Lee Mannion | Tuesday 12th April, 2022
If you have a workplace pension from your job, or you've set up a private pension yourself, you’ve probably found yourself wondering: where does my money actually go?
In this article, we’ll explain what happens with your pension contributions, why it’s important to be aware of where your money is going, and how to find out where your pension is invested.
While almost all of us have a pension, you may not realise that every time you (or your employer) pay into your pension, your money is being invested.
The savings you pay into your pension pot are used to invest in a pension fund on your behalf. Depending on what pension plan you’re on, and which provider you're with, your money could be used to purchase a wide variety of investments.
The most common investments inside the majority of workplace and private pensions are:
It’s possible that some of your pension contributions are going towards UK-based investments, with some also going towards companies or commodities from abroad. Different pension plans will allocate your savings differently, opting for various strategies for growing the value of your pension pot.
For example, here at Penfold, one of our saving options is our ‘Sustainable Plan’, designed to help people practice socially responsible investing. This plan only invests your pension savings into sustainable companies with a high ESG rating - allowing you to make a positive impact without sacrificing your pension’s growth.
For most standard workplace pensions, there won’t be too many surprises about where your money is invested. Although, you may have a hard time finding out the specific details of where your money really goes. More on that shortly!
Let's say you have £1,000 to invest. A banker comes to you saying he can invest your money for you, offering a healthy return. The only problem is, you won't get it back until you retire and he won't tell you where it's going. How would that make you feel?
For many, this is just what's happening with their pension.
The problem isn't with pensions. After all, they can be one of the best, most tax-efficient ways to prepare for life after work. The problem comes from the lack of visibility into your own, hard-earned money.
When it comes to finding out where your pension fund is being invested, it’s vital you're aware of the specifics of your own situation.
As we mentioned earlier, your savings could be used to invest in all kinds of things without your knowledge. More often than not, you’re putting yourself at a disadvantage by remaining unaware of what exactly you’ve invested in.
Here are three big reasons it’s so important to find out where your pension fund is invested:
It goes without saying that the goal of your pension is to grow your savings over time.
The more you invest and the longer you save, the higher the chances that your pension will grow. Of course, the performance of the investments inside your pension will have a significant impact on how much your pension will be worth when you eventually retire.
Ideally, you should aim to invest in things with high-growth potential, such as promising companies. But if you’re unaware of where your pension fund is going, it’s possible – even likely – that you could’ve invested in things like government bonds, which while less volatile, typically won’t grow as much.
To maximise the growth of your savings, you should make your own choices about where to invest.
Investing your money into a company whose policies or ethics don’t align with your own personal values isn’t something you’d knowingly want to allow. Unfortunately, it’s possible that this is happening right now.
When you don’t know where your pension is invested, you could be supporting businesses that aren’t following guidelines for sustainability or similar trends. If you’re particularly passionate about fighting the climate crisis, for example, you’d want to have enough control over your pension to ensure it’s going towards environmentally-friendly companies.
Of course, there are many more scenarios where your investments could conflict with your beliefs. With that in mind, it’s wise to gain a better understanding of your pension plan so you can take action if you’re unhappy with how your savings are being used.
Remember, your pension is your money, and it’s saving towards your future to give you an income when you stop working. The basic independence and financial autonomy that comes from knowing exactly where each penny of your savings goes shouldn’t be understated.
If you were paying into a savings account with a bank, but you couldn’t check your balance or didn’t how much interest you were earning, you’d be extremely frustrated. A pension is no different.
Of course, we’re not suggesting you check on your pension every single day. In our experience, a monthly or quarterly review is a great way to keep the peace of mind that your savings are working hard to set up a more comfortable life when you retire.
By becoming fully aware of where your investments are and how they’re performing, you'll have more control over your finances and be able to plan for the future more intentionally - drastically improving your odds of a happy retirement.
Although it shouldn’t be, finding out where your pension has been invested is a difficult thing to do. But there’s really no need for it to be this way.
Unfortunately, this is normally down to pension providers and fund managers burying the important information under pages and pages of financial jargon.
If you'd like to know where your pension is invested, here's what you'll need to do:
Start by digging out the paperwork you received from your pension provider when you started your job or opened your pension. If you have a private pension, this will just be a welcome pack or something similar.
If you didn’t keep that paperwork, you’ll have to contact your employer and find out who your company’s pension provider is. If you’re looking into a pension from an old job, be aware they may have moved on since you left. In that situation, you’ll need to find out who the pension provider was at the time you worked there. Penfold can help find old pensions.
Once you know who your pension is with, the quickest way to access the specifics of your pension plan is through an online account on the provider’s website. You’ll need your personal information for this, like your individual pension plan reference number, national insurance number, and various other details.
If you don’t know your own reference number, or your provider doesn’t have an online service, you’ll need to call them and speak to someone to find out.
Once you’ve logged in (or registered for) the online pension management service, you’ll find a summary of high-level information about your plan, your savings, the performance of your investments, and so on.
You’ll likely have to do a bit more searching in your account before you find the option to look into the details of where your money is invested. Once you do, it will take you to a ‘fact sheet’ for your pension fund.
Your pension fact sheet will contain plenty of financial jargon and charts, explaining the total size of the fund, the level of risk involved, the areas of investment, and so on.
The fact sheet also provides a breakdown in percentages of where you’re investment is going, but nothing more specific than, “global corporate bond,” or “small UK company,” or other vague descriptions like that.
To determine exactly where you’ve invested, you’ll need to investigate further. The fact sheet should contain a contact number, but this will often be the generic number for the company. More than likely, you’ll end up on the end of an automated phone system waiting a while before you speak to a real person.
From there, it will depend on how well you’re able to navigate your pension provider’s customer service team to track down the fund manager for your particular pension.
Even if you do end up speaking to the right person, you may still struggle to get all the information you need. And if you manage to make it through these steps without giving up, even when you do finally get that information, it will be presented in a way that’s hard to understand.
As mentioned earlier, the specifics of traditional pensions tend to be hidden in stacks of archaic, long-winded documents full of complex terminology that most people aren’t familiar with.
As far as we’re concerned, though, there isn’t a good reason why you should have to settle for this hassle. After all, these are your savings, and you deserve to know exactly where your money is going.
Thankfully, there is an easier way.
Today, there's one solution available that gives you quick, simple access to every aspect and detail of your pension, including where it’s invested and how it’s performing.
Here at Penfold, we believe everyone should have complete visibility into their savings. That’s why we’ve created a modern, easy-to-use digital pension platform that gives you full control of your pension at the simple tap of an app.
Our Explore Your Pension feature provides you with complete visibility into your pension. You can remove all the time-consuming paper-based processes and forget all the financial jargon. All you’ll see is a simple breakdown of your investments, including:
The intuitive Explore Your Pension dashboard also allows you to filter by countries, industries, and more, so you can go into as much or as little detail as you need. This level of transparency is particularly rare when it comes to pensions, which is exactly why Penfold was created.
Not only will gaining full visibility into where your pension is invested give you more financial independence and control, it has a number of other great benefits too.
For example, as an investor, you can use that stake in a company to have a positive impact on the future. With Penfold, your investment gives you the right to vote on the policies of the companies you’re invested in, empowering you to have a meaningful influence as an indirect shareholder in these companies
Your vote is counted with your fellow savers and sent straight to our fund manager, who will represent you in front of the company board at Annual General Meetings (AGMs).
When thinking about personal values and ethics, this is a great way for you to have a voice and shape the future that your pension is saving towards.
Whether you have a workplace pension or a private pension, you should always know where your money is and how it's being used.
More importantly, finding out where your savings are being invested isn’t something that should be difficult or stressful - despite the fact that it currently is the case with most traditional pensions.
We all deserve a quicker, easier way to track and manage our pensions, free from all the overwhelming paperwork and complicated processes. That’s why Penfold has launched this helpful service to make pensions simpler than ever before.
See how easy it is for yourself. Get started and take back control of your financial future today.
If you'd like to learn more about how your pension works and what you can do to maximise your savings, we’re here to help.
Check out our extensive library of jargon-free articles, offering advice to help you gain as much value as possible from your pension.