Deciding where to invest
When it comes to investing your savings for retirement, you have the option to take control and choose your investment strategy.
If you’ve decided to choose self-select, rather than relying on the default option, you may want to think about the sort of strategy you will follow.
This will depend on how long there is until you are planning to use your pension savings and how comfortable you are in taking some risk with your savings as a way of increasing their growth potential.
What investments do you currently hold?
You can check what investments you have access to in your workplace pension by logging into PlanViewer. Go to ‘Funds’ and select ‘Fund information’ for a list of the funds in your account.
If you click on a fund name, you’ll be taken to its factsheet, where you can see its objective, performance history and risk rating, along with the top ten investments it holds.
An overview of investment strategies
Having a basic investment strategy can be a good foundation for choosing funds for your pension savings. It can help you focus on the types of funds you might want to choose. Remember, you don’t have to stick to the same strategy throughout your lifetime. In fact, it’s a good idea to regularly review your investments and goals and decide if it’s time to re-align your strategy.
A growth strategy
A growth strategy focuses on investments that have a better chance of producing higher returns over the long term. These investments will also involve a higher level of risk, and the value of your portfolio may fall significantly during times of market volatility.
Time is the key to a growth strategy. Because you are investing for the long term, your investments may have time to recover from any setbacks, and possibly go on to achieve higher levels of growth in the future.
This type of strategy may suit you if there is still a long time before you retire. However, you need to be comfortable with the higher level of risk associated with aiming for higher returns.
When choosing funds for a growth strategy, look at each fund’s objective and risk rating in its factsheet – typically the higher the risk, the more growth potential there is. A fund’s name may give you a clue as to what sort of investments it holds. For example, ‘equity’, ‘opportunity’, ‘special situations’ and international funds are likely to have a growth focus, but it’s important to read the factsheets and find out exactly which markets each fund invests in.
A balanced strategy
A balanced strategy aims to combine investments that offer high growth potential and a relatively high level of risk, with investments that offer more security. The idea is to provide some protection for the money that you have already built up in your pension, while making sure there is still some potential for growth in the years before you retire.
You can achieve this balance by combining different types of funds or simply by focusing on investment funds that offer a medium level of risk and growth potential.
While not as risky as a growth strategy, a balanced strategy still involves some risk. It may suit you if you are well on your way to retirement or are only prepared to accept a limited amount of investment risk.
When choosing funds for a balanced strategy, read their objectives in the factsheets and check their risk ratings – typically they will be M1 or M2. A fund may have the word ‘balanced’ in its name, or another description such as ‘bond’, ‘strategic’ or ‘multi asset’ but it’s important to read the fund factsheets and find out exactly what types of investments each fund holds.
A conservative strategy
A conservative strategy focuses on lower‑risk funds so there is less chance of your portfolio suffering short‑term losses. These funds may hold cash deposits and the more secure types of bonds. By moving away from share-based funds, you can help protect your investments from the danger of a sudden drop in the stock market.
The drawback with this approach is that the potential return from conservative investments tends to be lower than with higher-risk options.
A conservative strategy may suit you if you are approaching retirement and need to be confident about how much your pension savings are worth. However, it’s important to remember that even if the risk of losing money is relatively low, it may be replaced by the risk of inflation eating into the value of your savings. If you follow a conservative strategy when you still have many years before you plan to retire, there is also the risk that you simply won’t have enough to live on, because your pension hasn’t grown as much as you needed it to.
When choosing funds for a conservative strategy, read the objectives in the fund factsheets and check their risk ratings – the lower the risk, the more conservative the strategy. A fund may be called ‘cash’, ‘defensive’, ‘pre-retirement’ or ‘government bond’ but it’s important to read the factsheets and find out exactly what types of investments each fund holds.
You should remember that a cash fund can go down in value, partly because of its charges, so it is not the same as a deposit account.
You’ll find more help with choosing investments on our investing basics page.
It is a good idea to review your pension investments on a regular basis to make sure that they are still right for your retirement goals.
None of the information above is a personal recommendation for any particular investment or course of action and it’s important to remember that the value of investments can go down as well as up, so you may get back less than you invest.
If you are unsure about whether your investments are suitable for your circumstances, or you need advice on any of the options available to you, we recommend that you speak to a regulated financial adviser.
Want to change your investments?
Log in to PlanViewer to make changes to the funds you’re invested in.