Helen Morrissey, head of retirement analysis, Hargreaves Lansdown: “A pension is the longest investment most of us will hold and yet not many of us even realise it. The latest research from Hargreaves Lansdown shows only 47% of pension-holders actually realise their pension is invested in the stock markets. A further 23% said that it wasn’t and the remainder were unsure. There’s also a clear gender gap, with 56% of men recognising their pension is an investment compared to just 40% of women.
To some extent this is understandable – people are auto-enrolled into a pension, and this can mean many do not actively engage with it. There’s also a language issue here - we talk about ‘saving’ into a pension, rather than ‘investing’ in one. It’s a confusion that must be dealt with if people are to make the most from their retirement, as investing is one of the best ways to build your wealth.
Your future self will thank you
Pensions cannot be accessed until at least the age of 55, and it’s precisely this slow, regular drip feed of contributions into the markets, over decades, that will see your pension money grow. Understanding how you are invested can really help you take charge of what you have. If you’re in a workplace pension, then you will be automatically enrolled into what’s known as the ‘default fund’. This will be invested across a diverse range of asset classes, and geographies and aims to meet the needs of most people. Taking time to check in on how your pension is performing from can give you the confidence of knowing whether you are on track for the retirement you want or whether you need to boost your contributions to bridge the gap.
Your pension, your choice
You also have the power to change your investments into something that better suits your needs. You may, for instance, want your pension to invest in a way that better reflects your values, and your provider can help you if you want to look at different options. You can log onto to your pension provider’s app or website and check the fund choices – it can take two minutes!
On the other hand, you shouldn’t let the fear of choosing investments stop you from contributing to a pension. Certain groups – for instance, the self-employed – are not covered by auto-enrolment and so need to make all the choices around which pension to go for and how it is invested from scratch. If this is the case, then check whether potential providers offer a hassle-free way to invest for your retirement through ready-made options, including the HL Ready Made Pension Plan, where you pick a solution based on your risk tolerance and let the experts do the rest. This can be an ideal entry point into investing, with the option of switching later as your investment knowledge and confidence grows.”
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