05/06/2025
Are You Working Harder Than Your Pension?
Most folk don't know that their pension might be silently drifting into lower-risk investments, well before they actually retire.
In fact, 90% of people are in their pension schemes default fund which may also include a "lifestyle strategy", (Investing Insiders).
This means your money starts being moved out of shares/equities (which are the engine for growth) and into things like bonds and cash as you get older. For some schemes, this starts 15 years before retirement!
At first glance this might make sense...
But here's the catch...
๐ Lower-risk investments usually mean lower returns
๐ If those returns donโt beat inflation, your money is losing value over time
๐ Retirement isnโt one day โ your pension might need to last you 30 years or more
In years gone by retirees would effectively sell their pension pot to an insurance company in return for an income for life (known as an annuity)... So having greater certainty over how much was in the pension through low risk investments was sound.
But nowadays more and more retirees are opting to draw their income from their pension gradually (known as flexi-access drawdown).
This means your money likely needs to keep growing after you retire, not just before.
If your pension is playing it "safe" too soon, there could be a significant amount of growth left on the table.
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Things you can check today:
โข Are you in your default fund?
โข When does your pension start moving into lower-risk assets?
โข Is your mix of investments right for your long-term goals?
๐ฉ Not sure? I can help.
Iโm an independent financial adviser โ no jargon, no pressure. Just practical help to make sure your pension is working as hard as you are.
โ ๏ธ Risk warnings:
- This post is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
- The value of pensions and any income from them can fall as well as rise. -- - You may not get back the full amount invested.
- Past performance is used as a guide only; it is no guarantee of future performance.
- Drawdown pension plans (unsecured income) are complex and are not suitable for everyone. Pension decisions can affect your income for the rest of your life (and that of any partner and other dependants).
- Where benefits are accessed on a flexible basis, these are not fixed or safeguarded for life. If security of income is important to you then you should consider purchasing an annuity or taking a scheme pension to provide a secured level of income.
