How to choose a pension fund

Once you know how pension funds work, next up is deciding which fund you'd like to use for your savings. In this article, we'll look at what you need to consider before you choose a pension fund.

How do I choose the best pension fund for me?

Choosing the best pension fund comes down to your unique personal circumstances.

Before deciding, it's a good idea to think about your age, desired level of involvement, attitude to risk and personal ethics.

Choosing a pension fund depends on your age, attitude to risk, ethics and how much you'd like to be involved

Are you willing to risk losing money by chasing high growth, or do you want to play it safe with less volatile investments? Would you like to have a say in where your money is invested, or would you rather leave it to the experts? Do you have any personal or religious beliefs that influence which investments you are comfortable with?

Here are some general guidelines to keep in mind.

Fund Breakdown

Start by taking a look at where the fund is invested. What kind of assets does the fund invest in (shares, fixed interest deposits, property)? What industries does it prefer? What is the ratio of risky investments to safer ones? Where in the world does the fund invest?

Answering these questions will help you hone in on what the fund is trying to do and if this matches your goals.

Fund Performance

It's also worth noting how the pension fund has performed in the past. Most fund factsheets will give you details on the fund performance, or you can look it up online if you have the fund name and code.

Remember, past performance does not always give a fair indication of how the fund will perform in the future. As with all investments, your pot value can go down as well as up.

Fees

Next, look at how much the pension fund will cost. In addition to the annual management charge from your pension provider, the fund manager may charge an additional amount for the day-to-day running of your chosen pension fund.

Penfold uses an all-in, single fee for each of our pension funds - so you know exactly how much it'll cost before you start saving.

Risk

A big factor in picking your pension fund is how comfortable you are with risk. While this will be personal to each of us, something that can be useful is to think about your age.

Generally, the younger you are, the longer you have to recover any short-term losses. This means a more risky portfolio may provide you with greater growth opportunities over decades of investing. If you’re older, you may want to invest in a low-risk option to reduce the chance of your pension decreasing in value just before you retire.

This is also why it’s important to check how many risk options your pension provider offers. As you age, you may want to switch your fund to a less risky option.

When choosing a pension fund, remember to check where the fund is invested. What kind of assets does the fund invest in (shares, fixed interest deposits, and property)? What proportion of the fund is allocated to each asset type? Is it spread across these assets to minimise risk?

Ethics

You can also choose to align your investments with your ethical principles. Many pension providers offer fund options where the objective is to seek growth as well as a positive impact on the environment and society. Your pension provider should be able to provide details on where your pension is invested.

At Penfold, we offer a sustainable pension option that invests your savings in companies with a sustainable impact, and a Sharia pension that invests only in companies that are compliant with Sharia law. You can also see exactly which companies your money is invested in at any time from your Penfold dashboard.

Choosing a pension fund

Now you know how to weigh up each fund, you're ready to look at your options. Your pension provider should be able to send you information about the fund options available to you.

Detailed information about each fund should be provided before you choose the fund or combination of funds you want to invest in.

Remember to look out for information on:

• the fund’s investment objectives
• management charges
• where the fund invests (normally broken down into country and type of asset or sector)

What pension funds does Penfold offer?

Penfold partners with BlackRock and HSBC to protect and grow your savings over the long term through a range of low-cost investments around the world.

Exclusive to Penfold, our default Penfold Plan offers 100% FSCS protection, pursues sustainability goals and is custom built to help boost your pension pot.

With Penfold, you have a few different options for your pension. You can see the full details of our pension plans here.

Lifetime Plan

The Lifetime plan aims to grow your savings early on, before gradually shifting to protect the value of your pot for retirement.

Managed by BlackRock, one of the biggest money managers on the planet, this plan automatically adjusts the investments inside your pension as you approach retirement. Your find will become less risky over time, helping you get ready for life after work.

If you're new to investing, or just want a 'set-and-forget' approach to saving, the Lifetime Plan is a fantastic way to sort your future.

A note on investments

At Penfold, our fund manager BlackRock invests your money in line with their MyMap strategy, which is specifically designed for long-term retirement savings. It's low cost, broadly diversified, and built to react to the market - so many ups and downs should fit into a level of risk that is comfortable for you.

This should give you the peace of mind to leave your investments in place for many years and not have to check them from day to day.