Once upon a time it would be fair to say that few people took their long-term approach to retirement seriously. Fortunately, and this might be due to the focus on pensions and similar topics from the media, this is changing for the better. People are starting to take a more proactive approach to their post-work future, thinking about everything from paying for their funeral early, to looking into elderly care plans.
The problem is, anything focusing on long-term financial plans is something of a minefield. It’s for this reason that this guide has been put together, as we will now take a look at some of the key considerations that you should bear in mind as you make your next pension investment decision.
Play the long game
If we were talking about some other forms of investment, there might be a very different answer to this point. However, as we’re on the topic of pensions today, there’s only one goal. And that’s to save for as long as possible.
As we all know, the average age is increasing. This means that we actually need more money now than we ever have done in later life and as a result of this you need to focus on investments that are designed to be used for a long period of time.
The best advice in this regard is to invest in shares. Sure, the likes of cash and bonds are regarded as very low-risk, but at the same time they aren’t going to prompt huge long-term growth.
Shares meanwhile have a history of performing very well in the long term. Of course, there are a few more risks associated and there’s no guarantee that they are going to continue to perform like this, but if we are basing our decision on historical statistics there’s no doubt that this is currently the best option.
In truth, it doesn’t matter if we are referring to pensions or another form of investment, it’s absolutely crucial to diversify your portfolio.
On the plus side, this step may have already been taken care for you. If your pension is within a basic managed fund, there’s every chance that it is already diversified.
On the flip side, if you happen to have your pension based in highly specialized funds, it tends to mean that the money is concentrated in one area and you should look into how you can split this up.
Pension funds don’t tend to be free
This is something that’s often forgotten about, but like the majority of investments you will usually have to pay for the privilege for having a pension.
This is something that you have to accept; it’s the way the world works. Something that you don’t have to agree to is the scale of the charges though. Like most financial products, some fees are more competitive than others and you should bear this in mind when you shop around for your next pension.