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.
