Is your Pension worth a Human Life?
In this article we will discuss the following:
- The top 5 Pension Fund providers in the UK
- What size investments do they have in Public Equities & the Defense sector?
- Options for Halal Pension investments
- The Benefits of managing your own Pension
The Top 5 Pension Fund providers in the UK
Between them, the Top 5 Pension Fund providers in the UK have a cumulative £1,685 Billion (£1.7 Trillion) of AUM (assets under management) and the total Pension market size is c.£7-8 Trillion.
This is invested across a range of asset classes from Government Bonds, Publicly Listed Equities, Private Equity, Private Debt and Gold – with some smaller asset classes in between.
As you’re probably aware, most Bonds are not-Sharia compliant, rendering your pension Haram. But where I want to focus on is the Public Equity exposure – aka Stocks.
What size investments do they have in Public Equities & the Defense sector?
The table below shows the AUM of the top 5 funds and how much they allocate to Stocks, which is a lot less than what they allocate to Bonds. Of this, we can see that the top 5 alone invested £191 Billion into FTSE stocks as of 2023.
|Fund||£ Billion AUM||% Invested into FTSE Stocks||£ Billion Invested into FTSE Stocks|
|Legal & General Investment Management (LGIM)||600||10-15%||75|
|Royal London Asset Management||150||10-15%||19|
By extrapolation, this gives us c.£850 Billion of exposure by all UK Pension funds to FTSE stocks. Given the current market cap of the FTSE100 is only c.£2 Trillion, we did a calculation and even though 42 out of the 100 stocks are Halal, on a market cap basis, c.£1.5 Trillion of the 100 companies were not-Sharia compliant.
Therefore, on a market cap basis, roughly 75% of the FTSE100 is un-investable due to an ethical or financial issue.
Nevertheless, let’s assume Bonds are Halal, and let’s also assume the FTSE100 is Halal.
But let’s look at this from a Defense & Aerospace perspective – you know – the true “blood” of the UK Economy.
Given 5% of all FTSE stocks are in the Defense and Aerospace sector, this means anywhere between £30-45 Billion of UK Pension pot money is allocated to stocks like BAE Systems and other similar companies. This equates to roughly 0.6% of the whole Pension market.
What is further astounding, these companies have had a spectacular few years. The 3 year FTSE All-Share Aerospace and Defense index is up by >120%, and the 1 year index is up by 54%.
These are 10 stocks (5 US mammoths and 5 UK) which must be avoided in
any pension or personal investment fund:
- Honeywell International Inc (market cap: $159bn)
- The Boeing Company ($145bn)
- Raytheon Technologies Corporation ($119bn)
- General Electric Company ($119bn)
- Lockhead Martin Corporation ($109bn)
- BAE Systems (£34bn)
- Rolls-Royce Group (£17bn)
- QinteiQ (£2bn)
- Babcock International (£2bn)
- Serco Group (£1.6bn)
As Muslims, we have some serious questions to ask ourselves:
- Is our Pension serving our values?
- Is our Pension delivering results?
- Is our Pension worth a Human Life?
Options for Halal Pension Investment:
For Muslims looking to invest in a halal pension, several options are available:
- There are a few halal pension funds and investment options available to cater to the needs of Muslims who seek Sharia-compliant investment solutions. Here are two examples:
- HSBC Amanah Pension Fund (note however, that some have raised concerns that these funds have allocations to companies currently on the boycott list (a list of companies that actively support Israel). We will be investigating this fully in due course.)
- NatWest Islamic Pension Fund (note however, that some have raised concerns that these funds have allocations to companies currently on the boycott list (a list of companies that actively support Israel). We will be investigating this fully in due course.)
- Self-Invested Personal Pensions (SIPPs): With a SIPP, individuals can have more control over their investments and choose Sharia-compliant assets, such as Islamic bonds (Sukuk) and Public Equities that comply with Islamic finance principles.
Note: Consult with a financial advisor who specializes in Islamic finance to help structure a pension portfolio that aligns with your values and beliefs.
The benefits of managing your own Pension
Managing your own pension by tracking ETF’s can be a cost-effective option, but it comes with risks and responsibilities.
- Traditional pension funds typically charge an annual management fee of around 0.5% to 1.5% of AUM. Over 10, 20, and 30 years, if you started with £10,000, these fees would amount to approximately £1,244, £3,226, and £5,303, respectively, assuming an average fee of 1%.
- Managing your own Pension with ETF’s: If you opt for ETF’s, you might incur lower fees, typically ranging from 0.05% to 0.5% annually. Over the same time horizons, the fees would be significantly lower, amounting to approximately £124, £322, and £530, respectively, with a 0.5% annual fee.
That is 10x less fees, complete control over your long-term passive investments, and peace of mind that your Pension Pot is serving your values, giving you the returns you want, and serving humanity on your terms.
We must do a full audit of our current Pension pots and change strategies if needed. The current volatility in the markets, the global political and macroeconomic indicators point to a few difficult years. Now is the perfect time to take action and learn those skills needed to manage your own pension.
Don’t let your pension cost a human life.
Disclaimer: all statistics are as accurate as possible but should not be relied upon to make financial decisions. This article is for information purposes only.