It’s never too early to start thinking about saving for your pension. It’s recommended that you start paying into your pension fund as soon as possible, so that you have a sufficient amount of money to live on once you reach retirement age. If you’re interested in making your pension contributions work as hard as possible for you, it’s important to look into investment options for your money.
Do I Need to Make My Own Pension Decisions?
If you have a stakeholder pension or a personal pension, you will usually have to make your own pension choices. This also applies to people who put money in a workplace defined-contribution scheme. Most pension providers will try to make your investment choices as simple as possible, and there’s often a default option so if you don’t make an active decisions, your pension will be invested in a broadly-appropriate scheme. If you’re a member of a workplace defined-benefit scheme, you can rely on your employer to take investment decisions and risks to help you get the amount of money promised by the scheme.
Main Pension Investment Options
Investment funds usually invest in a number of key categories of asset, including cash, bonds and shares. Look for an investment fund that broadly offers the investment strategy that you’re interested in. Details like the choice of specific assets will be handled by the fund’s investment professionals. Most people choose between funds that specialise in specific assets and those that invest in a mixture of different assets. Spreading and diversifying your investments is an excellent strategy for managing risk, and some people even decide to divide their pension savings between a range of specialised funds. Another option to consider is the ‘lifestyle fund’. This type of fund will move the balance of your investment into less risky options (bonds and cash) from higher yield, higher risk investments like shares as you near your retirement age. This allows you to take financial risks with your pension when you’re younger, but consolidate it safely later on.
Key Considerations When Choosing Investment Options
Always invest in shares, unless you’re close to retirement age. If you have a large pension pot, you should get in touch with a specialist wealth management service. A larger amount of money will require more careful management, more diversifying and more complex financial decision making. Before you decide on any one pension fund, check how much a couple of different funds charge. You can shop around for the best deal, just like with car insurance or a personal loan. Remember to review your investment choices regularly, including each time your personal circumstances change.