Should You Stay Invested in the Default Pension Fund?

Thanks to auto-enrolment, by the end of 2018 there will be 10 million more employees in the UK saving into a pension for the first time. But what will they be invested in?

Emma Wall 4 April, 2017 | 4:02PM

This week marks the end of one tax year, and the beginning of the new 2017/18 tax year. For investment ideas, back to basics education and advice from the experts read Morningstar’s Guide to Planning for Retirement.

Thanks to auto-enrolment, by the end of 2018 there will be 10 million more employees in the UK saving into a pension for the first time. But what will they be invested in? More than 90% of workplace pension scheme members are invested in the “default” fund. This is a one-size-fits-all scheme that makes investment decisions on behalf of members, pooled by their age group.

Simplified, the investment strategy is this; the younger you are, the longer you have until retirement, the larger proportion of your portfolio that should be in riskier assets. As the member approaches retirement, the default scheme will de-risk the portfolio on their behalf, moving out of stocks and alternatives and into cash and bonds, prioritising capital preservation over growth.

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About Author

Emma Wall  is former Senior International Editor for Morningstar

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