How to invest your pension savings
As part of the process of choosing a pension, it is important to consider how you would like your money to be invested. The majority of pension providers now offer a wide range of funds to choose from, which can include lifestyle funds or sometimes target-date funds and a choice between both active and passive investment management of your pension money.
Lifestyle and target-date funds
Lifestyle and target-date funds shift their investment profile as you move towards your retirement date. They start off with a higher allocation to equity investments such as shares and then move part or all of the fund to cash and bonds as they approach their target date. This can be good if you are likely to purchase an annuity at retirement but may be a bad choice if you are likely to leave the savings invested.
Active management provides you with a professional fund manager who will attempt to beat the market, whilst passive management provides a very low-cost route to achieving the market average.
With investments, generally the more risk you are prepared to accept will lead to higher returns over the long-term but also normally means more volatility (up and down movements), which can be very scary to the inexperienced investor and may lead to you making bad decisions should your investments fall unexpectedly.
Investing in cash and bonds to deliver a predictable return may seem prudent but over the long-term inflation could wipe out any gains you make. Whereas investing in property and shares is likely to give you a return over the long-term significantly above inflation, making your money work harder for you, but you have to live with the increased volatility.
When you save for a pension, you shouldn’t just focus only on how much you’re putting into it; you should also regularly review how it’s being invested. As you get older, it’s prudent to change your investment strategy to reduce risk as retirement draws closer.
The importance of seeking professional advice
Eastcote Wealth Management has years’ experience in this area and can help you to access the pension options available to you and help you to maximise your pension on retirement. Please be careful with your hard-earned pension savings and think very carefully before cashing them in or moving them. If you’re offered a scheme which seems too-good-to-be-true, it probably is. For further information, see www.pensionsadvisoryservice.org.uk/pension-problems/making-a-complaint/common-concerns/pension-scams.
Please do not hesitate to contact us if you would like to discuss your retirement options in more detail. Remember, we offer a free no obligation consultation and will be happy to help if we can. We take a holistic and long-term approach to wealth management, opting to build a lasting relationship with you and provide a tailored solution for all of your investments.
A pension is a long-term investment. The fund value may fluctuate and can down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. Occupational pension schemes are regulated by the pensions regulator.