The big retirement choice over 9 out of 10 people ignore

Source: Aegon Workplace Team

Do you know which fund your retirement savings are invested in? If you’re unsure, chances are it’s in what’s known as the default fund. 

Around 95% of people with workplace pensions are in their default fund*. For some, the default fund is a good fit for them. After all, when deciding on a default fund, employers choose one that, in their view, best meets the average needs of the population as a whole. 

Then again what if your needs aren’t the same as everyone else’s?

How well does a one-size-fits-all solution fit you?

Consider this. No one else in your workplace is exactly like you - same age, same family situation, same point in their career, same hopes and dreams.

Default funds provide a relatively simple solution for investors. But knowing if it’s the right fit for you depends largely on where you are on your journey to retirement and your appetite to risk. If you want more control over where your money is invested, you need to choose a fund that’s more tailored to your needs and that you feel comfortable with.

Do you have time on your side?

Take too little a risk when you’re starting out, and you might not get the benefit of all the years your pension could be growing. But taking too high a risk as you get closer to retirement, won’t keep you protected from peaks and troughs in the market. The key is to find the right balance for you. The value of an investment can fall as well as rise and isn’t guaranteed. You could get back less than you invest.

Only you can decide what’s best for you

How fast your savings grow - and how secure they are - is down to which funds your savings are in. 

The default fund is a balance of both. It might be right for you just now. Or you might prefer to shift focus one way or the other. 

It’s your choice -but remember the default fund is where your pension savings remain invested, together with the savings of your colleagues, for as long as you make no decision to switch. 

For advice as to whether a fund is suitable for you, please speak to your financial adviser. 

*the Pensions Regulator, DC trust data 2018-19