Savers would be more engaged in their pensions if their scheme investments made positive contributions to society.
Legal & General's annual Defined Contribution member research found savers would contribute more to their pensions if private assets were invested in more sustainable assets.
Overall, 68 per cent of DC savers said they would feel more engaged with their pension if it was invested in assets like affordable housing and helping to address the housing shortage in the UK.
While 63 per cent cent said this would be the case if their pension was helping to drive the energy transition by investing in clean energy and 57 per cent said allocations to innovative tech companies would increase engagement.
Rita Butler-Jones, DC head at Legal & General, said: “Greater pension engagement is a puzzle the UK pensions industry has been trying to solve for decades.
"As we see growing allocations of pension capital to private markets, it is encouraging that when savers are aware that their pensions can be used to drive positive real world change, it fosters an increased sense of engagement, wellbeing and connectivity with their retirement pot.
"Private markets could therefore not only help to drive greater potential returns across UK pensions, but potentially greater member engagement and contributions too."
L&G also polled DC scheme decision makers about their attitudes to the future of their private market allocations, finding DC schemes were also prioritising these outcomes in their private market investments, with 80 per cent saying this trend is set to accelerate over the next two years.
The climate transition, digital transformation (including AI) and healthcare hold most appeal for DC schemes when considering thematic opportunities in private markets.
When it came to the environment, renewable energy was the main target for schemes with 87 per cent saying clean energy infrastructure was a focus.
While from a social perspective, half of schemes said social issues in private market investments will enhance long-term returns, with 43 per cent prioritising allocations to affordable housing.
Some savers were concerned about the risks of investing in private markets, particularly in the older generations.
Some 73 per cent of over 50s worried investing pension money in assets that could not be sold quickly could risk not being able to easily access the money.
The research highlights millennials and generation Z were particularly positive about using private markets into their pension portfolios.
Almost three quarters in these age groups said they would be happy if their money was being used to support affordable housing.
While 81 per cent of generation Z would be happy to pay more for a pension which was helping drive technology and innovation compared with 51 per cent of baby boomers.
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
