Investments: things to consider now

While you were saving for your retirement, you would have invested in one or more funds that you and/or your financial adviser chose to protect or grow your money.

Investing your pot after you’ve taken your tax-free cash, or to take income from it as and when you need it, works in the same way.

However, you may find that your priorities and considerations change, along with your attitude to risk and reward.

What to consider now:

1. Your confidence levels when it comes to investing

   Are you happy making these decisions on an ongoing basis, and monitoring how your money is doing? Will you want to continue to do that on a long-term basis?

2. How and when you want to use your money in the future

   How you want to use your money later down the line will have an effect on how you choose to invest it in the meantime. Aiming to take cash in five years time, for instance, may require a different investment strategy to taking your money as a regular income in ten years. Thinking ahead is crucial when you make your investment choices.

3. Investment performance now and in the future

   Taking some investment risk can often be the trade-off for better returns – if the market does well so does your investment fund, and the opposite is true as well. If the market dips, so could the money in your pension savings.

   Generally, if there’s a market downturn, it can take 2 – 3 years for it and your investments to recover, on average. So the closer you are to needing to take income from your pot the more of an effect a dip in the market could have on you and your plans.

4. The impact of inflation

   There are pros and cons to each investment option, and where you choose to invest your money is all about your goals, how you want to reach them, and the type of risk and reward associated with different types of investment. For example, if you want to protect the money you have in your pension savings pot because you want to take an income from it over the short-term, you may decide that you’d like to consider investing some or all of your money in cash. That can be a good option, but it’s not right for everybody, or in every situation.

   Any money held in cash-based assets (even your bank account!) doesn’t always keep up with inflation over time. Any cash you have today may not be able to buy you as much in the future because of the impact of inflation. So while you haven’t actually lost any money, you end up with less buying power. Here’s an example of how that works:

   

   Make sure you know the pros and cons of each investment option. And speak to an adviser if you’re not sure.

5. What are the costs and charges of your investments?

   Investment funds have charges attached. These are for things like fund management and administration costs. Usually, these will be taken directly from your pension savings pot so you won’t have to pay anything upfront, but they will have an impact on your overall savings value over time. Make sure you know what these could be, and how long you might want to invest for, to get a good idea of the impact these charges could have.

   Remember: you can speak to a financial adviser to help make sure you get the most out of your investment strategy, and help you manage your future income.