Daily Express

Pen­sions knowl­edge gap

- By Har­vey Jones Business · Lifestyle · Money Tips · Personal Finance · Lifehacks · London · United Kingdom · Canada Life Financial Corporation

MIL­LIONS of us say our pen­sions re­main a mys­tery, with one in three savers not re­al­is­ing their money is in­vested in the stock mar­ket and other po­ten­tially volatile as­sets, such as prop­erty.

Many will have been shocked to see the value of their pen­sion funds fall dur­ing the pan­demic, as they did not know the risks they were tak­ing on. Nearly three quar­ters have made no changes to their pen­sion in the wake of Covid- 19, with many say­ing they would not know where to be­gin, ac­cord­ing to re­search from Team­spirit. Man­ag­ing direc­tor Adam Smith said this points to a gap­ing pen­sions knowl­edge gap: “How can we ex­pect peo­ple to check, mon­i­tor and en­gage with their pen­sions when they don’t know how to do it?”

Sep­a­rate re­search from Royal Lon­don shows that half of pen­sion hold­ers have never looked at where their con­tri­bu­tions are in­vested. An­drew Tully, tech­ni­cal direc­tor at Canada Life, said pen­sions are usu­ally in­vested in a com­bi­na­tion of shares, bonds, prop­erty and cash, both in the UK and world­wide: “You should never put all your eggs in one bas­ket, it makes sense to spread your money around.”

He said you need to work out how much risk you are tak­ing with your money, check­ing what your pen­sion in­vests in or ask­ing an ad­vi­sor to do it: “The higher the risks the more your pen­sion may grow, but with a greater chance of mak­ing a loss.”

Tully said pen­sions are a long- term in­vest­ment and you need some stock mar­ket ex­po­sure, de­spite the risks: “Cash is rel­a­tively safe but re­turns are low, es­pe­cially to­day, and likely to be eaten away by charges.”

Peo­ple who join their em­ployer’s auto- en­rol­ment pen­sion scheme are usu­ally in­vested in a de­fault fund un­less they choose oth­er­wise: “This may not be the best op­tion for ev­ery­one, so check.”

Tully said con­sol­i­dat­ing your var­i­ous pen­sions into one could make it eas­ier to man­age your in­vest­ments.

He also said to check whether your pen­sion plan op­er­ates a “lifestyle strat­egy”, au­to­mat­i­cally mov­ing your money into low- risk in­vest­ments in the fi­nal years be­fore re­tire­ment: “That may be out­dated now as un­der pen­sion free­doms many peo­ple stay in­vested in shares, us­ing draw­down af­ter they re­tire.”

If you have a fi­nal salary pen­sion you are for­tu­nate as there are no in­vest­ment choices to make, he said.

Stephen Lowe, direc­tor at re­tire­ment spe­cial­ist Just Group, said pen­sions are usu­ally set up to work for savers, even if they do not pay at­ten­tion to where their money is in­vested: “The money should still be well stew­arded and costs con­trolled.”

He said you need to be en­gaged when set­ting up your pen­sion, to work out if you are con­tribut­ing enough, and where it is go­ing.

“Check your an­nual state­ments to make sure per­for­mance is on track and you have set the right level of in­vest­ment risk,” he said.

You also need to pay at­ten­tion to all pen­sions af­ter you move jobs. Lowe added: “If you trans­fer your pen­sion, this must be done for the right rea­sons, so seek pro­fes­sional help to avoid scams or other mishaps.”

 ?? Pic­ture: GETTY ?? MYS­TERY: But it’s time to get to know your pen­sion
Pic­ture: GETTY MYS­TERY: But it’s time to get to know your pen­sion

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