How to check and choose your pension investments

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When money is paid into a pension plan, it’s invested. But how do you check where your money’s going? How do you choose your investments? How do you stay calm when markets aren’t doing what you’d like them to? Find out today.

How do you check your pension investments?

If you have a defined contribution pension plan, money that’s paid in is normally invested in one or more ‘funds’. Your funds might’ve been chosen for you automatically if you got your plan through your job, or you might have chosen them yourself.

The fund(s) you’re in could be made up of different investment types, including equities (shares in companies), bonds (loans to companies or governments) and property from around the world. You can learn more about different investment types in our guide.

If you have an online account with your pension provider, or you use their app, you can usually review your investments by logging in.

What should you think about when choosing pension investments?

There are different things to consider when choosing pension investments, including:

• How long you think your money will be invested (the longer it’s invested, the more opportunity it has to potentially grow)
• Your retirement goals and how long your money needs to last 
• Your attitude to risk 
• Your personal beliefs – for example, some people avoid investments related to the tobacco industry
• The charges you'll pay to invest in a particular fund 

With higher-risk investments (like equities), you can potentially see more growth over the long term, but their value might go down and up more frequently and dramatically. Lower-risk investments, like particular types of bonds, are less likely to see drastic decreases in value, but you might not experience particularly significant growth with these.

So if you’re, say, in your 20s, you might feel happier with some higher-risk investments, as your pension plan has more time to potentially recover from dips in the market. But if you’re going to be taking money out soon, you may be more comfortable with a more balanced approach across different investment types.

How do you choose your investments?

You may be able to choose (and change) your investments through your online account or your provider’s app. If not, get in touch with your provider. You’ll usually be able to see how investments have been performing and some sort of rating to help you understand how much the value might go down and up.

The investment options that are right for you depend on your circumstances and how involved you want to be.

Your provider may offer 'ready-made' options, where investment managers do all the work for you.  As you approach your chosen retirement date, the investment managers usually move your money into different investments to try to reduce the downs and ups in your pension plan, while preparing your money for retirement. You might see some ready-made options being referred to as 'lifestyle profiles'.

Or you might prefer a do-it-yourself approach, where you pick your own investments from a range of fund options run by your provider’s chosen investment managers. If you go down the DIY route, you won’t be moved into different investments automatically. You’ll need to check in on your investments to see if they’re performing in a way that lines up with your goals. 

When making any decisions about your pension investments, it’s important to think carefully. Your choices will impact how much money you end up with in retirement.

How do you stay calm when things aren’t going your way?

Investment markets around the world can go down as well as up – in other words, they can fluctuate. 

Try not to panic when markets fluctuate. It’s worth reminding yourself that history has shown markets can recover from falls. Just be aware that past performance is not a guide to future performance.

If markets are fluctuating and you’re seeing the value of your pension investments go down, you might be tempted to take your money out. But if you do this while your investments are down, you’re not giving your pension plan an opportunity to potentially recover from those losses (though recovery isn’t guaranteed). This means you’re potentially ending up with less than you otherwise could’ve had. 

Or you may panic and want to move your money into different investments. But it might be worth taking a step back and trying to give your pension savings an opportunity to recover, as those market dips could just be short term. So consider what’s right for your circumstances.

If you want more support with investing, you could get advice from a financial adviser.

Has the most recent UK general election caused market fluctuations?

Elections can cause markets to fluctuate over the short term, especially if there’s lots of uncertainty around who might win. But it’s helpful to stay calm and try not to let this influence your decisions too much. 

Labour won the latest UK general election, as polls predicted – and the result hasn’t had much of an impact on investment markets (although this could change over time).

Speaking of the new government, if pension-related changes are put in place in future, we’ll be sure to keep you up to speed!

 

The information here is based on our understanding in July 2024 and shouldn’t be taken as financial advice.

A pension is an investment. Its value can go down as well as up and you may get back less than was paid in.