Making your investment choices
If you decide to choose your own investments, there are a few things you should think about.
Spread your investments
Most financial experts agree that the best way to invest your pension savings is to have a spread of types of investment such as equities (also known as stocks and shares), property and cash deposits. So if one particular investment performs poorly, you won't be as badly affected. This is called asset allocation.
Think about how long you have to save. The amount you invest in each type of investment is affected by the length of time you have to save. For example, someone in their twenties might aim to achieve maximum growth by investing more in equity funds.
On the other hand, an investor with only a few months to go until they start taking their pension benefits might favour less risky investments such as cash.
Consider your attitude to risk
The value of all investments can go down as well as up, and you could get back less than you invested.
The more risk you're willing to take, the higher your potential return - but the greater your chance of loss.
Lower risk investments on the other hand offer greater security but lower potential returns. You need to decide how much risk you want to take with your pension savings.
To find out more about our seven risk categories and your attitude to risk simply complete our online Risk Attitude Profiling Questionnaire.
Decide how involved you want to be
If you want to do everything yourself we offer a carefully selected range of funds for you to choose from. If you'd like us to do the work, our Governed Portfolios and Lifestyle Strategies offer an 'off-the-shelf' solution.
Think about how long you have to save
How suitable a particular investment is for you depends in part on how long you have until you retire. For example, someone in their twenties will probably want to achieve maximum capital growth so may invest in more aggressive funds. An investor only a few months from retirement will probably want to take far less risk - or no risk at all.
Think about any specific requirements you have
You might want to invest in a particular geographic area or in small companies rather than multinationals. Whatever your requirements, it's possible to choose funds that reflect your preferences.
Monitor your investments regularly
It isn't enough to select appropriate funds at the start of your plan. You also need to monitor the performance of your funds regularly to make sure they suit your changing needs. This can help you consider how to protect your savings from market falls and also take advantage of growth opportunities.
Make sure you are paying enough into your pension
The amount you will need to pay into your pension will obviously be different for everyone. However, generally the more you pay into a pension plan, the more you can expect to receive when you retire. So you should try to save as much as you can, as early as you can.
For detailed information and to work out your personal requirements you should please speak to your financial adviser.
Published 2 April 2012