If you don’t know where your pension is invested, you are not alone.
New research from Barings Asset Management has found that more than two in five adults (41%) cannot remember how they decided to invest their retirement funds when they last reviewed their pensions.
The number of adults who have never reviewed how their pensions are invested is also very high.
16 million people – 45% of non-retired Brits – admitted to never having reviewed their pension plans.
Understanding how your pension is invested is essential to good retirement planning.
By leaving a pension plan on autopilot, there is a real danger that you will be taking too much or too little risk to meet your retirement objectives.
As each of us has different goals for retirement, investment strategies within pension plans needs to be individually tailored to meet these goals.
Opting for a default investment option, such as a ‘managed’ fund, rarely results in the right outcome.
Even using so-called ‘lifestyle’ investment options poses real dangers to your wealth, as decisions to move into different asset classes can be made without reference to changing economic and market conditions.
We recommend to our clients that they review how their pensions are invested at least once a year.
This formal review process ensures that pension plans are invested to take changing objectives into account, as well as to reflect changing market conditions.
An annual review should include an exercise to rebalance the underlying asset allocation of a pension plan, to most effectively manage risk.
Do speak to us if you are unsure how your pension is invested and you want to make sure it is invested in the right funds to meet your retirement planning objectives.
Photo credit: Flickr/jugbo
