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More choices for your pension pot

Today, savers reaching retirement have more choices about how they use their pension pots to fund their retirement than ever before.

Previously, people purchased an annuity to guarantee a set figure for the rest of their lives, many now choose to invest their pension throughout their retirement years. The challenge this brings is to deliver a continuing income while ensuring they don’t run out of funds later in life.

Releasing your pension funds

A growing number of retirees are choosing to go into income drawdown, where their pension pot is invested and they take an income from it. Those who choose to invest will need to consider some practical points, such as whether they would like a fixed amount each month, or prefer to access ad hoc amounts as and when they need them. It’s also important for investors to consider how much risk they are happy to take with their money.

Risk

Investing means introducing risk to your money. Being prepared to assume a certain degree of risk can help you grow your cash. Conversely, there is, of course, the possibility that you could lose some or all your money. Stock market performance is unpredictable. Investing is all about adopting a longer-term view, diversifying risk, and giving your money time to grow.

Diversification

The key for drawdown investors is to build a diversified portfolio of funds which aims to produce a reliable dividend yield, without taking undue amounts of risk. In practical terms, this means investing across a range of sectors and stock markets to spread the risk. That way, a poorly-performing investment should not greatly damage your overall returns, and your money has greater opportunities for growth. A portfolio that includes a combination of different assets has been shown historically to perform better than one that is only invested in one type of asset.

Asset classes

The process of deciding where to invest your money is referred to as asset allocation. The main categories of assets are cash, equities, bonds and property, and each has its own risk profile. Once your portfolio is established, it’s important to schedule regular reviews so that your investments can, if necessary, be altered or rebalanced in response to economic and market forces.

If you want to take control of your retirement, please call Pension Works on 0808 164 2664 or click here to complete a contact form.

Please Note: The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

 

Disclaimer
The contents of this article are for reference purposes only and do not constitute financial or legal advice. Independent financial or legal advice should be sought in relation to any specific matter. Articles are published by us without any knowledge or notice of the circumstances in which you or anyone else may use or rely on articles or any copy of the information, guidance or documents obtained from articles. We operate and publish articles without undertaking or accepting any duty of care or responsibility for articles or their contents, services or facilities. You undertake to rely on them entirely at your own risk, and without recourse to us. No assurance of the quality of articles is given or undertaken (whether as to the accuracy, completeness, fitness for any purpose, conformance to any description or sample, or otherwise), or as to the timeliness of the publication.
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