Where is your pension invested?
You’ve done the hard bit - despite a busy career, debts to clear and a housing ladder to climb, you’ve been managing to put something aside for retirement as well.
By starting your pension saving early in your working life, you’ve given yourself plenty of opportunity to let investment returns build before you eventually retire. Unfortunately, if you want to maximise what you’ve saved your work is not quite done. You’ll need to top up your contributions when you can and take smart risks (because, of course, the value of investments can go down as well as up) with your money to give your pot the chance to grow.
That’s not always easy because your ‘pension’ is not really one pot of money - it’s likely to be several smaller pots across different schemes, particularly if you have changed employer over the years.
It’s a common situation
You probably won’t know how much you’ve got in each one - so you can’t know for sure whether you’re on track to meet your retirement savings target - but you also won’t know how they are invested. There is a risk that your money is not sufficiently ‘diversified’ across assets to help provide protection from heavy falls in one market, country or sector.
The chances are that your money will be in the ‘default’ fund option that every scheme offers. These days that’s likely to mean large ‘vanilla’ funds which invest across both shares and safer bonds - but there can still be big differences in how each default fund splits your money and such differences could have a big impact to your return in the long term. Different approaches can be correct - but they might not suit you.
What’s more, you’ll only know if a pension pot is invested correctly for you, if you know how all your other pots are invested as well. A riskier approach in one pot might be fine if you’re being cautious elsewhere - but it’s hard to know that when you have pots in several places with little oversight from month to month.
The problem can get more acute as you get close to retirement because you may wish to move you money into safer assets that have less chance of sudden falls in value.
It’s why more and more people are choosing to consolidate all of their pensions together in a Self-Invested Personal Pension (SIPP), where in a single online account you can see what you have saved, and where.
Is consolidating right for you?
As well as the ease of viewing and managing your pension money in one place, cost should be another consideration. There will always be some kind of charge for investing your pension money and this will influence the level of your pension fund over time so it’s important to consider the charges you’re paying on your old funds and compare this to the charges if they are held in one place. Once you know the costs you can decide whether you will get value by consolidating.
Make sure that you also check the details of your old schemes before you give them up. Some old schemes may have valuable benefits that will be lost if you transfer away - for example, early retirement options or final salary guarantees. If this is the case, it’s probably not in your best interest to transfer.
If you decide to transfer your pensions to a SIPP, it’s likely you’ll have a greater choice of investments. That of course can be great thing - but also off-putting if you’ve never taken active investment decisions before.
Fidelity Personal Investing provides easy to use investment selection tools for investors at every level of experience. If you want some help choosing a fund based on what matters to you, then the Pathfinder tool will point you towards a multi-asset fund that holds a selection of other funds picked and managed by experts.
For the more experienced investor, there are expert-recommended funds, including many discounted options, and Investment Finder will let you sort, filter, chart and compare a wide range of funds from leading providers and individual shares.
The value of investments can go down as well as up, so you may not get back the amount you originally invest. You cannot normally access money in a SIPP until age 55. Tax treatment depends on individual circumstances and all tax rules may change in the future. Pension transfers can be complex and pensions with safeguarded benefits and advised transfers are not eligible for this offer. Please read our pension transfer factsheet, cashback T&Cs and exit fees T&Cs.
This information and Fidelity guidance tools are not a personal recommendation in respect of a particular investment. If you need additional help, please speak to an authorised financial adviser. You should regularly reassess the suitability of your investments to ensure they continue to meet your attitude to risk and investment goals.
Be ready for whatever life may bring
Find out more about the benefits of bringing your pensions together in a Fidelity Self-Invested Personal Pension (SIPP)
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