ESG Credentials Required For Sustainable Investment Returns
John Groarke, Retail Marketing Manager with Irish Life, notes that while 2020 was an unprecedented year for everyone, there was only a small reduction in pension contributions compared with 2019.
“We expect 2021 to move back to the growth we saw over the five years up to 2020,” Groarke adds. “This reflects the continued importance that self-employed individuals and business owners are placing on providing for their future and putting retirement plans in place. Throughout all this uncertainty, the need to provide an income for yourself when you retire has remained unchanging for most people.”
In Groarke’s view, the state pension needs to continue to be the bedrock of the pension system. “The current target of 33% of the average industrial wage is something we support, but the state pension must also be sustainable. We also strongly support changes which would recognise the role of those who work in the home or who work predominantly in non-paid, care-giving roles.
“Age-related contribution limits could be modified and simplified, and we would see these as part of wider changes to help make the pension system less complicated and attract more pension savers. We are not convinced that the post-retirement pension landscape really needs a new product, and we feel that the Approved Retirement Fund currently meets the needs of retirees. The most important thing for those in or near retirement is to get financial advice, and any product solution needs to fit in with this advice.”
Though many consumers are sceptical about greenwashing in financial products, Groarke contends that product and fund offerings that meet ESG requirements are not just part of a ‘green’ agenda, but are now genuinely seen as good investment analysis. “ESG factors are rightly becoming a central consideration of all major investment decisions, both by companies and individuals. Products that don’t have ESG credentials are probably not offering long-term, sustainable investment returns,” says Groarke.
One of the consequences of Covid has been digital innovation, and financial services has been no different. “A recent example of our digital product innovation is Smart Invest, our new investment app that allows people to invest and track performance with just a few clicks,” he says.
One issue where in-person expert counsel is advised is in choosing which option when drawing down a pension. The options are an annuity (income for life); an ARF (a pension fund that you can draw down incrementally in retirement); or some combination of these.
According to Groarke: “Both have pros and cons, and what option is best will depend on individual circumstances, such as other income, assets or liabilities, health, dependents, state pension etc.
The best option will depend completely on your own personal circumstances, and a good financial adviser will tailor the solution to meet your needs.”