One of the best ways to help keep your pension plan on the right track to support your retirement is to make sure that where you’re invested is right for you and your goals.
So, here are some things to consider when choosing and reviewing your pension investments whether you’re just starting out, you’re getting closer to retirement or you’ve already started taking money out of it.
How much of a role do you want to play in managing your investments?
If you aren’t an investment expert or don’t have the time to manage your investments, you could consider a lifestyle profile.
These are ready-made options designed to make it easy for you to save for retirement. They start by investing in a fund or funds which aim to increase the value of the money in your pension pot over the long term. Then, as you get closer to retirement, they gradually and automatically move your money into carefully chosen funds designed to reflect how you plan to take it.
If you’re in your workplace pension scheme’s default investment option, you may already be invested in a lifestyle profile. At Standard Life, we have a range of lifestyle profiles to help you find one that best meets your needs, including how you plan to take your money in retirement and how you feel about risk.
If you know how you want to invest and want to be in control, then you can choose from a large range of funds covering different types of investments (known as asset classes), regions and investment styles.
If you go down this route, you’ll need to make sure you have the time to really commit to managing your investments. You’ll have to research options and, if necessary, move your money around. It’s also up to you to move your money into suitable investments as you get closer to retirement.
If you don’t have the time or the knowledge to do this, you may run the risk of your pension savings not meeting your goals.
It’s important to remember, the value of investments can go down as well as up and you may get back less than what was paid in.
Make sure you regularly review your investments - even in retirement
Whichever approach you choose, you should regularly review your investments to make sure they’re on track to meet your goals - even if you’ve already started taking money from your pension savings.
If you’ve already started accessing your pension savings, bear in mind that they’ll need to cover not only your immediate spending but also the money you may need to last you throughout your retirement. That’s why it’s important to make sure where they’re invested continues to support these goals.
How much risk are you comfortable taking?
Understanding investment risk is really important when choosing your investments. You should think carefully about how much risk you’re comfortable with and able to take with your money.
If you go down the DIY route, you'll be responsible for making sure that you’re comfortable with the level of risk your chosen investment options are taking.
If you choose to delegate and let the experts help you, think about an option that invests on your behalf within your chosen level of risk. Experts will then make sure this level of risk stays the same. And it’s generally easy to move to another option if your attitude to risk changes – in other words if you want to take more or less risk.
You can check how much risk you might be comfortable taking with your investments with our risk questionnaire.
Are your investments diversified?
For most people, it’s a good idea to balance out the amount of risk you take by spreading your money across a mix of investment types (like equities and bonds) and across different countries. This is known as diversification.
It means that if things go badly in one particular country or investment type, not all your money will be affected.
You may already be invested in a workplace default or another option with a diversified mix of investments. But if you decide to choose your own funds, you’ll need to make sure you’re suitably diversified by researching and picking different types of funds. You’ll also need to regularly monitor your investments and, if necessary, switch them.
You can check and review where your Standard Life pension plan is invested by logging in to online servicing or downloading the Standard Life app. You can also make changes to your investments if you wish.
If you’re still unsure about which investments are right for you, it’s a good idea to speak to a financial adviser. It’s likely there will be a charge for this.
If you don’t already have an adviser, you can find one in your area at unbiased.co.uk.
This article should not be regarded as financial advice.
The information here is based on our understanding in May 2021.