The recent Credit Crunch and economic downturn that followed meant that stock markets the world over have fallen. For many people saving for their retirement in a money purchase pension scheme this meant a reduction in the value of their pension funds.
If you have recently received your pension statement and are concerned by the poor performance of your pension fund then you should take action to put it back on track.
Is the default pension fund the right one for you?
Most members of occupational company schemes, as well as many members of a private pension plans, decide to invest in their scheme’s default fund. However, most default funds are fairly cautious and tend to under perform. While cautious investing may suit older members approaching retirement, younger members in their 20s and 30s should be looking for good capital growth and may want to take a more risky approach, while they still have time to make up for any losses.
The fact is that your scheme’s default fund may not be appropriate for your needs and if you’ve lost out from the recent Credit Crunch, then you may want to change your fund choice to try to recover your losses.
Unfortunately, all too often inertia and ignorance means that pension scheme members just stick to the default fund, when their investments could be better off in another pension fund.
If you decide to invest with the default fund it is vital that you understand how this fund invests. You should also look at the other funds on offer to see if they may suit you better. You should also regularly review your pension fund choice to ensure that your plans are on track. At least this way if you decide to stick with a particular fund (including the default fund) it will be because it suits you and your needs. To make the most of your pension plan you need to be pro-active and make information choices.
Pension Fund Options
Most money purchase pension schemes allow you to choose from a variety of investment funds for your pension savings, as well as offering the more cautious default fund. Each will have a different investment strategy. Some will track the FTSE 100 other, while others will be a managed fund made up from a mix of equities and other investments. There may also be specialist fund concentrating on one type of asset or lifestyle funds which will switch the range of investments to become less risky as the holder approaches retirement. Each fund will have their advantages and disadvantages, and may be more appropriate for you at different stages of your pension planning.
Ultimately, the size of your final pension pot will depend on how much you’ve contributed and the performance of these investments funds. To make sure that your pension savings are really working for your retirement you need to make sure that you’re investing in the right type of fund for your circumstances and retirement goals.
If you are unhappy about the performance of your current choice then you must look at other options and decide if you want to change your investment fund. As with any investment, it is up to you to monitor its performance and take action if your selected fund is under performing.
It may be time to turn to an expert
As your comfort in retirement rests on making the right decisions with your pension planning you may feel that you would like some help and advice – especially if you are disappointed with your current pension fund’s performance.
Now may be a good time to re-think your pension planning. If you don’t have a strategy in place then there is no time like the present to put one in place.
To help you with your pension strategy you may want to turn to an expert…someone who understands the confusing world of pensions and can help and guide you. An independent financial advisor will be able to help you identify your retirement goals and explain the options available to help you to achieve your retirement planning goals.
Next to buying a home, saving for your retirement will be one of the biggest financial commitments that you will make during your lifetime, so it should pay dividends longer term to review your pension planning with an expert and take action to keep it on track. To contact an independent financial advisor fill out the form below.