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The importance of good pension investments

Many people will rely on their pensions for an income in later life. And yet you wouldn’t be alone if you don't know where your pension is invested – or even that your pension is an investment at all.

With investment, your capital is at risk.

Let’s look at the importance of reviewing your pension investments and the big impact that the quality of your investments can have on your retirement. We'll show you how Bestinvest can help you answer the question ‘what is a good investment?’  

Your money should work hard for you

You have probably worked hard for your money, so it’s natural to want it to work hard for you in return. This means it is important to review your pension and make sure your money is held in high-quality investments that have the potential to grow for you over time. If it isn’t, you might want to make some changes. After all, the better your investments perform the more money you should have to enjoy in retirement.

But always remember that the value of your investments can go down as well as up. 

The difference good investments can make

Just how big of a difference can the quality of your investments make over time? We’ve crunched the numbers and created the chart below to give you an idea. It shows two £20,000 pensions left untouched for 30 years. The first has good investments that grow by 5% a year and the second has bad investments that grow by 1% a year.

The graph is based on investment returns of 1% and 5% per annum (exclusive of any fees which may vary from provider to provider), compounded annually. All figures quoted are for illustrative purposes only.

Over 30 years we can see the first pension growing to £86,439 – that’s £60,000 more than the second! Of course, not everybody has three decades to let their pension grow before they retire, but even over 10 years, the first pension outpaces the other by more than £10,000.

Keeping an eye on your pension

If you think your investments could be doing better, don’t panic – scroll down to find out more about how our Best SIPP could help. But even if they are performing well, it’s important to bear in mind that you still need to check up on your pension every once in a while. An investment might have been performing well in the past, but there’s no guarantee that it will continue to in the future.

Great investment options with Bestinvest

Our Best SIPP* gives you plenty of options to make sure your money is working hard for your future.

Search for investments easily

With our investment search tool you can effortlessly filter and search investments. Whether you want to focus on a particular investment style or geographical area, or you are looking for a specific company, it only takes a few clicks.

Need some inspiration?

If you’re stuck for ideas, have a look at our investment ideas. Download the latest edition of The Best™ Funds Guide to see the funds we believe are good choices for your pension investments (and any others!).

How to open a Best SIPP

It’s easy to open a Best SIPP and take control of your pension investments. If you have several pensions with different providers, you may wish to transfer** them into a Best SIPP by filling out this form. Our team will send you the paperwork and then take care of the whole transfer for you. We’ll even pay you up to £500 for any exit fees that your other providers charge (see our terms and conditions).

Or if you’d prefer to open a Best SIPP with a lump sum, you can get started with as little as £100.

Would you like to talk to a Coach about your pension?

If you’d like to know more about the Best SIPP or you have questions about your pension, just get in touch to see how we could help. You can call us on 020 7189 2400 or talk to a Coach about your pension with our pension specialists.

Further details

This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact a financial adviser.

*SIPPs are not suitable for everyone. If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you, then a SIPP might not be right for you.

**Before you consider transferring a pension, it is important to ask yourself: Will I lose any valuable benefits or features from my existing pension plan? Will I incur any penalties on my existing pension if I transfer? Is it an occupational final salary pension scheme? (In which case it is very unlikely to be advisable to transfer). Have I considered the charges on my current plan? (A new arrangement may be more expensive – especially if you have a stakeholder pension).

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