An ethical pension product works in much the same way as a standard stakeholder pension, but the pension funds are only invested in companies of an ethical nature.
If you want to make sure your future is invested ethically, you will find that most ethical stakeholder pensions will suit you – but be aware that there are a lot less of these on the market than standard pension products.
Some people opt to take out an ethical pension and support a charity at the same time, giving them the opportunity to support their favourite cause while investing in their own future.
Whilst there aren’t that many products on the market, the Ethical Investment Research Services department found five ethical indices that it could use to compare product performance. In 2010 the Charities Avoidance Index, which excludes all companies who are involved in tobacco, alcohol, gambling, pornography and military sales, performed 0.38% better than the FTSE all share index. So, investing ethically doesn’t always involve earning less money for your future.
Members of larger schemes, particularly company pension schemes, can also encourage those people managing the pension to invest ethically.
Some companies you wouldn’t usually associate with ethical practices are now doing their best to attract your business by highlighting their own ethical practices.
Oil companies are the biggest example of this, and want your investment to help them find alternative and greener sources of energy.
As with all pension options these schemes can be confusing. If in any doubt, speak to an IFA (Independent Financial Advisor) who will talk through the options available to you, and highlight the best choices for your needs.