The Default Fund: Where is your pension invested?

Do you know where your pension is invested and is it in the best fund for you? You may or may not be aware that all workplace pension schemes (WPS) are required to have a default investment fund which all scheme members are initially opted into.

Many people think of the default pension fund as a safe investment choice due to the levels of governance over the scheme. As an adviser supporting employers with the set-up and ongoing running of workplace pension schemes, we add an additional layer of governance to monitor the scheme for the benefit of the employees, as well as the scheme provider themselves, so I can see the benefit of this added safety net.

It is worth noting, however, that all investments do contain an element of risk and this can vary in default pension funds depending on how they are invested and managed. Some people are more comfortable with investment risk, with the idea of generating greater returns in mind, and some people are more concerned with what their investments are supporting – for example, the growing appetite for more sustainable investment options – therefore, the default fund may not be best suited to each employee’s preferences or circumstances.

However, the vast majority of WPS members are unaware that you have the option to change out of the default fund once you have joined the scheme. For those who are already aware of this, most choose not to, due to lack of knowledge and confidence in which funds to select, with the fear of making a ‘bad decision’.

This is where an Independent Financial Adviser can help. We regularly support scheme members seeking alternative options for their pension. From here we can look at the default fund itself and advise on other funds available to select from, based on their needs. Just as importantly, we can also assist in the ongoing monitoring of this suitability to ensure that it remains an appropriate option.

If you are looking to review your pension investments, or you run a business that may wish to look at alternative default fund options for your workplace pension scheme, please do not hesitate to get in touch to speak with an Independent Financial Adviser or corporate financial planning specialists on 0117 450 1300.