Your portfolio
If you are under 40, you will have at
least 25 years before you retire and can
afford to invest your pension in a fund
that is almost entirely invested in the
stock market. It provides the greatest
opportunity to increase the value of
your money and you can weather the
dips because you have time to make
back losses.
In the five years to the start of 2018,
the 19,000 members of the Hargreaves
Lansdown workplace pension who
switched out of their company’s
default fund made
annual returns that were
4 percentage points higher
than if they had stayed put.
These savvy investors also
beat the average returns of
12 default funds from nine
workplace schemes, including
Hargreaves Lansdown’s own, over
one and three years.
Exiting your employer’s default
fund should be fairly easy,
even for inexperienced
investors. The scheme
is likely to have
a range
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“Adventurous funds tend to
provide higher investment
returns over time. However,
the performance is usually
more volatile. You may
experience larger and more
frequent negative returns in
the short term”
of funds, one of which should be
better suited to your need for higher
returns. You just need to ask.
Fiona Tait, technical director
at specialist retirement adviser
Intelligent Pensions, says: “Start
by asking your employer’s scheme
what investment options are
available. Some offer more
than one default choice,
for example between
‘cautious’, ‘balanced’ and
‘adventurous’ funds.
“Adventurous funds
tend to provide higher
investment returns
over time. However,
the performance
is usually more
volatile. You
may experience
larger and
more frequent negative returns in the
short term. These tend to suit younger
investors, who can afford to ride out
the dips in fund value.”
Most workplace schemes will also
offer a range of individual funds
invested in specific asset classes and
sectors. Choosing between these is
more difficult. As a rule of thumb, any
fund that invests more than 65 per
cent in the stock market provides the
opportunity for higher rewards (with
higher risks) than your company’s
basic default fund.”
Workplace schemes are unlikely
to provide access to individual
investments. “Should you have a
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