Within the field of ethical investing there are three broad approaches commonly used. Yet few people take a step back to question the ethics of owning shares – especially shares in large companies – in the first place. Trustee investment planning offers a whole new way of doing things. Trustee investment planning allows access to a far broader range of funds and possibilities than regular pension provision. For the ethical investor, this can be highly attractive, since even the most ethical pension funds are typically limited and inflexible. This article examines one point of view about ethical investing that argues that share ownership in large companies may be inherently problematic, and that such opportunities are therefore key when looking into pension planning.

Ethical investors generally take one of three approaches in selecting shares in which to invest. You can avoid companies that do harm – perhaps tobacco firms, arms manufacturers, and so on. You can take a more active approach, deliberately choosing companies that do good – perhaps sustainable power providers. Or you can invest in a company with the intention of using your voting rights to alter their practices, thereby influencing company policy to become more ethical. None of these actually question the ethics of share ownership per se. And yet – wherever you come out on the issue – this is an interesting question, and one that trustee investment planning happens to address quite neatly.

In theory, when you invest in shares you are giving your money to a company for them to use in their business – hopefully generating a return in the process, which you see in the form of dividends and capital growth. However, especially for the big companies, the market for resale of shares is so fluid and easy to access that there is arguably very little connection between your money and what the company does – it’s just moving pieces of paper around, or the electronic equivalent. Plus, people who invest in shares often do so for a comparatively short span of time (for some traders, this can literally be hours or even minutes). That means that their purpose is not to use their money to carry out the work of that company: it is to use it to generate a return that is not remotely linked to the business in question. In some cases the ‘investment’ is essentially a tool used to skim value off the company, rather than enable its work.

It might sound like a particularly strict form of ethical investing, but from this point of view the principle is that there should always be a direct link between your money and the work of the company: your return should actually be earned in some useful way. That’s where trustee investment planning can come in for pension provision, because it enables many more options than regular pension providers do.

Trustee investment planning works in conjunction with SSASs or SIPPs to give extremely flexible and diverse investment opportunities for retirement. Whereas regular pensions will rely on a limited number of big funds, with TIP you can invest in a far broader range of assets that you can precisely tailor to your ethical requirements. You can have shares in small companies – even unlisted ones – in which you have personal involvement, or in commercial property used by a specific business which has aims you respect and wish to support. On that scale, the direct, personal link between your money and the aims of the company is preserved: you know you really are doing good with it. (Unlike a normal private pension plan, you can also opt for ETFs – perhaps clean energy or a social index.)

Trustee investment planning is therefore a way to broaden your pension provision to include a vast range of assets that reflect your ethics in a very personal way. Your IFA should be able to give you more details about how to go about arranging this with a SSAS or SIPP.

This article was supplied by Norwich financial advisors, SGWealthManagement.co.uk who are registered with the FSA and serve individuals and organisations throughout Norfolk, East Anglia and the south-east.