_pension_age_from_2028}/yr	£3,598/yr	£5,349/yr	£6,623/yr
Needed contributions	£210/mo	£300/mo	£490/mo	£850/mo

‍The above scenarios assume a retirement age of 65 and an employer contribution of £150 per month. We haven’t included additional state pension income.

Bear in mind that you’re likely to earn a higher salary as you get older, so you should be able to increase your contributions over time. Your employer should also be able to pay in more as your salary increases.

Options to boost pension savings

If you need to make up for a shortfall, there are plenty of ways to go about it.

Join a workplace pension

It’s now a legal requirement for employers in the UK to offer a workplace pension to their employees. New employees should be auto-enrolled into this scheme, but it’s possible for the employee to opt out of it. You can’t join your company pension until you’re 22 and earn at least ^{_money_purchase_annual_allowance} per year. If you’re 21 or under and earn ^{_lower_earnings} or more in a tax year (2024/25), you have the right to opt into your workplace pension scheme. If you choose to opt in, you’ll be entitled to the minimum level of employer contributions. If you earn less than ^{_lower_earnings} you can still ask your employer to give you access to a pension to save into. They have to do this, they just don’t have to make any employer contributions

If you’re working but haven’t joined your employer’s workplace pension scheme, doing so will help you get back on track. Not only will you receive tax relief on contributions from the government, but your employer will also contribute at least 3% of your qualifying earnings.

Start a personal pension

If you’re self-employed or unable to join a workplace pension for another reason, you can always start your own self employed pension.

You can choose between a defined contribution pension or a Self Invested Personal Pension (SIPP). Even though you won’t receive employer contributions (unless you own a Limited business), you’ll still receive tax relief from the government.

If you’re unsure which is right for you, you might want to speak with a financial adviser first.

Combine your old pensions into one

If you’ve changed employers, you’ll likely have multiple pension pots dotted around the place. It’s easy to lose track of these pensions or forget about them altogether. For example, you might move home and forget to tell your pension provider. This isn’t uncommon. It’s estimated more than 4.8 million pension pots are missing in the UK with this figure expected to grow by 13^{_personal_allowance_rate} by 2050.

Keeping track of multiple pensions can be time consuming, if you even know where to look. And given that different providers charge a different range of fees, you might find yourself paying more than you need.

Combining your pensions into one easy-to-manage plan that has a single fee structure could save you money in the short-term, as well as reducing the amount of ‘fee erosion’ over the long term.

Before moving your old pensions, check if there are any exit fees or other penalties that could make it worth keeping them where they are.
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Delay retirement

The longer you pay into your pension, the more chance it has to grow. And thanks to the miracle of compounding returns, the amount that it grows increases over time.

So delaying retirement by even a couple of years can significantly increase your retirement income. Here’s an example.

Let’s take a 55-year old with a pension pot of £150,000, and see how their retirement age could affect their income.

Retirement age	Annual retirement income
65	£8,824
^{_state_pension_age}	£9,307
^{_pension_age_from_2028}	£9,828
68	£10,390
69	£10,999
70	£11,^{_state_pension_age}1

And this assumes they never pay into their pension again after the age of 55, which is unlikely.

Delaying retirement can have lots of benefits. For more, read 6 reasons why you should delay taking your pension.

Plan for a more modest retirement

Increasing pension contributions isn’t always possible, and it can become costly if you leave it until later in life (as we’ve seen). Depending on your retirement goal, you might find that you can actually live off less without seeing much impact on your standard of living.

A recent Which? survey suggested that couples enjoying a moderate retirement living standard spend £43,100 a year. That’s £21,550 each. So, depending on how much you planned on saving for each year of your retirement you may decide you don’t need to increase your contributions as much as you thought or at all.

However, if you can increase your contributions - even just a little - you might find it worth doing. Because no one knows what the future brings, and saving more now could pay off just when you need it.

Consider other ways of earning retirement income

While it’s sensible to have a good pension in place, you don’t necessarily have to rely on it exclusively to earn your retirement income.

Other ways of earning income in retirement include:

Cashing out of other investments
Selling collectable items
Renting out property
Downsizing your home
Selling a second home
Releasing equity in your home (comes with risks)
Taking on part-time work

Planning ahead for retirement

Retirement is one of those things that seem a long way away until you get there, by which time your options to address any shortfalls will be limited.

If you do find yourself with a gap in your pension savings, don’t worry. The above tips should help you get back on track, even if you need to adjust your retirement expectations a little.

When it comes to pensions, the best time to act is when you’re young. The next best time is today.

Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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How PensionBee is representing the diversity of their customers

Take a look at our new customer campaign and learn how we’re representing our customers across our marketing communications.

Love is one of our five PensionBee values, driving everything we do from the way we communicate to the way we design our product. As we’re on a mission to make as many people as possible pension confident so that everyone can enjoy a happy retirement. We’ve long been dedicated to celebrating the diversity of our customers and showcasing the different experiences within our community.

After reading a report from Anything But Grey about the marketing industry’s age-related blind spot, I wanted to ensure we continue representing a core demographic of our customer base, the over 50s, in our next marketing campaign. To date, we’ve featured customers in their 50s enjoying a campervan as well as walking along the beach, and this time set out to showcase customers at home enjoying their everyday lives. It was important to us that we were visualising and reflecting back what people belonging to that age group actually look like and not just a stereotype.

In January, we sent a call out in our newsletter looking for enthusiastic customers to be a part of our marketing campaigns. We were inundated with responses and a team of us spent time speaking to customers and getting to know their stories. We selected six people to join our existing bank of testimonials, which seeks to amplify our customers’ voices in the media and share their experiences of the pensions industry. Of our new additions, half are over 50. Whilst this shouldn’t be a surprising statistic given the industry we’re in, we’re really proud to be representing this age group across our website, digital assets and offline in an authentic way.

Moira, Fiesal and Ed, who are all over 50, are three of our 240k Invested Customers. This genuine representation helps add authenticity and honesty to our marketing. They were used in the campaign alongside Suzette, Alex, Kezia and Jackson, her French Bulldog! We wanted to showcase how our customers are both preparing for and enjoying retirement.

We’re committed to highlighting the real people that are combining, contributing and withdrawing from their pensions with PensionBee. Take a look at our website and digital ads to see them there.

We’d love to hear from you! If you’re interested in sharing your PensionBee experience with the press or appearing in future campaigns send an email to press@pensionbee.com.

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How PensionBee is making pensions affordable for every saver

We’re introducing a new fee structure, designed to reward the most dedicated savers.

How pension contributions could stop you from losing 30 hours of free childcare

Find out how pension contributions could help you keep 30 hours of free childcare.

How our BeeKeepers continued working through lockdown

Our BeeKeeper, Ollie, reflects on the experience of helping customers be pension confident during a pandemic.

March 2020 was a daunting time for everyone, including at PensionBee. Lockdown number one was in full effect, working from home was a new experience for many of us, and no one knew when we were going to see our loved ones next.

Adjusting to working from home

When the initial whispers of a lockdown were happening, we began quickly looking at a company-wide work from home arrangement. One of the key challenges we faced was to make sure we could continue to take care of our customers’ pensions while keeping their information secure. And we needed to continue to do our jobs at the level that our customers have come to expect.

Working from home isn’t a new concept at PensionBee. Many of us have been working from home infrequently for many years. But we’d never had our whole team work from home, and no one had done it for such a long period of time.

Working from home isn’t a new concept at PensionBee

It was challenging at first. In the office, it’s so easy to share information and ideas, help each other with specific challenges, or just relax over a coffee break together. Collaborating over Highfive, our video conferencing software, wasn’t new but it took some getting used to as our only option.

Our technical team pulled out all the stops when it came to making life easier for everyone. Within a day or two, the whole team was up and running from their dining tables, home offices and - in a few cases - their coffee tables. We were able to stay in touch with our customers without missing a beat, reassuring everyone involved that this storm will pass, and that we’d be there to look after their pensions so they could focus on what’s important – their health and wellbeing.

Staying safe and reassuring customers

We maintained a ‘business as usual‘ approach while making sure that everyone was safe and adhering to the lockdown rules. We created a Critical Task Unit (CTU), allowing a few select members of the team to remain safely socially distanced while working in the office to process the post and paperwork we often receive from providers. Fortunately, we were able to contact dozens of providers that normally have a paper-based pension transfer system, and convince them to process hundreds of transfers paper-free. This helped cut down on the amount of unnecessary paper used, along with the number of people needed in the office to get through it all.

The rest of our BeeKeepers and Nectar Collectors adapted to working from home well. They made full use of virtual meetings, using secure networks to take care of customers’ accounts, and answering customer emails, calls, and live chats without missing a beat.

From day one, they were managing to answer over 9^{_personal_allowance_rate} of customer calls and were available on email and live chat

We had a huge influx of customer communication at first. Understandably, many customers were concerned about the volatility of the stock markets and how their pensions might be affected. The BeeKeepers took working from home in their stride. From day one, they were managing to answer over 9^{_personal_allowance_rate} of customer calls and were available on email and live chat for any customers that just needed some reassurance that their future retirement was being carefully managed.

Looking to the future

By the time the pandemic started to settle down, the whole PensionBee team had adapted well to our new way of working. Some people have chosen to work from home permanently, moving closer to their families or accelerating planned moves out of the capital. Despite the challenges we faced, PensionBee hit several significant milestones, including reaching £2 billion of AUA in July of this year and listing on the High Growth Segment of the Main Market of the London Stock Exchange back in April. We were even able to celebrate this huge achievement remotely with each other over video calls (thanks to bottles of bubbly we received in the post!).

We’re a family at PensionBee. And after the year that everyone’s had, not seeing your family for a long time has been tough - especially when you’re so used to seeing them every day. We’ve done our utmost to keep the hive buzzing over the last 18 months, and we’ll continue to look after our customer’s pensions, and each other, as the last of the lockdown restrictions lifts and we can finally get back to a bit of normality.

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How open source software can enable digital transformation

Business leaders are increasingly choosing to use open source software in their technology infrastructure. We explore some of the key ways open source software can be a driver of digital transformation.

Adapting and innovating are essential for any company to remain competitive. A business’s digital transformation strategy is a key part of enabling it to be nimble in responding to changes in its industry and building compelling products and services.

Open source software (OSS) now lies at the heart of many companies’ technology infrastructure. Its transition to a pervasive foundation for software development over the last 30 years has been remarkable. The time has long passed when only proprietary software solutions would factor into a business’ thinking about what software should comprise their tech stack. A report by Red Hat, a provider of OSS to large companies, surveying over 1,000 businesses across the world, revealed that ^_rate of companies agree that OSS is important to their infrastructure.

Business leaders are showing confidence that utilising OSS in their business operations isn’t just a viable option but in fact, the preferred way to drive their business forward, with the same report finding that open source will make up more of the software solutions these businesses use in two years’ time than proprietary software.

As OSS becomes increasingly critical to the operations of businesses of all sizes we take a look at a few of the essential ways it can enable and drive forward digital transformation.

Speed of innovation

OSS enables businesses to innovate quickly by giving them a starting point for their software solutions that they can build on. This could be particularly beneficial to start-ups and small businesses who could start with community-developed OSS to see whether a solution is right for them without the long-time lock-ins and potentially prohibitive costs often seen with proprietary solutions.

Businesses can also develop prototypes more rapidly, as OSS often provides generic solutions that a team can easily customise for their needs. With access to the source code, businesses are able to build, test and modify different versions of a software product, to understand whether one provides the benefits and efficiencies they’re looking for and more swiftly iterate a new version if it doesn’t.

Greater control

An inherent property of OSS is that it can be freely modified. Businesses, therefore, can have more precise control over the features and capabilities of their end product. As a business’s needs change they’re free to develop a solution that best serves their end goal rather than relying on proprietary vendors to develop features they’re looking for (if they ever will) first. This puts the power and timing to deploy features and fixes further into the hands of businesses.

Additionally, a business may find an open source solution which provides 8^{_personal_allowance_rate} of the capabilities they require meaning they simply need to modify the remaining ^_basic_rate to suit their particular needs. In this way, businesses will find that many open source solutions have already done much of the heavy lifting in terms of development and helpfully provide a suitable foundation to build on top of.

Agility

Deploying OSS enables businesses to be flexible and react more quickly to changes within their industry. Its customisability enables unique solutions to be developed that could give businesses a competitive edge in the marketplace and allow them to more easily modify the software infrastructure that supports their business model and processes.

Further, businesses don’t need to make long-term commitments to proprietary solutions and can therefore change up their approach and pivot towards new priorities with greater ease when implementing new or adapting existing digital technologies.

Security

The security and stability of a piece of software is, of course, a paramount concern when designing a digital transformation strategy. As OSS is publicly accessible, it’s open to anyone to view the source code, increasing the chances of identifying security and reliability issues and consequently, the speed with which fixes can be deployed. This can help to better ensure the integrity and security of the software solutions that are powering a business’ transformation.

Community development and engagement

The open source community is hugely engaged with the projects it develops. Its community’s a big driver of the tremendous value OSS provides and one which champions transparency and collaboration. Businesses can draw on not only the expertise offered by their own employees, but the expertise of the large open source community. Some businesses make a point of “giving back” to the communities that build the software they use, either by making code contributions or helping with writing documentation, answering questions or related activities.

Can open source alone bring successful digital transformation?

Whilst open source’s already driving the digital transformation goals of businesses effectively, simply making the choice to use OSS alone may not allow businesses to immediately reap the potential benefits it can bring. Red Hat advocates for what it calls an open transformation approach. They suggest that, in addition to open technologies, open processes and open culture are key to ensuring successful digital transformation. Open processes concern identifying and removing barriers and developing better ways of working within the business and an open culture seeks to ensure teams effectively communicate and work together as they navigate changing circumstances.

As development in each of these areas progresses together, they can maximise the impact that implementing new or adapted technologies can have on business goals.

Open source - a digital driver for progress and success

The choice to use open source-based solutions in digital transformation strategies is becoming ever more attractive to businesses. The adoption of open source continues to be a strongly positive one. Business leaders are indicating that the decision to deploy open source as part of their infrastructure isn’t just one of the cost savings but rather because they see that it offers legitimate advantages over proprietary solutions and can enable a faster time to market for products and services.

Open source can allow businesses to scale up, adapt to changing market needs and create innovative, unique solutions, without having to sacrifice the high levels of security and stability necessary to underpin digital operations.

Risk warning

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How important is financial independence?

Read what changes can be made in society; including childcare costs, and access to domestic abuse support in order to achieve financial independence for women.

For women in the UK, financial independence can be vital, sometimes lifesaving. And the best way to ensure it is by pushing for progressive government policy. Women’s financial independence seems mainly defined as having enough money to make your own decisions and meet various spending or savings goals. Just ‘financial independence’ by contrast, is often defined as having enough passive income to not work.

Why the difference? Potentially a bit of sexism (although passive income’s a big no-no on the equality front), but mainly because of the barriers many women face to accessing finance that gives them that independence of choice to live their lives comfortably, fairly and with dignity.

Debt burdens, childcare costs and access to domestic abuse support funding are just some areas in which social and governmental reform will have the effect of creating more financial independence for women, who bear the biggest burden of all three.

Debt

The Women’s Budget Group says: “These households, who already face economic hardship, may need to borrow for necessities (e.g. food, shelter) and yet are often also forced to pay the most in interest rates. By contrast, households on higher and more stable incomes can often borrow more cheaply to fund consumption (e.g. holidays or luxury items) and asset accumulation”

Being debt-free or having manageable debt payments is largely thought to be a key indicator of financial independence. We’re often told debt’s a personal problem and the result of poor budgeting or money management. In fact, it’s a structural issue that has greater impacts on lower-income households, the majority of which are female.

Charities such as StepChange has successfully campaigned for more debt relief provisions from the UK government. In November 2022 the government introduced a breathing space scheme, called the Debt Respite Scheme, which means creditors are obliged to freeze interest and charges, along with pausing debt collection activity, when people tell them they’re struggling with debt problems.

Find out more about StepChange campaigns and how to get involved.

Childcare

More tireless campaigning can be seen from Pregnant Then Screwed, which was one group responsible for the somewhat-welcomed announcement in the UK’s latest Spring Budget that from September 2025, working parents of children under the age of five will be entitled to 30 hours of free childcare per week.

“We are elated to hear that the childcare sector will now receive a significant investment”, Joeli Brearley, Founder and CEO of Pregnant Then Screwed said. “However, we’re concerned that the money pledged isn’t enough to reduce costs for parents sustainably.”

The average cost of sending a child under the age of two to nursery is £138.70 a week part-time (25 hours) and £269.86 a week full-time (50 hours) in the UK, meaning many women don’t feel they have an independent choice to make when it comes to leaving the workforce to raise children.

Find out more about Pregnant Then Screwed campaigns and how to get involved.

Leaving the workforce is a major contributor to the gender pay gap, which remains largely unchanged year-on-year in the UK. Women already account for 69% of low earners, so additional pay disparity’s not helpful in securing financial independence.

Domestic abuse

Financial constraints are a major reason why women across the income spectrum can find it extremely difficult to leave an abusive relationship and to stay out. Many domestic abuse situations will involve an element of financial control, be that racking up debt in her name, restricting access to bank accounts and withholding money in a variety of ways.

Having a solely owned, easily accessible ‘f*** off fund’ – a pot of money that may help you to leave an abusive relationship, or an unsuitable job or tenancy – can therefore provide essential, sometimes lifesaving, assistance.

Cuts to refuge funding amounted to £7 billion from 2010 to 2018, and more recent grants haven’t been enough to meet the rising cost of living. With services forced to turn women away, that ‘fund’ potentially needs to be the biggest it’s ever needed to be.

Women’s Aid has run an SOS (Save our Services) campaign since 2014 to secure funding for refuges. Find out more and how to get involved.

It may also be important to keep other pots of money separate from partners. There are no additional benefits to combining your finances in the UK - you can still apply for a joint mortgage or other joint loans, and if you choose to marry or get a civil partnership your tax and pension entitlements aren’t dependent on joint finances. But there are potential drawbacks in addition to financial abuse, such as combined credit scores and taking on debt.

However, combining finances, or depending financially on a partner, can also be an important decision, for example, in order to support a creative endeavour or spend more time with children or communities.

All women deserve to make choices unburdened by the financial constraints of debt, abuse and gendered costs, and it’s important this basic level of independence is facilitated in our society. After that, the importance of your financial independence is really up to you.

This blog was inspired by an article from Rebalancing Act, a weekly newsletter answering women’s questions on money, finance and economics.

Natasha Turner is one half of the weekly women’s finance, economics and money newsletter, Rebalancing Act, and Global Editor of sustainable finance publication ESG Clarity. She’s also currently writing a book on whether finance can ever be truly feminist.

Risk warning

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How does the furlough scheme affect pensions?

Read about the impact of furlough on pension contributions and what you can do to mitigate any downsides.

How do we decide what to build at PensionBee?

Our VP Head of Product, Martin, talks about how we decide what to build based on what's best for our customers.

A new colleague recently asked me how we prioritise work at PensionBee and how she could get her new ideas introduced into our product.

Like a lot of things in Product Development, and indeed work in general, prioritisation can be an art as well as a science. We need to ensure we deliver value to our customers, and whilst there are many great ideas we’d like to execute on, we need to ensure there’s a foundation of logic built into what will make the biggest difference to the greatest amount of people, given we’re juggling scarce resources, such as people, time and budget.

Goal setting (OKRs) method

The Objectives and Key Results (OKRs) framework was created by Andy Grove at Intel in the 1980s, which was then picked up by John Doerr in the 1990s and early 2000s who took the concept to Google and helped it become the company that it is today. This framework has effectively become the ‘gold standard’ of goal setting and prioritisation in the ‘tech world’.

It enables the business to set an objective, with clear measurable results, and for teams within the business to ideate and execute on solutions that can achieve those targets.

We use the OKR framework at PensionBee, and as I write this, we’ve recently run a strategy session with our Growth team to reaffirm their current objective and ideate on some ways that can get them to achieve it. Check out some of what the Growth team will be focusing on this year in this blog on what Open Banking means for our customers.

So OKRs are a bit of the ‘science’ of prioritisation, but what about the ‘art’? Well, here are some methods that we (and no doubt many others) use to some degree.

The ‘start up’ method

There’s a feature list a mile long of things that we know we need to do, a natural symptom of being a young company with a backlog of obvious stuff that doesn’t yet exist. A good example of this is customers being able to withdraw from their pension via our mobile app. We’re a pension provider, we allow customers to drawdown from their pension from within the website, but what about our customers who have signed up from the Apple and Google app stores that don’t even know we have a web product? We need to definitely deliver that feature, to allow all of our customers the same experience and functionalities.

The ‘we’re a fintech’ method

As a pension provider, we need to encourage positive savings behaviour. Making it possible for customers to add additional money to their pension is paramount to this aim. However, as a pension provider in the fintech space, we need to make it possible to do this, in a way that is both better and easier than our legacy peers. Partnering with technology companies like our partnership with Plaid, an ‘Open Banking’ supplier enables us to hit this goal.

The ‘regulatory’ method

Sometimes the regulators in our industry, such as the FCA, will implement initiatives that aim to enhance customer outcomes...

One of these initiatives, Investment Pathways, was put in place to provide customers entering drawdown with additional guidance so that they could consider if their chosen investment plan was suitable for them when they were considering their retirement goals.

Of course, anytime there are these industry mandated initiatives, they will shoot straight to the top of the priority stack of what we will build.

The ‘subject matter expert’ method

At PensionBee, we’re fortunate to have some of the smartest people in their respective fields working with us. These subject matter experts will apply their knowledge and industry experience to propose initiatives that will get PensionBee to hit its business goals. The sponsorship of the Brentford Bees football club, was great for brand awareness and timed to perfection, happening just before Brentford were promoted to the English Premier League.

The ‘idea backlog’ method

This one is a bit of cheeky inclusion in the ‘art’ of prioritisation. The Backlog really should be prioritised based on quantifiable data points, and very much aligns to the OKR framework. It’s still an art to make sure it works though!

In the last six months, PensionBee adopted the Agile discipline of Scrum with an aim to get better specifications, collaboration and faster cycle times in place.

The adoption of this method has been a real success, but not without its sticking points. Trying to really define teams and responsibilities has become crucial to ensuring everyone has focus in their work. For a long time there has been semi clear dividing lines, but with a lot of grey.

Specifically, our Growth delivery team, which is tasked with product features to grow PensionBee’s core AUA and customer number metrics, faced a real tension between product development vs. marketing requests (like brand, content and SEO). How do you compare things like having an Open Banking enabled contribution journey, vs. new landing pages for specific plan campaigns?

The Product Manager for the Growth team, Ari, who previously sat in our Acquisition team, and knows the inner workings and goals of both, created a process guide for how ‘Marketing’ requests can come into the Growth team’s backlog for triage against everything else. That list of items is on a weekly basis curated with Ari and the Business Owners of Team Growth, our CMO, Jasper and VP of Marketing, Neill.

So there you have it - there isn’t one size fits all when it comes to deciding what to deliver on, but all of these methods together form the special ingredients that work towards us building a great pension product and service, so that everyone can look forward to a happy retirement.

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The power of the golden record for data

Poor data integrity can be a big burden on an organisation, from regulatory compliance failures to losing a competitive edge. Learn about the importance of a golden record for data management and how to unlock its power.

Maintaining data integrity’s essential for all organisations and poor data integrity can have many negative consequences. Businesses may be less competitive, experience reputational damage or fail to meet regulatory standards, and many organisations may find it more difficult to make evidenced-based decisions among numerous other implications. At worst, poor data management can even lead to serious consequences for some organisations like misidentifying patients and issuing incorrect treatments.

For those, like PensionBee, who operate within the pensions industry, failure to maintain data integrity could impact numerous areas of service. The Pensions Regulator (TPR), which regulates the UK’s workplace pension schemes, emphasises that without accurate record-keeping there could be a variety of consequences ranging from a pension scheme failing to meet its legal requirements to harming their ability to check employers are paying the correct contributions to their employees. In 2019, TPR found that hundreds of pension schemes had failed to review their data within a three-year period, let alone perform an annual review as per their expectation. Among other issues, this may mean workplace pension savers may not receive the pensions they’re entitled to.

With the potential cost of poor data integrity so high, it’s important that organisations are able to maintain a set of data they can readily rely upon. To this end creating a ‘golden record’ of data is sought after for its ability to not only help organisations meet compliance rules but also create more efficient processes and unlock new opportunities. A golden record of data refers to a consolidated data set which is considered to be the single source of truth for all the data a business holds about a customer, employee or product.

Building a golden record involves collating data stored across potentially numerous systems, such as customer relationship management (CRM) and enterprise resource planning (ERP) databases, and harmonising them into a single data set. The idea is that the golden record data can be safely assumed to be correct and the most reliable data available.

No matter whether an organisation functions as part of a government, within a healthcare or education setting, or as a non-profit or commercial organisation, a golden record of data can positively impact how efficiently it runs day-to-day and create new opportunities.

Why create a golden record for data?

It’s easy to imagine that as the amount of data stored across multiple systems increases so too does the probability of errors and mismatches among those data records. This makes it difficult and time-consuming for a business to use such data as it becomes difficult to identify and decide which are the correct details for an entity such as a customer or product.

Without a golden record, data are often duplicated and sometimes incomplete across databases. Anyone who’s ever searched through databases of records has probably come across these issues; for instance, encountering several versions of someone’s name, where one may be misspelt, or finding multiple email addresses recorded for the same individual.

Take, as another example, the name of a business customer. This may be recorded in an invoicing system as Arkwright Enterprises, whilst being also recorded in an ERP system as A. Enterprises. Or perhaps the postal address entered by a customer when registering on an e-commerce site may include a line not recorded in the CRM database. If all of these systems were to be merged into one master data set without cleaning the data beforehand, each of these records would be included as a separate entry along with any errors in the data itself.

The benefits of creating a golden record

A golden record of data can open up many benefits, of which some of the most significant are listed below.

Compliance and regulation

It’s much easier to fulfil compliance-related requests such as a Subject Access Request (SAR). SARs were created as part of the General Data Protection Regulation (GDPR) and Data Protection Act (DPA) legislation, introduced in 2018, enabling consumers to request the data a business holds about them and details of how it’s being used. Should a business receive one of these requests it’ll find itself in a much better position to provide all the data necessary as well as information on where and how it’s stored.

Business decision-making

More incisive decision-making is enabled by greater insights into a data set. For example, a business may notice certain trends in consumer behaviour which may help them develop a new product or marketing strategy.

Enhanced marketing activity

Marketers are provided with a more holistic and meaningful picture of their customers. This could give them the ability to create more highly targeted campaigns, and ads which are better personalised to customers or open up opportunities to cross-sell other items.

Operational costs and complexity

A golden record of data can provide several benefits to the way a company operates. Operational costs such as data storage are reduced when there are fewer data entries which need to be maintained.

Data can be more quickly and easily searched and analysed because it’s immediately available in the highest quality possible and because there’s only one central record to look at instead of searching multiple systems.

As the fields in the master data set are linked to the corresponding ones in a data source such as a CRM system, when those fields in the original data source are updated so too is the master record, thereby helping to ensure your master data set always has the most recent data.

The challenges of creating a golden record of data

The benefits of a golden record can transform how successful an organisation can be yet reaping the benefits depends upon having a well-thought-out and implemented plan for creating a golden record of their data. Compiling a record of data, free from inaccuracies and duplication, isn’t necessarily a quick or straightforward process and often requires several carefully applied steps to get to that point.

Identifying and standardising data

Prior to being merged into a golden record, all the sources of data need to be identified. This can be more complex in some organisations which may have a large and growing number of systems, each recording data separately.

The fields within the data source should be reviewed to ensure they’re as complete and accurate as possible. For example, there may be a value for an item in a data source which has been entered into the wrong field, such as a customer’s full name being entered entirely in the first name field and not split across both first and last name fields. The fields in the data source should also follow the formatting requirements of the golden record. For instance, the format for a date field in a data source should match that used by the golden record.

Matching and merging data

Next, matches in the data need to be identified to remove any duplicates. In a customer database, for instance, there could be numerous customers with similar names. Are these the same individual? If so, are the variations in the name simply misspellings? Or was an error made in editing the wrong entry at some point meaning the different data entries are mixed up with each other?

Where any duplicated data has been identified, a decision has to be made as to which field, from which data source, should supersede all others and become the authoritative version of that item of data which can be merged into the golden record. Going back to our earlier example, when deciding between two names recorded separately, should a business go with A. Enterprises from data source one or Arkwright Enterprises from data source two? In this case, a business may choose to use the data from data source two as this source is generally more reliable in recording business names. A scheme which records employer contribution data, such as contribution amounts, date of payments and recipient data, in multiple places, will need to decide and resolve which are the most accurate instances of the data if inconsistencies are found.

However, there could well be more complex scenarios, particularly where it’s not clear that the data from multiple sources are referencing the same entity. In circumstances like this, a manual review may be needed to decide which version of a record should be chosen for merging. Whilst manual reviews may slow down the process of creating a golden record they may be the only way to judge which data source to use and the short-term trade-off in time should reap benefits over the long term.

Unlocking the power of the golden record

Having a golden record of data holds tremendous value for organisations across industries, from meeting compliance obligations at a minimum to helping to propel commercial business ambitions, yet the advantages it offers may be limited without a rigorous process for creating one in the first place. There should be well-designed data source selection and cleansing criteria, including manual data cleansing where it’s needed, as well as a process for how future updates to a golden record are made. Establishing a method which includes controlling and approving future changes will help protect its integrity and produce the kind of quality data that can help make transformative business decisions.

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Get started with Regular withdrawals

Discover how Regular withdrawals, our newest pension withdrawal method, makes it more convenient to take your retirement income with automatic monthly payments direct to your bank account.

Why closing the gender investing gap matters for impact investing

Closing the gender investment gap could unlock over $3 trillion of extra assets under management. What would that mean for impact investing?

The gender investing gap includes the difference between the number of females and males who engage in investing activity. Historically, women haven’t invested at the same rate as men. This is for a mix of reasons such as lower risk tolerance, lack of confidence or education. Often, women prioritise supporting families and saving for the future.

The tide on the gender investing gap’s slowly turning. With it, comes the opportunity to speed up impact investing. In 2022, BNY Mellon calculated that if women invested at the same rate as men, there would be an extra $3.22 trillion of global assets under management available to invest. Women display preferences for sustainability considerations when investing. A 2020 survey found that only ^{_corporation_tax_small_profits} of women said they would invest in a company that wasn’t considered socially responsible. This is compared to 51% of men. So, what could this mean for allocating money to funds and businesses addressing the world’s great social and environmental problems?

Closing the gender investing gap will have a positive impact for economic growth and female entrepreneurship. Below we explore the gap through a climate and social impact lens. We take a look at the positive effect that would take place when women are empowered and given the right tools to invest at the same rate as men.

The gender investing gap

How has the gender investing gap evolved over the last few decades? A study by the University of California-Berkley found that in the 1990s men traded ^{_additional_rate} more than women. A FinanceBuzz survey revealed that 6^{_personal_allowance_rate} of men check their investment portfolios once a week. By comparison, only 41% of women do.

These patterns have shifted since the outbreak of COVID-19. Women faced more job losses due to caregiving responsibilities and loss of income. This has rolled back some of the economic gains made by women in recent decades. The pandemic also prompted more open conversations about investing amongst women. These focused on how they could protect and increase their family finances during uncertain times.

The female investing mindset’s likened to women’s approach to business practices which have been found to value honesty and transparency. This combined with a long-term outlook, has the potential to contribute to a new era of impact investing that looks beyond financial returns.

How closing the gap will drive impact investing

At an overarching level, impact can be positive or negative, intended or unintended, and direct or indirect. Impact investing as a strategy aims to address social and environmental problems, alongside financial gains. Examples range from renewable energy projects to microfinance initiatives, regenerative agriculture programmes, affordable housing and the supply of healthcare and education, to name but a few.

Investments falling under the ‘sustainable’ umbrella continue to grow. At the beginning of 2020, the value of sustainable investment in major financial markets globally stood at $35.3 trillion.

This is only set to rise under the influence of policies that have set out a pathway to decarbonise the global economy. This is alongside the appetite of investors who recognise the transitional, legal and reputational costs of business as usual. So, how will the closing of the gender investing gap contribute to this?

Women outperform men and have a longer-term mindset

Evidence from many studies suggests that when it comes to investing, women tend to outperform men. Warwick Business School found that women outperformed men by an average of 1.8% over a three-year period. With a higher rate of return, think about how that money could be allocated to impactful causes. In the same study, it was found that women only traded their investments nine times a year, versus men at 13 times a year.

Data from RBC Wealth Management notes that women are less likely to prematurely sell assets during periods of major market volatility. They’re also around ^{_corporation_tax} less likely to withdraw their investments than men. Similarly, N26, a group of European investors, found that only 23% of women prioritise short-term wealth gains compared to 43% of men who have long-term wealth as their investment priority. Such a position could be beneficial from a climate standpoint, as even if profits for a business they’re invested in decline, female investors are unlikely to sell. Instead women might instead focus on a company’s climate and social agenda.

Legacy’s another important piece of the puzzle. Female investors have been found to focus on future generations. They have a desire to pass down wealth to their children for safety and confidence. This ties into the principles of sustainable development, i.e. meeting the needs of the present without compromising the ability of future generations to meet their own needs - as set out in 1987 by the United Nations Brundtland Commission.

Female investors display an affinity for sustainability

By unlocking the opportunities for more women to invest, we could witness a rise in impact investing. This is driven by higher interest and preferences by women for sustainability. In 2017, Morgan Stanley asked investors how interested they were in sustainable investing or other investment funds that pursue positive social and environmental impacts, without impacting potential financial returns. 84% of women said they were interested versus 62% of men.

More recently, a 2022 sustainable investing report by Boring Money, which interviewed over 4,500 UK citizens and 1,500 retail fund investors, found that seven in 10 women agreed that they could achieve better returns with sustainable funds, compared to six out of 10 men. The results also revealed that ^{_scot_top_rate} of women chose climate change as an area to focus on, compared to ^{_scot_higher_rate} of men.

Whilst not the same as sustainable investing, the female affinity to ESG as a framework for risk assessments shows that closing the gender gap in investing could lead to wider adoption of processes for investment screening that incorporate more than financial performance.

From their ‘Women and investing: reimagining wealth advice‘, UBS found that 71% of women were making investing decisions with sustainability considerations in mind, compared to 58% of men. That, combined with women investing at the same rate as men, could mean there is over $1.87 trillion flowing into more responsible investing. This would be enough to fund regeneration and decarbonisation initiatives aplenty, not to mention projects dedicated to eradicating poverty and gender inequalities.

Unlocking the impact of female entrepreneurship

Empowering female investing can have a positive ripple effect on female entrepreneurship and with that, the opportunity to support enterprises and funds focused on socio-economic equality and supporting women.

Vice Presidents of The European Central Bank (ECB) have called for an increase in the number of female fund managers and decision-makers in venture capital funds to positively impact women and the sustainability agenda. As it stands, only 5% of managing partners in EU venture capital funds are women which could, in part, explain why women-led businesses continue to report struggles on gaining investment from VCs.

A European Parliamentary report entitled ‘Closing the gender investment gap for a more resilient, innovative, inclusive and balanced economy’ has weighed in on the contribution female investors can provide to female entrepreneurship. It states, ‘We know that 3^{_personal_allowance_rate} of entrepreneurs are women, but they receive 2% of the financing available and with the pandemic, this figure has even dropped to 1%.’ The paper highlights that the rise in female investing to fund entrepreneurship can make climate action more impactful through solution-based businesses focused on innovation and equality.

Creating a conversation that’s representative and inclusive of all genders, ages, races and backgrounds can help ensure that female investing with an impact focus includes voices in South America, Central America, Africa and Asia and furthers the climate agenda. By empowering female investors, we can help protect those who are most vulnerable to climate change, especially women and girls.

Risk warning

Amy Nguyen is a Strategist, Researcher and Writer focusing on corporate sustainability, global value chains, finance and fashion. Amy is the Founder of Sustainable & Social, a platform dedicated to deconstructing complex climate issues for a millennial audience.

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Future World Plan investor update Q3 2020

Nancy Kilpatrick from the Future World Plan fund manager, Legal & General, updates us on the plan's performance in Q3 and the latest news.

Hi, I’m Nancy Kilpatrick from Legal and General, and I’m writing to you today to give you an update about the Future World Plan, which you’re invested in.

How did the plan perform compared to the market, over the last three months? Did we have a good quarter or a bad quarter?

The Future World Plan returned c. 7% over the three months to the end of September, broadly in line with global stock markets. Given the range of news we hear day in, day out, this can almost certainly be classified as a good quarter for savers in the plan.

Stock markets continued their recovery from their low point in March during the third quarter of 2020, although September saw markets give back some of these gains on concerns that a second wave of COVID-19 cases was acting as a headwind to the global economic recovery. Encouraging updates on COVID-19 vaccine candidates and supportive comments from central banks over future monetary policy had boosted stock markets during July and August.

Most of the world’s markets made gains early in the third quarter, before some uncertainty emerged in September. We saw US stocks continuing to lead the recovery, recording a new all-time high in August, led by technology stocks in companies such as Alphabet, which owns Google, and Apple. September however, brought the return of volatility amid the on-going impasse in Congress over the contents of a new fiscal stimulus package. The US presidential election, of course, was another major source of uncertainty in the region.

The UK was a notable exception in that it posted a disappointing quarter, losing ground as new localised lockdown restrictions raised concerns over the economic outlook, while there were fears that the government would fail to agree a trade deal with the EU before the end of the Brexit transition period in December. Dividend cuts across a broad range of sectors also highlighted the impact of the pandemic as companies opted to preserve cash.

What can savers expect for the next quarter?

While there is no doubt that the discovery and availability of a viable vaccine will be the primary driver of market returns (as the recent short-term boost following the announcement from Pfizer demonstrates); looking through this, there are other factors that concern us with the outlook for global stock markets.

At time of writing, the US election has brought about the (highly expected although subject to final/re-count) change in President from Trump to Biden, which brings a level of uncertainty in itself, moreover concerns over potential disjoint of a Republican senate and Democratic President add to worries of a difficult environment for future policy, particularly around taxation of large tech companies and international trade.

In Europe, the threat of deflation, meaning the decline in prices for goods and services, which was already prominent before the pandemic, continues to raise concerns. While this can be the cause of negative market movements, the potential for more central bank intervention to boost markets in reaction to this conversely, would have an opposing positive effect on short-term returns. In the UK of course, we have Brexit and the hard exit which were central to our fears before the pandemic took over.

While it is clear that there are many issues to be worried about on the horizon from a political and longer-term economic perspective, so long as central banks continue to be able to ‘do whatever it takes’ to prop up economic activity by way of fiscal stimulus, investment markets will continue to react to these shorter-term boosts in a positive way. In this world of uncertainty, what we can be certain of is a boost, once a vaccine becomes readily available for COVID-19.

How has Legal & General driven positive social change in the past quarter?

The third quarter brought an exciting announcement, which all of us at Legal & General are incredibly proud of. You may be aware that we are firm believers in diversity, crucially, that diversity of thought is not only good for business but key to effective management. As a founding member of the 3^{_personal_allowance_rate} Club we were proud that Legal & General were the first investment manager to put our vote to this topic; voting against any FTSE100 company with all male boards in 2015. Through the years, we continue to extend these expectations on a global level, with most recent attention on US and Japanese companies.

This quarter we have formalised our (and no doubt many others’) long held view that diversity is not just about gender. Ethnic diversity is key to ensuring that company boards are truly reflective of both company client bases and the world around us. We are delighted to announce that from next year, Legal & General will be voting against any FTSE 100 company with all white boards, another milestone that we are immensely proud to be leading with. Our hope is always the ‘domino’ effect; to truly effect change we need to come together as an industry to send consistent messages to companies. The more asset owners use their votes in this respect, the more pressure there will be for companies to implement change. We hope others will join us on this path, such that in time, board diversity becomes industry norm rather than an exception.

Views expressed are of Legal & General Investment Management Limited as at 12 November 2020. Forward-looking statements are, by their nature, subject to significant risks and uncertainties and are based on internal forecasts and assumptions and should not be relied upon. There is no guarantee that any forecasts made will come to pass. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be solely relied on in making an investment or other decision.

Your updated fact sheet will soon be available to download in the BeeHive. If you’d like to ask a question in the next update or share your thoughts, you can get in touch with PensionBee via email or Twitter.

As with all investments, past performance is not indicative of future performance and you may get back less than you start with.

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Future World Plan investor update Q2 2020

Nancy Kilpatrick from the Future World Plan fund manager, Legal & General, updates us on the plan's performance in Q2 and the latest news.

Hi, I’m Nancy Kilpatrick from Legal and General, and I’m writing to you today to give you an update about the Future World Plan, which you’re invested in.

How did the plan perform compared to the market, over the last three months? Did we have a good quarter or a bad quarter?

The Future World Plan had a good quarter to end June 2020; returning 17.5% as global stock markets rebounded strongly during the second quarter, recovering much of the losses incurred during the opening quarter of 2020. Stimulus measures announced by central banks around the world, including several interventions by the US Federal Reserve to calm unsteady markets, lifted stocks in April. Subsequently, rising hopes for a rapid recovery in global economic growth helped to maintain the momentum behind equity markets as the quarter progressed, with lockdown measures being lifted and major economies reopening.

Year-to-date (to 17 July) global stock markets have more than recovered; returning 3.5% in sterling terms. US shares led the charge with the region recording its best performance since the final quarter of 1998. The market has been led higher largely by the major technology stocks which dominate both US and global markets. With the US making up around half of the country exposure within the fund, and technology ^_ni_rate with the likes of Microsoft, Amazon and Apple amongst the top 10 holdings, this has been beneficial for plan returns. Other regions present a mixed picture, with Europe overall just managing to eek out a positive return this year, emerging markets struggling and, most notably the UK, still down around ^_ni_rate this year. Given the industrial and consumer services (retail and restaurants) weightings in the UK market as a whole, our home region has struggled.

What can savers expect for the next quarter?

While it is pleasing to see such a recovery in markets we warn that these are still very early days. The outlook, not just for financial markets, but for all of our daily lives; is still very much driven by how the virus plays out. Recent signs of a second wave led to uncertainty around the severity of those. For financial markets particularly, the resulting impact to companies and the economy through the halt in activity brought about by lockdown measures are most likely to impact returns in stock markets. Indeed, at the time of writing we see increased cases in the US ‘sunbelt’ states leading to tightening lockdown measures. With vaccines generally unlikely to become widely available until next year, this reminds us that it is a case of too early to tell and makes us question how exuberant the stock markets can really be in these highly uncertain times.

How has Legal & General driven positive social change in the past quarter?

While we tend to believe that engagement via talks with company management taking place behind the scenes can often be most effective, there are occasions when we feel that it is necessary to address certain causes for concern publically.

Most recently we spoke out against the actions of the world’s largest mining company, Rio Tinto, following the destruction of a 46,000-year-old Aboriginal heritage site as part of a mine expansion. We were disappointed in this incident and concerned with the implications for the ongoing relationship with local communities.

While the issue of land rights and (social) licence to operate is a complex one, which has important ramifications for the mining industry, we have made it clear to not only the Chair, but to the sector and to regulators that we expect the company to demonstrate accountability in this case, and institute changes to prevent such incidents from happening again. While we watch for future developments closely, we continue to work with others to send a clear message – that business cannot be at the expense of community relations.

Views expressed are of Legal & General Investment Management Limited as at 28 July 2020. Forward-looking statements are, by their nature, subject to significant risks and uncertainties and are based on internal forecasts and assumptions and should not be relied upon. There is no guarantee that any forecasts made will come to pass. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be solely relied on in making an investment or other decision.

As with all investments, past performance is not indicative of future performance and you may get back less than you start with.

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Future World Plan investor update Q1 2020

Nancy Kilpatrick from the Future World Plan fund manager, Legal & General, updates us on the plan's performance in Q1 and the latest news.

Hi, I’m Nancy Kilpatrick from Legal and General, and I’m writing to you today to give you an update about the Future World Plan, which you’re invested in.

How did the plan perform compared to the market, over the last three months? Did we have a good quarter or a bad quarter?

The fund performed in line with global stock markets over the quarter, returning -17.9%. This compares with the UK stock market return of -23.8%, showing some element of benefit from being invested in all regions rather than solely the UK, the latter of which saw a more major impact. That said, it has been an unprecedented time for all of us, both on a personal level, in the way that we all lead our everyday lives, and also markedly for our investments as the impact of the COVID-19 pandemic plays out across economies and every investment market. For almost everyone with investments therefore, this has absolutely not been a good quarter.

As soon as there were signs of global contagion and most notably outside China and surrounding Asia; fears led to unprecedented selling of assets – almost every asset class with the exception of (some) government bonds and cash fell in value over the quarter. At times we even saw pressure on low-risk government bonds as investors looked to raise and stockpile money from anything that they could sell, and at levels not seen since the 2008 financial crisis.

What has however, also been unprecedented has been the response by central banks and governments to help prop up markets and to attempt to limit the longer-term impacts of this pandemic. Interest rate cuts, more stimulus has, at the time of writing led to a record ‘rebound’ last week, particularly as the US government announced more measures, extending the already significant action it has taken in an attempt to stabilise global markets. Year to date (14th April), the US stock market is down only 12% with the lows this year so far showing a return down over 3^{_personal_allowance_rate}.

While action across the pond might feel irrelevant at these times, what the US does is particularly important to your investments as the region makes up around 6^{_personal_allowance_rate} of the global stock market and most significantly, the plan in which you are invested. The relative resilience of the US market can mainly be attributed to its exposure to technology companies, which as you would imagine have been the least worst performers at these times when working from home has significantly increased. The other side to this is the UK market (c. 6% of the fund), which tends to have more of an exposure to oil, gas and mining companies which will fare worse when activity drops due to lockdown scenarios.

That said, it is still very early days and wholly likely that we might still see more negative moves from here – equally, should ‘normality’ resume, and a vaccine be found and efficiently distributed, we could very well see a relatively quick rebound in stock markets from current levels (which remember are largely driven by sentiment). More on that in the next section with what investors might expect going forward…

What can savers expect for the next quarter?

We will, as you would expect, spend a lot of time thinking about what could happen from here. It is deeply concerning that markets are not looking to fundamental data but are very much now reacting to how the virus plays out. This makes it almost impossible to predict what is to happen however, we do have three scenarios that we consider at this time to try to understand how our investors will be impacted.

The first being the big initial shock that we have seen, followed by a ‘rapid’ rebound. This would be a situation where there are a few weeks of lockdown, then a gradual lifting of restrictions. This is our most positive case and we warn that there will still be quite an impact on unemployment and a significant impact on global GDP growth; around -3%, similar to what we saw in 2008. The rebound in economic growth (which lag markets by at least six months) should then follow in 2021.

The second scenario involves the potential of a second wave of infections and then a longer period of lockdown. Here we see this initial shock, a lockdown for months rather than weeks, with the most harmful impact being a second wave of infections. This level of shutdown and additional impact of a second wave, could then lead to some bankruptcies and have a larger effect on economic growth (some -5% to -1^{_personal_allowance_rate} of global GDP).

The third, the worst case and least likely in our view, is something akin to the Great Depression mark 2. In that scenario life as we knew it does not return to normal; the virus lingers and a new lockdown of sorts remains for the longer-term in that people are wary of being physically close to other members of the general public. This leads to travel, leisure and entertainment industries (in addition to commercial property, transport and energy) not recovering. This could mean significant company bankruptcies across industries leading to more than ^_basic_rate decline in global GDP.

When it comes to official estimates; The UK’s Office for Budget Responsibility has published a virus scenario – based on three months of full lockdown with a further three months of partial lockdown, they see the economy (not stock markets) shrinking 35% in Q2 2020 and unemployment spiking at 1^{_personal_allowance_rate} before a sharp recovery. Separately, the IMF produced a report called The Great Lockdown which forecasts a 3% contraction of world GDP in 2020 as a whole.

As we have said, these are unprecedented times and the outlook is very difficult to predict. What we have seen however, is a pulling together of communities, governments and policymakers to support both businesses and every economy. So far this has shown positive signs and so long as the spread of the virus can be controlled, we see the first two scenarios as the most likely, with a shorter-term hit to growth, but an eventual recovery. What supports our relative optimism at this time are (albeit very early) signs that the rate of infection in Europe is slowing (with Spain and Germany now relaxing some lockdown measures), daily deaths are declining, and we have had news that China has approved human trials for three potential vaccines.

Whilst there is no doubt that these are difficult times, if we all continue to pull together, maintain faith, and continue to support the companies that we are invested in, we will get through this and will recover. How long it will take is the biggest question mark.

How has Legal & General driven positive social change in the past quarter?

From Q1 2020 we will be voting against all companies where the CEO also serves as board chair (excluding Japan, due to unique features of this particular market). We have advocated a separation of these roles for many years because having a distinct CEO and board chair provides a balance of authority and responsibility that we believe is in both the company’s and investors’ best long-term interests. Board independence is equally important to ensure robust oversight over company strategy and executives’ decisions – CEOs should not be able to ‘mark their own homework’.

Last year, we supported 51 shareholder resolutions in the US asking for a split of functions of board chair and CEO, and voted against 40 directors proposing to combine roles of board chair and CEO without the prior approval of their shareholder.

On a company specific level we are pleased that, following active engagement with DTE Energy over a three-year period, and providing clear guidance of our intentions of voting policy from this quarter; we have seen the company separate CEO and board chair roles in advance of our vote being cast.

Views expressed are of Legal & General Investment Management Limited as at 15 April 2020. Forward-looking statements are, by their nature, subject to significant risks and uncertainties and are based on internal forecasts and assumptions and should not be relied upon. There is no guarantee that any forecasts made will come to pass. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be solely relied on in making an investment or other decision.

As with all investments, past performance is not indicative of future performance and you may get back less than you start with.

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E6: Shariah investments - with Ibrahim Khan, and Martin Parzonka

The Pension Confident Podcast

PensionBee Content

24 May 2022

minute read

May 2022

Inside the BeeHive

Sustainable Investing

The following is a transcript of our monthly podcast, The Pension Confident Podcast. Listen to Episode six here or watch on YouTube here. Scroll on to read the conversation.

PHILIPPA: Welcome back to PensionBee’s Pension Confident Podcast. I’m Philippa Lamb. Now, when it comes to being socially responsible, you might be recycling or doing meat-free Mondays, maybe taking a train instead of a plane. And more and more of us are investing in line with our beliefs too. We can already choose to put our money into companies or sectors we support, like say green energy. And of course, we can avoid sectors we don’t want to support. You can make those choices about your pension too. And today, we’re going to be investigating an approach you may not have considered before and that’s Shariah investing. It’s a socially responsible option which complies with goals and the values of the Shariah, or Islamic law that Muslims live by, but it’s open to everyone. So what are Shariah investments? How do they work, and how could a Shariah pension be right for you, even if you’re not Muslim?

Music starts

More than 3.3 million Muslims live in the UK, and to put that in context, that’s more people than the whole population of Wales. And while most non-Muslims know something about Islam, Shariah investment may be a new idea. So whether you’re familiar with Islamic finance, or completely new to it, this episode is all about how it works and why it’s worth knowing about. Globally, Shariah investing is on the rise. Recent data from Reuters estimated that the global market for Shariah funds has ballooned by more than 300% in the last decade alone. So there is growing demand for Islamic investments, but how are they different from other investments? I’ve got two experts with me to answer that. Ibrahim Khan is a former lawyer, and he’s Co-founder of Islamic Finance Guru, that’s an investment and personal finance platform, all about helping Muslims make smart decisions with their money. And the business and investing magazine Forbes recently rated him in their 30 under 30 list of entrepreneurs to watch. Ibrahim, welcome to the podcast. Quite an accolade!

IBRAHIM: Hi, it’s a pleasure to be here! Yeah, it was great. It was great to be on the list.

PHILIPPA: Surprised?

IBRAHIM: Yeah, it was - it was great to see that they, you know, were looking at people, not just from the mainstream finance world. And I think that’s fantastic.

PHILIPPA: Also, here with us, we have PensionBee’s own Head of Product, Martin Parzonka. He’s here to give us his take on Shariah investing, and also to tell us about PensionBee’s own Shariah pension. Welcome back, Martin.

MARTIN: Thank you Philippa, good to be here. Excited to get into it.

PHILIPPA: Now, before we get going, the usual disclaimer. Anything discussed on this podcast should not be regarded as financial advice and when you’re investing, your capital is at risk. We’re talking about Shariah investments and how they fit into the ethical investment landscape. So I’m going to put our guests on the spot, I’m going to ask them what changes they’ve made in their own lives to be more socially responsible. Martin?

MARTIN: Well, we were laughing about this before we got into the studio but I drink/eat a thing called Huel, which is a powdered food.

PHILIPPA: Other powdered foods are available.

MARTIN: Mix it with water and it hits all the nutrient profiles that you need. You know, it reduces meat consumption. And that’s important.

PHILIPPA: Yeah, now the breakfast choice, Ibrahim and I were less convinced. I’ve got to say, less keen on that. But -

IBRAHIM: That’s the, you know, that Huel I’m sure is the substance that, you know, Neo was getting pumped on it in The Matrix.

PHILIPPA: Yeah, and he was happy with that. That’s the scary thing. How about you? I mean, socially responsible choices, what are you doing?

IBRAHIM: So I drive a Toyota Prius, which is a hybrid, which is fine, there’s loads of them. But then the thing that takes it to the next level, is that if you drive below 28 miles an hour, it uses just the electricity. So next time you’re stuck behind a Toyota Prius driver driving slowly, you should understand that he’s doing it for this reason.

PHILIPPA: And feel good about yourself too -

IBRAHIM: And feel good about yourself, you’ll be a little bit late, but it’s alright.

MARTIN: It’s also safer.

IBRAHIM: It’s safer, it’s safer for the environment. And you know, the guy’s saving money.

Halal and haram investments

PHILIPPA: I’m not sure you’re selling the idea, really, but point taken, point taken. Shall we start with the basics Ibrahim, what exactly is Shariah investing?

IBRAHIM: So Shariah investing is really just looking at the two words. It’s, you know, Shariah-compliant, so it’s compliant with Islamic law. What that actually means is you look at the Quran and the sayings of the Prophet Muhammad, peace be upon him. And then investing, is just investing in line with those rules and regulations. So in a nutshell, that looks like not investing in things that, you know, generate interest, or gambling, or investing in alcohol or pork. These will be like the really obvious ones, and then there’s some others that are under the surface and a bit more technical.

PHILIPPA: Okay. So Shariah compliant investments, they have different criteria, completely different criteria from, say, fossil fuel free investments, but you would still classify them as socially responsible.

IBRAHIM: I think there’s a really strong overlap between the two. But there is still a difference.

PHILIPPA: So yeah, so the crossover is, I mean, it’s directly excluding certain sorts of companies, and also its business practices as well, isn’t it?

IBRAHIM: Yeah, absolutely. So if, you know, a company is, I don’t know, involved in, let’s say, the war in supporting Russia in some way, shape or form. That could be, you know, a clear question mark.

PHILIPPA: So there’s judgments involved?

IBRAHIM: 100%. So there’s two types of mindsets that you approach when you’re analysing, you know, is this Shariah-compliant or not? There’s a quantitative side, you know, looking at the debt levels and looking at the amount of impermissible income that’s coming into a particular stock. And then there’s a qualitative side, you know, then you’re just eyeballing and it’s a moral question.

PHILIPPA: Yeah. You talk about debt. So yes, companies that are highly leveraged. That’s an issue.

IBRAHIM: That’s an issue. Definitely. So the most that you can be is 33%. Debt to total assets.

PHILIPPA: So there’s a hard number there?

IBRAHIM: Exactly. So if you go over that, you’re in trouble.

PHILIPPA: Do you want to fill us in on some of the terminology?

IBRAHIM: Yeah, for sure. So a “Riba“ is the term that is to do with interest essentially, and that’s not allowed. And then you’ve got “Gharar“, which is uncertainty or doubt and that would rule out certain areas such as, as I said, derivatives or lots of types of insurance will not be allowed. And then you’ve got “Maysir”, which is gambling. So you know, Bet365 cannot be in a Shariah compliant portfolio. And then you’ve got a few other technical things as well.

PHILIPPA: Okay. So they will be described as haram?

IBRAHIM: They will be haram.

PHILIPPA: Prohibited.

IBRAHIM: That’s the one.

PHILIPPA: What about Halal investments, Martin? The opposite end?

MARTIN: Well it’s basically everything else that Ibrahim hasn’t covered there. It’s the opposite of all that. And a lot of companies are actually Shariah compliant without even realising it. So Ibrahim mentioned, there’s some - there’s a lot of overlap with fossil fuel investing, and the Shariah fund, that we have at PensionBee, for example. And you’ll find that if you look at the underlying investments - that a lot of that is tech companies, right? Because they’re not ones that are, you’re not earning interest on them. They’re ones that may not be entirely leveraged. It’s interesting, the comment there about looking at them and understanding their business practices, though. So Netflix is tech, right? Inverted commas, but then the content they serve up - questionable. You look at platforms like say Facebook maybe, might be also questionable, because you know, are they a platform? Are they a publisher? It’s an ongoing discussion right now. But in the main, you will find that there is that overlap, and a lot of tech companies do form part of a Shariah compliant portfolio.

PHILIPPA: It’s subtle, isn’t it?

MARTIN: Yeah, it is. It is.

PHILIPPA: And it’s topical. I was reading the Financial Times a couple of weeks ago, the trade union that represents Uber drivers. It was so interesting to me that they were threatening legal action against Uber because their pension scheme was not Shariah compliant.

IBRAHIM: Yeah, I love a bit of a fisticuff when it comes to the pension world, because you get so few of them. So Uber, yeah, is being threatened with legal action by a union of Uber drivers, which I think is - it’s great, right, that people are standing up for their rights. You know, they actually got in touch with us and asked us to publicise and promote this, because again, there’s two sides of this one is the, you know, the legal action, which is to make sure that Uber drivers have the possibility of going for a Shariah option, which they don’t have right now. But then the other bit where they say, “Look, can you help us out a bit?” is educating Uber drivers about the point of pensions in the first place. And, you know, if you’ve never had a Shariah compliant option ever available to you in your life, why would you even start thinking about that? You know, it’s a boring subject. And, you know, you kind of have to prompt people, and there’s a big education piece as well.

PHILIPPA: I think the majority of their drivers are Muslim.

IBRAHIM: Yeah.

PHILIPPA: 75%, apparently, which I thought was fascinating that, you know, they hadn’t actually thought about that when they came up with their pension scheme. Were you surprised to hear that?

MARTIN: Honestly, I wasn’t. I think the pension industry, the finance industry does come from a place of, you know, Anglo Saxon, to be honest, and so doesn’t consider the entire community when these products are devised, right? I’m also glad that this is happening. It really shakes up the industry and says, “Hey, guys, like, there’s an underserved community here. Why are we being so sort of blinkered about it?”

PHILIPPA: Yeah, it’s stretching inclusivity in ways that finance hadn’t thought about before, isn’t it? I mean, in fairness, you were telling me that Uber - they’re not objecting to this. They just hadn’t thought about it.

IBRAHIM: Yeah, I think that’s a great signal for businesses just across - well, for Muslims vis-a-vis businesses across the UK, because Uber is pretty litigious, right? They, you know -

PHILIPPA: They have their issues.

IBRAHIM: They fight things to the Supreme Court and yet on this point, they’ve said, “Look, the law is very clear here. And we’re going to get this sorted, just give us a few months.” So, you know, that as a signal I think is fantastic.

PHILIPPA: Head’s up for everyone.

IBRAHIM: Yeah, exactly.

PHILIPPA: It should be a heads up for all employers, shouldn’t it?

MARTIN: Yeah, I think some are a little bit passive. Honestly, they are a bit lazy about it. Like I’m reading the pension firms comments back, it’s like “I try to do the right thing”. But everyone’s like, did you really? Did you really look at this? Did you - do you talk to your customers?

IBRAHIM: They’re not evil, right?

PHILIPPA: Absolutely.

IBRAHIM: They’re just a bit slow. And you know, perhaps not thinking about the wider picture. Yeah.

PHILIPPA: Yeah. Well look, now we’ve got the basic idea. Can you tell us a bit about the origins of Shariah?

IBRAHIM: Yeah, Shariah or Shariah pension?

PHILIPPA: Shariah investing. Otherwise we’re going to be here for a long time!

IBRAHIM: So it all starts with the creation of the universe. So, Shariah investing, I think it, you know, ultimately derives from the Quran and the teachings of the Prophet Muhammad. The rules or the, you know, the guidelines came up in the seventh century. And over this, you know, the centuries thereafter, you know, very, very rigorous schools of law developed around understanding this stuff, and then applying it. If we fast forward through the centuries, the latest modern incarnation of all this stuff, I would say, started probably around the 1970s, 1960s-70s. It’s when we had the first Islamic banks, this coincided very nicely with the huge financialisation that we’ve seen of the mainstream economy as well. And so, you know, Muslims are thinking, how do we fit into this, you know, massive kind of new world of financialisation? We’ve decoupled from the gold reserves, how does it all work now in this new world? And so you had Islamic scholars and practitioners who came up with a body called the AAOIFI, which is a catchy name, yeah. And they’re based in Bahrain, there’s an equivalent version, which is also very respected in Malaysia, so that Malaysia and the Middle East are the two big hubs of Islamic finance. And so these guys took the traditional teachings and applied them and came up with guidelines. For example, how do you deal with hedging, currency exchange? Or what does Islamic law have to say about, you know, insurance? Or, how does Islam screen different kinds of stocks? What about crypto? I mean, this is a huge new thing, right? So this is a very living kind of application manual that people look to now.

PHILIPPA: But that’s really interesting. It is, as you say, it’s a living mechanism. And it’s kind of constantly being reformatted to keep pace with everything else that’s going on in the financial world.

IBRAHIM: Totally 100%. I mean, even within stock investing, we saw the craziness over the last two years. And now we’re seeing, you know, continued craziness in the other direction. And as a result of that, scholars actually said that the debt to asset ratio that I was talking about, they actually shifted that to the debt to market cap ratio.

PHILIPPA: Okay, before you go any further, market cap?

IBRAHIM: Market capitalisation - how big a company is, and -

PHILIPPA: Value rather than assets per se.

IBRAHIM: Exactly. Just because there was so much, you know, volatility going on. And so that’s a really live example of Shariah in practice. And then of course, you’ve got crypto which is, you know, its own beast.

PHILIPPA: You see, I’m glad you raised that, because actually, now I have to know. What is the thinking on crypto?

IBRAHIM: I think the majority would say that it is permissible in principle and they see it as a digital asset. And then you need to analyse it, each crypto asset for whether or not it’s structured in a Shariah compliant way or not, and most of them are, but then some of them, let’s say something like compound, or yearn finance, or other interest-based crypto assets, where the purpose is just to do lending, but in the crypto world, that will be problematic. Yeah. It’s cool. I’m enjoying screening these things.

PHILIPPA: It’s intensive, isn’t it? Because this is such a fast-moving world, and things come along constantly that need consideration about whether they’re going to work or not.

IBRAHIM: 100%.

MARTIN: You mentioned the crypto currencies themselves, like is the blockchain tech compliant itself?

IBRAHIM: Yeah, there’s no issues with the software and the underlying technology and, you know, decentralised ledger. I think the issue comes with cryptocurrencies being very volatile. I guess one of the principles was Maysir, right? Not gambling. So they’re a bit concerned about, you know, is this just a massive Casino? The Shariah, at heart, you know, I’ve mentioned all of the rules. But actually, if you take a step back really what this Islamic law is about, when it comes to finances, they want - you want to stop injustice, and you want to stop uncertainty in the market. And if you can deal with those two things, you know, that’s a good situation.

PHILIPPA: So the regulatory framework, for people who aren’t used to it, that is a bit confusing, isn’t it? I mean, that’s a bit unexpected, because we’re used to regulation. You can do this, you can’t do that in financial services. But that’s not quite how it works.

MARTIN: That sounds preferable somewhat, like having a discourse rather than just the central body saying, “This is what I think”, because that’s going to be quite centralised, in their opinion will be their opinion. Where if you have a discourse, you’ve got other views coming into it, which is probably a more interesting way of dealing with these things.

PHILIPPA: More collaborative?

IBRAHIM: I agree, I actually think that there’s a lot of alignment between how, let’s say, the FCA sets its rules and Islamic law because the Financial Conduct Authority when it sets its rules, you know, they talk to consumers, they talk to the government, they talk to companies, and then people look at the laws and they apply them. And same with Islamic law, where, you know, there are the discussions within the academia, and then the discussions with the practitioners, and then it gets kind of codified into these like standards that AAOIFI put out, and then it gets applied. So I think there is a parallel kind of situation.

PHILIPPA: So, but Martin, I mean, what about investment returns? Because you know, there is big money to be made from Haram industries, like tobacco, isn’t there, realistically? So does that mean Shariah returns are bound to be lower than conventional investments?

MARTIN: Like all investments, it’s a bit of a cop-out answer, but it depends. There can be money to be made with haram investments and using tobacco as the example. I think the reality is that whilst those companies might pivot into something that’s not tobacco, necessarily, the general community will look at those companies and say, “You know what? I know what you’re all about, and I’m just not going to invest in you”. And so, you know, those companies by virtue of that their market cap will decrease.

PHILIPPA: So your argument is they’re not actually sustainable?

MARTIN: I don’t think they are. That’s my personal view. And I don’t think they’re sustainable and I think money will go elsewhere, to more sustainable investments. The other comment about returns, though, it is fair to say that the Shariah investments are certainly the ones that we have at PensionBee, it is 100% equity, which means stocks in companies, therefore, it is subject to market turmoil. And that fund doesn’t invest in things like bonds, because of the riba component, right? Can’t earn interest. So there is a consequence that, you know, bonds are usually used to offset the volatility of stocks, because it can’t invest in bonds, it’s going to, as a consequence, have a volatile risk-reward profile in Shariah compliant investments, certainly the one we have.

PHILIPPA: So you would say this is long-term, as you said, and that’s maybe the point to really stress. We’re not talking about immediate wins here.

MARTIN: No, not at all.

PHILIPPA: And the wins aren’t necessarily as tangible, maybe. So we are talking about - to put it slang-ily - feel good wins, as well as cash wins. You know, you feel good about yourself doing this stuff, because it’s socially responsible. Yeah, there’s quite a lot to be said for that.

IBRAHIM: 100%. And really, you know, with pensions, the majority people would be investing for the long-term anyway. Right?

PHILIPPA: Absolutely. It’s fascinating, isn’t it? And then we’re going to talk about PensionBee’s own Shariah pension in a moment. But this is an intensive business, selecting investments. Presumably, that feeds into charges, does it?

MARTIN: Yeah, it does. So there is a committee actually, that and going back to that discourse point we said earlier, there is a committee that looks at the portfolio mix of the Islamic Finance Fund that we have, and then make decisions on what’s in what’s out. I guess, you know, customers that want to purchase this plan, can have that level of trust with it. They know that it’s been looked at properly. That does have a consequence, it does have an impact on fees compare to other investments, because of the level of scrutiny and the additional work that goes into it. There’s also fortunately, unfortunately, diversification is impacted. You know, we mentioned the word “bonds” before because they earn interest, in riba, and so they can’t be compliant. But this talks to limited scope of Islamic finance and something that like industry really needs to address and find other ways to make this work. It’s very interesting not to like harp on the whole crypto thing. But it’s interesting that that as a product isn’t necessarily like excluded from the outset. So there is an ability for new products and services to come into this Islamic finance world and actually be -

PHILIPPA: It’s work in progress.

MARTIN: Be part of it. Yeah.

Shariah finance in UK

PHILIPPA: Yeah. It’s so interesting. I mean, because, like all investments, there are pros and cons aren’t there, to Shariah? But there’s this huge community worldwide, millions and millions of people who will not invest their money in anything that is Haram. So if people are thinking about this and thinking, this is interesting, how hard is it to find Halal investment?

IBRAHIM: Historically, I think it was pretty difficult, because there weren’t as many around and it was a little bit harder to surf it as well. That problem has, you know, somewhat receded and there’s a lot more products in the market. Now, I think, going to Martin’s point about, you know, in the pension space, where are these products? Therefore, I think there’s a couple of issues. The first is that, you know, because these products are still relatively nascent, it will take time to build up the assets under management and the scale that is needed to make it viable in the pension landscape. I mean, to give you some context, the HSBC fund from memory is something like $3 billion or £3 billion. That is actually relatively small in the widest, you know, wider picture. BlackRock and others. They’ve got huge. They’ve got literally trillions of dollars under management.

PHILIPPA: It’s a minnow.

IBRAHIM: Yeah, exactly. And because the fees that we’re talking about are in the 0.2, 0.5 kind of range, in order for a company to be able to offer that in a viable way, it wants to make sure that it has as much you know, of assets under management that it can get a hold of. But if you’re targeting a niche audience, that is already restricted. And so that means that the fees need to then therefore creep up a little bit. So there’s a whole bunch of different factors. But from our side, we will really want to encourage Islamic Sukuk bond. So there’s an Islamic version of a bond, which is called the Sukuk, and there’s funds that offer that. So I really want to encourage those kinds of, you know, those kinds of funds to be a lot more easily accessible to people like, let’s say PensionBee.

Future of Shariah pensions

PHILIPPA: Yeah. So I mean, I’m interested to know whether Shariah financial services are actively targeting non-Muslims now with these products. I mean, is that seen? Are non-Muslims seen as a market for them?

IBRAHIM: Yeah, absolutely. The majority or a very significant number of people who use the Nest Shariah workplace pension, were actually non-Muslims, just because they were attracted to the tech stocks aspect of it and the high growth.

MARTIN: Shariah out was like finances based on religious principles. But so what? Right you can be non-religious and still be interested, like you say, tech stocks, right? People that want to take on that risk, high growth kind of fund at the start of their career - they look at it and go “100% equity? Cool, that’s for me, why not be invested in this?” And then also, you know, that it’s got that sort of moral aspect of excluding bad industries. And so it sort of ticks a couple of boxes for a lot of people.

PHILIPPA: Yeah, a lot of wins. So I mean, we mentioned PensionBee’s own Shariah pension plan. It is, of course, open to everyone, Muslim or not. Tell us about that.

MARTIN: Exactly right. So the plan is, from us, it’s managed by State Street Global Advisors. They purchase it from HSBC, which is, you know, a massive investment firm or asset manager globally. And they’re the ones that have the Shariah committee that looks at the investments to make sure that they’re appropriate for the fund. It follows the key principles. So no interest, you know, the ban of uncertainty, you know, speculation and gambling. What we charge is 0.95% annually. And for anything above £100,000 with a PensionBee plan, that fee is halved. The more people that get into it, you get scale, right? And so then, you know, fees can change in time. It is 100% equity, like we’ve talked about. And what that means is its company shares, so investments physically into individual companies that are held in the fund, which isn’t uncommon with Shariah savings, because for example, bonds can’t be included because they own their own riba. Although interestingly, Ibrahim’s made that comment around - there’s an Islamic finance approved version of a bond. That’s quite interesting to see where that goes.

IBRAHIM: Yeah, there’s a lot of Sukuk out there, which is the Islamic finance version. And instead of lending being the basis of it - its rental. You know, there’s some kind of asset that is the basis of it. The UK government issued its own Sukuk where they put a government building as the basis for that and it was a sale and leaseback so the government sold that to the bondholders and then leased it back from them. So that was how you were getting a regular return from it.

PHILIPPA: This is the government issuing a Shariah compliant bond effectively? Well -

IBRAHIM: Exactly.

PHILIPPA: Yeah. I mean, that kind of takes me into my next question, really, which is expansion into the wider financial services sector, but from what you’re saying that’s happening already?

IBRAHIM: Yeah, absolutely. I think, you know, Islamic finance touches on pretty much every area that you can think of from, you know, be it insurance, pensions, bank accounts, you know, you name it, every single thing that you can think of, when it comes to the financial sector, there’s an Islamic aspect to that, which just needs to be thought through.

PHILIPPA: And then presumably, you’d say the same. This is - I can see that you’re thinking this is a really wide landscape now.

MARTIN: Yeah, for sure. It’s the tip of the iceberg, but like, who knows, until we have these kinds of discussions like this, no one really knows about this stuff. And it’s like, it kind of needs to be promoted more by industry within industry, so that people do get an appreciation of what’s out there.

PHILIPPA: Actually, there’s one point I want to make. I mean, listening to you two talking about it, and I didn’t know very much about it before. The thing - apart from the whole, you know, socially responsible thing, the transparency of Shariah investing feels very appealing to me, because you do know where your money’s going. Do you think that’s going to be a big factor for people?

MARTIN: 100%, it will be. We often have customers say to us, “I want to know what my plan is invested in”. It’s fair enough, you know, it’s people’s money. They want to know where their money’s gone and historically, the financial sector has been this big sort of like smoke and mirrors.

PHILIPPA: They just take your money and do something with it.

MARTIN: Do something with it. Where does it go? I don’t know, somewhere? Just worry about it in 50 years when you’re lifting your pension, what happened in that time? We’re trying to promote people to take retirement savings seriously, right? And by being transparent, I think there’s that level of comfort with knowing what’s going on and so people will engage with it more.

PHILIPPA: Okay, there is so much to talk about here. But we’re going have to wrap this one up anyway. It is such an interesting subject. I have learnt loads and I hope everyone else has too. Ibraham, thank you very much indeed.

IBRAHIM: It’s a pleasure.

PHILIPPA: Martin, thanks.

MARTIN: Thank you. Happy to be here.

PHILIPPA: Thanks to everyone for listening. If you’ve enjoyed this episode, please rate, review and share it. While you’re at it, why not subscribe and make sure you never miss a future episode. You’ll find the series in all the usual places: Apple, Spotify, wherever you’d like to get your podcasts. If you’d like to find out more about Shariah investing, you can find loads more information in the show notes. If you’d like to get in touch with any feedback or questions, email us at podcast@pensionbee.com or tweet using the handle @PensionBee. A final reminder that anything discussed in the podcast should not be regarded as financial advice. And as with all investments, your capital is at risk.

Music starts

Next month we’ll be back with an episode you will not want to miss because it is all about staying safe from financial scams. Join us then.

Catch up on episode 5 and listen, watch on YouTube or read the transcript.

Risk warning

Period	Market Event	FTSE World TR GBP (%)	4Plus Plan (%)
4Plus Plan’s inception – 6 Sept 2013	QE Tapering, China Interbank Crisis and its aftermath	-5.44	-2.41
3 Oct 2014 – 15 May 2015	Oil price drop, Eurozone deflation fears & Greek election outcome	-5.87	-1.77
7 Jan 2016 – 14 Mar 2016	China’s currency policy turmoil, collapse in oil prices and weak US activity	-7.26	-1.54
15 June 2016 – 30 June 2016	BREXIT referendum	-2.05	-1.07

Period	Market Event	FTSE World TR GBP (%)	4Plus Plan (%)
4Plus Plan’s inception – 6 Sept 2013	QE Tapering, China Interbank Crisis and its aftermath	-5.44	-2.41
3 Oct 2014 – 15 May 2015	Oil price drop, Eurozone deflation fears & Greek election outcome	-5.87	-1.77
7 Jan 2016 – 14 Mar 2016	China’s currency policy turmoil, collapse in oil prices and weak US activity	-7.26	-1.54
15 June 2016 – 30 June 2016	BREXIT referendum	-2.05	-1.07

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