Members want a responsible investment strategy to deliver growth, but they also want to have trust in their scheme and ensure their savings are safe, according to research on Tesco’s defined contribution scheme members.
Speaking at LCP’s DC and Financial Wellbeing conference on May 10, Tesco’s head of group pensions Amy de Baat said when the scheme recently sought to incorporate responsible investment into its investment strategy, it engaged with its members to understand their priorities with a view to integrating them.
She explained: “The challenge we had is that responsible investment can mean different things for different people, and so we thought that this is a great opportunity to be able to engage with colleagues and ask them what responsible investment means for them.
“At the end of the day, we’re investing our members’ money, and so it felt right to ask them what was important to them.”
We’re investing our members’ money, and so it felt right to ask them what was important to them
Amy de Baat, Tesco
The research found that 90 per cent of members think it is important that a responsible investment strategy can grow their pensions as much as possible, 89 per cent said they want their money to be safe, while 88 per cent find it important that they can trust Tesco to manage their savings well.
Engaging with members on retirement savings
The scheme held several workshops for employers on all different work levels, ages and backgrounds, to try and get a broad opinion and explore some of the key themes.
Tesco also emailed a survey to colleagues to get broader feedback. By engaging with members in this way, the scheme was able to pull together a detailed picture of what responsible investment meant for people and have insight into the language they use.
De Baat said: “One of the key findings was that for most people, trust was very important. We know that most of our members invest in the default fund — they’re not investment experts — and they expect the employer to be able to set an appropriate fund.
“Growth and security were very important for them as well. So it meant that any changes we were to make had to be supported by in-depth financial analysis so that we were confident that what we were doing would improve member outcomes.”
It was also a great opportunity to be able to engage with members on pensions about something that they are very passionate about, de Baat added.
“We know that responsible investment is very important in terms of financial reasons, making sure you invest in good, well-run companies, but we also believed that it was something our employees would want us to look at,” she said.
“From a corporate perspective, it was very much aligned with the wider Tesco corporate objective in terms of our impact on the environment and the business making sure we were using our scale for good.”
The scheme saw it as the start of an ongoing conversation on pensions, particularly for the younger population who perhaps are not so interested in pensions but are very engaged in environmental planning.
Understanding the differences between the different ages was very helpful in terms of feeding into the scheme’s thinking, but is also something that the scheme wants to take forward in the future.
The future of the planet was most important to members aged between 18 and 34, those aged between 35 and 54 were most concerned about their children’s future, and the impact on their immediate community was most important to those aged 55 and over.
“It would be great when you’re then talking back to colleagues, youre able to tailor your communications to what’s important to different cohorts. We’re not completely there [yet] on the journey, but it helped us in terms of our future thinking.”
Incorporating members’ views into investment strategy
Once the Tesco scheme had all that data, the challenge was how to translate that into an investment strategy that directly correlates with what members said was important.
“We completely reviewed our investment strategy,” de Baat.
“It became quite clear early on that we were going to have to look at each of the different building blocks and make sure that it addressed our colleagues’ priorities.”
Less than third of schemes regularly track individual fund performance
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Tesco set a net zero target to aim for its investments to be net zero by no later than 2050, which de Baat said is “very much aligned to what colleagues are telling us in terms of their objectives to protect the planet”.
“We also reviewed our self-select range because, again, it was important that we addressed all colleagues’ priorities, and there was a recognition that different colleagues do have different priorities, but that we were looking at the whole thing in a holistic way,” she added.
“We’re starting to implement it over the next few months.”
