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Alistair McQueen, head of savings and retirement at Aviva, highlights the flexibility of modern pension investments: “Your pension choices aren’t set in stone. Most pensions allow you to adjust your investments at any time without any extra cost, which can alleviate concerns about getting started.”
Key considerations for building pension savings include:
Tax Treatment: Tax implications depend on individual circumstances and may change in the future. This content is for informational purposes only and does not constitute tax advice.
Defined Benefit Pensions: Members of defined benefit or final salary schemes generally don’t manage investments themselves; these are handled by professional managers. However, they may need to decide on additional voluntary contributions to boost their pension.
Defined Contribution Pensions: Members of defined contribution plans, including workplace and personal pensions, accumulate a retirement pot based on contributions and investment growth. Decisions about how contributions are invested are usually required.
Workplace Pensions: Contributions are typically invested automatically into a default fund selected by the pension scheme. If satisfied with this choice, members can continue contributing without further action. However, exploring available investment options might better align with personal circumstances.
Investment Choices: Many workplace pensions offer various investment funds. Some may offer higher growth potential but come with increased risk and volatility. Assessing each fund’s fact sheet can help determine the appropriate level of risk and potential return.
McQueen advises, “Each fund option should have a fact sheet detailing its objectives and underlying investments, along with an indication of risk. Higher-risk funds may yield higher returns over time, but with more volatility, while lower-risk funds offer stability but potentially lower returns.”
