Pension investments: Six steps to follow when looking at your retirement savings

MoneyMagpie Editor and financial expert Vicky Parry warns you might be investing in companies you don’t like without knowing it

Most people let their pension invest their money for them with a pre-selected fund type. This makes it easy to ‘set and forget’ their investments and wait for their money to grow over time for a comfortable retirement.

But with recent global economic upheaval, and a spotlight on consumers pushing back on companies such as Tesla, now is a good time to investigate where your pension funds are invested. Being invested in a rocky company or industry isn’t great for fund growth – especially if that sector or company doesn’t align with your personal values, either.

Where is Your Money?

The first step is to find out where your pension funds are invested. This is usually quite easy to do online if you have an account where you can look at your personal pension details.

However, the individual funds may not be available to see. For example, Nest invests in over 2,400 funds – which aren’t listed on the account dashboard. You can, however, get in touch with your pension provider to find out more.

Fund investments do change over time. The information you receive will be a snapshot of where your money is invested on that day; you may want to set yourself a reminder to check every few years if you want to be conscious of where your money continues to be invested.

READ MORE: Cadbury makes Freddo chocolate smaller as price stays the same in supermarketsREAD MORE: DWP to drop key policy under major benefits changes

Workplace Doesn’t Mean Best Place

Hands up if you keep your pension in the same place your employer chooses! Most people will use their workplace pension and assume it offers the best value for money as well as investments that align with their beliefs.

However, pension providers are not equal. Workplace pensions are often chosen because they are cheap, which is great for those who want to ‘set and forget’ on low platform fees over time. But this means they might not be getting the best investment for their money – or their ethics.

This doesn’t mean you should ditch your workplace pension. However, you can have more than one pension pot with different providers. Shop around for one that aligns with your beliefs and offers value for money with platform fees. Then, set yourself a reminder to regularly move money from your workplace pension pot (that your employer tops up with their contributions) into your preferred provider.

Doing this means you won’t miss out on the tax relief and employer contributions of your pension. If you simply opt out of the workplace pension, your employer won’t be required to top up your contributions – so you’ll miss out on free money to invest! Make sure you keep your workplace pension and simply regularly transfer your funds across to your chosen provider, instead.

Ethical Investment Funds

If you don’t want to choose individual funds or get into the nitty gritty of where your money is invested, there is a simple option. Most pension providers now offer an ethical investing fund, sometimes called a green or eco-friendly fund.

An ethical fund takes into account where your money will be invested. It won’t, for example, invest in funds that damage the environment such as the oil industry. Instead, it might invest in green energy companies. Some funds also look at societal impact of funds on communities around the world, too.

Pick the pre-selected ethical fund from your pension provider if you want to know your money is doing good in the world but you don’t want to fuss with individual investments.

Assess Risk Based on Your Retirement Goals

There is a caveat to ethical funds, however. They are still quite new, and the technologies and sectors they include have less market stability than other fund options. This is because of the very nature of ethical investing: green technology is exciting, but tends to be more volatile to political will and is not as ingrained in world infrastructure as other sectors like oil and gas.

Ethical funds also come with a premium price tag, partly because of the constant shifting requiring a more hands-on approach to investment by fund managers. This means they can cost you more in platform fees than other options.

Ethical or sustainable funds are best suited to those with more than ten years to retirement, to allow for market instability. If you’re coming up to retirement in the next decade, consider your appetite for risk versus the need for a solid retirement fund.

Look at Alternative Investing Strategies

There is another option to ethical investing for your retirement. You can choose to leave your pension funds where they are, especially if you’re happy with the provider and you know your money isn’t invested in a company in direct opposition to your personal beliefs.

A stocks and shares ISA allows you to pick and choose funds for your investments. Again, you can opt for pre-selected funds, but you can also include individual stocks and shares from companies you wish to invest in. Your growth is tax-free, as is any money you withdraw from an ISA (unlike a pension, which is only 25% tax-free).

Diversifying your financial products like this means you have options to choose where your money is invested and be far more hands-on about it if you would like. It also means you can plan ahead for tax-free income from your ISA at an earlier age than you can access your private or workplace pension, making it ideal for people who want to consider early retirement or build a lump-sum for an investment like a buy-to-let property for retirement income.

Speak to an Independent Advisor

The best thing you can do when it comes to ethical investing is to speak to an independent advisor. You should speak to advisors at your pension provider first, to understand where your money is invested. And, when you have this information, it’s worth spending the money to sit down with an independent advisor who can go through your personal circumstances and financial goals, to work out the best way to invest as ethically as you wish.

Some of the brands and websites we mention may be, or may have been, a partner of MoneyMagpie.com . However, we only ever mention brands we believe in and trust, so it never influences who we prioritise and link to

READ MORE: Surprise sale slashes cordless Dyson V11 price with £100 freebie included