PensionBee planning to roll out fossil fuel-free fund

The move would make the online pension platform one of the first UK pension providers to go completely fossil fuel free

PensionBee is planning to roll out one of the UK's first mainstream fossil fuel-free funds by the end of this year after receiving £31m in fund commitments from customers in under a week.

Since the funding campaign began on November 12, the online pension platform has already received almost a third of the £100m needed in order to offer the pension at an annual fee of 0.75 per cent, it said on Tuesday.

The fund would ban companies with proven or probable reserves in oil, gas or coal, while increasing investment in companies that are aligned with the Paris Agreement, PensionBee said.

The online pension provider first announced it was developing the fund in partnership with Legal & General (L&G) in March. The move would make PensionBee one of the first UK pension providers to go completely fossil fuel free.

The PensionBee platform already invests in L&G's Future World Fund which seeks to engage with fossil fuel companies to get them to change their business practices and carbon footprint over time. But a survey of its customers in early 2020 revealed that many thought the time for engagement is over, with 34 per cent of people wanting to exclude oil completely.

We had people before who wanted to remove fossil fuels from their investments for ethical reasons, but since Covid-19 we now have a growing a growing population of people who think that the financial future of oil is quite uncertain, Clare Reilly, chief engagement officer at PensionBee.

As a result, she said PensionBee would offer two different approaches to tackle climate change: divesting completely from fossil fuels or engaging with those companies.

There are still going to be customers that want to continue to engage, because obviously once you take your money away, you lose your voice and seat around the table, said Reilly. A lot of people still believe that we need to engage with oil companies to get them to change their business models - and certainly we want to still offer that option to our customer base because people are still undecided on how we get oil companies to stop.

The fossil free pension fund will track the FTSE All-World TPI Transition ex FF ex Tobacco ex Controversies index, which was launched in early 2020 as part of collaboration between the Transition Pathway Initiative and the Church of England.

The future of pensions is sustainable investing and this is how we engage people in pensions and how we give them a sense of agency and power over where their money is invested, added Reilly.

It follows PensionBee's analysis of its customer base earlier this year which found 52 per cent wanted to balance making money with creating positive social outcomes, and a further 16 per cent would even consider removing certain companies from their portfolio that focus solely on profit at the expense of social outcomes.