Here’s what I’m doing with my workplace pension

A pension is one of the most important long-term investments any of us will have, and ensuring it is invested as well as possible is vital.

Thankfully, even if you don’t want to make your own investment decisions, the money you put into workplace pension schemes is directed in the first instance into default fund options. That means retirement savings are invested in a way that is broadly appropriate, taking into consideration your age and how long you have until retirement.

But you may also have the choice of selecting your own investments. This will depend on the options offered inside your workplace scheme.

Recently, I switched my workplace pension from the default strategy into a selection of funds I handpicked.

A default pension strategy is designed to fit the average worker. They tend to be safer as employers want to preserve employee’s savings over many decades. But as a young person with lots of time on my side, and an interest in making my own investment decisions in the future, picking my own funds made more sense. 

This was prompted by a conversation with a more senior colleague. “When it’s your own hard-earned money, you’ll keep a closer eye on the markets,” he told me. And he was right. Although it sounded daunting in theory, I took the plunge. 

I ended up selecting eight funds. All of them are medium to high-risk funds, which works well for me as I’m still only 24. 

So, how did I justify my selection and allocation?

Well first, I looked to the basic investing principles for some guidance. Diversification is the foundation of a portfolio, so I opted for a couple of global funds and a multi asset fund where I gain exposure to multiple regions and asset classes. These made up the bulk of my portfolio. 

I also wanted to include a fund with low fees - a tracker fund is a perfect way in. I chose a UK-focused index fund which features large-cap companies including healthcare companies and oil giants - sectors that I expect to prove good value in the next couple of decades. 

From my research, I anticipate oil companies will increase their investment in renewable energy as the net zero deadline approaches, while the world’s aging population means healthcare and pharmaceutical companies will continue to grow. 

Since I’ll reach the retirement age in just over forty years, I wanted my pension to include exposure to developing countries. India caught my attention since it has a growing population of young people. The fund I chose offers exposure to the country’s tech companies and banks. 

I’m Muslim so I wanted to dabble in some Shariah-compliant funds too - though they do typically come with a higher cost. 

This isn’t my final selection forever, of course. I don’t want to tinker with my workplace pension too often, but I may well change my allocation as time goes on. I may even add some more riskier funds as my confidence grows.

I’m hoping to include some sustainable funds soon, although I’d like to research this area a little more as there are so many facets to sustainable investing. Greenwashing remains a concern when it comes to sustainable investing, so I want to ensure I put my money in the right place. 

The whole process was underpinned by research. I’ve been soaking up all the investment knowledge I can, keeping up with the financial news and listening to podcasts. I’m also looking at different fund’s investment objectives, portfolio breakdowns and performance.  

I’m learning that a lot of investing comes down to psychology. Losing money is not fun but I know I can afford to ride it out given I have such a long-time frame ahead of me. 

I’m glad I chose my own funds - it helps build my confidence as an investor and it means I’m putting my money where my mouth is. My fund choices may not be perfect, but the point is I’m engaged. I know I’ll make mistakes but I figure the time to do that is now, when I’ve got time to recover and the amounts involved are still small. 

But I can sleep easy knowing I have a small pot brewing away for future me.

If you’re looking to get more engaged with future you, you could consider opening a Self-Invested Personal Pension. You can save from as little as £20 a month and HMRC will add to each payment.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). Overseas investments will be affected by movements in currency exchange rates. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.