How to get under the bonnet of your workplace pension
If you are an employee in the UK then the chances are you are an investor already – because you probably have a company pension.
Auto-enrolment has meant that more and more workers have some pension savings invested – and the minimum amounts contributed each month by both employee and employer went up at the start of the tax year, on 6 April 2018.
How much do you know about what is being done with your money?
Should you contribute more?
First things first: if you are not taking advantage of your employer’s offer to match a certain level of contributions then, providing you can afford to, you should do so – you are effectively turning down free money.
In matching schemes, the amount you save - up to a certain percentage - is immediately doubled by your employer’s scheme. That’s an immediate 100% return. You are not going to get that anywhere else.
Beyond that there are still tax advantages but it will depend on your overall financial situation and priorities.
Take control of how your savings are invested
It is worth finding out how your pension is being invested and deciding if it’s right for you…
Contact your pension provider – via your HR department - and ask for your account details. There will probably be an online portal through which you can access your pension savings account – if you can’t find your log-in details, ask the pension provider to send them.
Look at what your contributions are going into. There should be a run-down of the funds that have automatically been chosen for you, with the percentage of your monthly contribution that is going into each.
You will be able to see the asset allocation within each fund.
Usually the default option in employer schemes is a “conservative balanced” fund, with a high proportion in UK equities and government bonds.
Think whether this suits you. There should be a range of funds on offer and you can switch your current pot into ones that you prefer as well as setting future contributions to go into them too.
Your pension provider may offer general information to help you choose, or your company might offer financial advice in-house.
If you want to know more, here are five ways to get the information and advice you need to take control of your finances.
Take account of costs
Some funds charge more than others. Management fees can vary quite widely between active funds.
In general, actively managed funds - which try to beat the overall market - will also have higher fees than passive funds or “trackers”, that simply mirror a particular index or benchmark.
Keep on top of it
Make regular assessments as to whether you can or should pay more into your company pension, and whether it is still invested appropriately. Much of this will depend on your age and attitude to risk.
Read more: What can I invest in? Funds for beginners
Read more: Pensions: our guide to the basics