Rita Butler-Jones: When savers are aware that their pensions can be used to drive positive real world change, it fosters an increased sense of engagement, wellbeing and connectivity with their retirement pot
The integration of private market assets such as affordable housing, clean energy infrastructure and innovative tech companies can help to encourage UK savers to engage with and contribute more to their pensions, Legal & General (L&G) research finds.
The firm's annual defined contribution (DC) member research – published today – found over half (58%) of DC savers do not know that their pension money can be used to change the way companies work and the society we live in.
The research – based on an online survey of 2,024 respondents in the UK, conducted in April 2024 by Ignition House on behalf of Legal & General – also found that nearly three-quarters (68%) of DC savers agree they would feel more engaged with their pension if it was invested in assets like affordable housing, helping to address the housing shortage in the UK.
Some 63% of members agreed that if their pension was helping to drive the energy transition by investing in clean energy, they'd feel more engaged, while 57% said that allocations to spin-out businesses from university science and technology departments would boost their engagement.
The research found the inclusion of private markets in pension portfolios could not only drive engagement, but potentially higher contributions too – noting that over half (55% and 52% respectively) of respondents agreed that they would be inclined to pay more into their pension if it was invested in affordable housing or for allocations to clean energy, with 49% saying the same for innovative start-ups.
Asset owner research – conducted among 30 investment asset allocation professionals at DC schemes – found these areas were also a priority at a scheme level, with DC professionals placing emphasis on diversification and capital growth as they seek to increase returns and long-term outcomes for members.
Just as members report a preference for their pensions to invest in environmental and socially orientated assets, Legal & General said DC schemes were also prioritising these outcomes in their private market investments, with 80% saying this trend is set to accelerate over the next two years.
L&G head of DC Rita Butler-Jones said: "Greater pension engagement is a puzzle the UK pensions industry has been trying to solve for decades.
"As we see growing allocations of pension capital to private markets, it is encouraging that when savers are aware that their pensions can be used to drive positive real world change, it fosters an increased sense of engagement, wellbeing and connectivity with their retirement pot. Private markets could therefore not only help to drive greater potential returns across UK pensions, but potentially greater member engagement and contributions too."
The research comes as L&G launched its private markets access fund in July – a fund that is designed to offer DC schemes a single point of access to a diversified portfolio of private market assets, including affordable housing, clean power infrastructure and university spin-outs.
It also builds on L&G's strategic update in June where the firm announced it would bring together its public and private markets capabilities in a single asset management division and target growth in its workplace DC pensions business.
Professional Pensions and Legal & General are holding a webinar – Engaging DC members with private markets – at 2pm today (25 September). Click here to listen live or to listen to the event on demand.
