This can be a problem if we don’t understand how our pension money is being invested, then we will never really know if we are getting the best deal. If you want the type of retirement you have always dreamed of, then you need to stay on top of your pension and understand how your finances are being invested. We will not even attempt to go into the Social Security program(just a reference in the photo) in this article, because that topic could have a whole website dedicated to itself.
Get a proper pension review from your emploand ask an expert to talk you through your options. You may find that your pension review reveals that your current pension is not earning you much money and you could be doing much better. Sort out your pension now and make sure it is making your money work as hard as possible.
Where does it all go?
You pay your pension faithfully each month. The money goes out of your account and off to your pension provider. But what happens next? Many people have no idea what happens to their money and their pension fund and the whole process is a bit of a mystery.
There are many types of funds run by financing from pension investments. These funds can perform very differently. Two people could be paying the same amount into their pensions each month. One person’s fund could be performing much better than the other. This would mean that on retirement, even though they both paid the same amount in, one person will receive a much higher pension return to enjoy. Look into your pension now and work out just where your money is going and how you could be making it work harder for you! Also remember that each employer can have a very different pension structure for each employee based on years of service, salary level, etc.
Types of Funds
If you are unsure where your money is going then book yourself in for a pension review now. Your expert pension advisor will be able to talk you through your pension and help you understand what is happening with your money. There are many types of funds commonly used by pension providers.
This is a secure type of investment that is backed by UK and overseas governments. Government bonds are a way for countries to raise capital for various projects and initiatives. Investors will see only modest profits but in return these are generally very secure, low risk investment options.
These funds enable investors to buy into the ownership of companies. Company shares can be bought on the open market and are known as equities. This can be a highly profitable investment area but this is at a higher rate of risk. The equity market is volatile so to reduce this, the equity fund will hold a wide range of shares to spread the risk. This means if one company were to fail there would still be others to hold the fund together. Equity funds can bring big rewards, but there is also a higher possibility of a low rate of return as well if the fund does not perform as expected.
These investments are offered for those people who want more than just financial returns for their investments. Ethical funds invest in companies and initiatives that are socially or environmentally responsible. This means you would avoid investing in any companies in industries harmful to the environment or countries with poor human rights records. These funds can be volatile and there is a risk of poor return. This can be a good option, however, if you want to make more ethically valid investments with your money.
As a freelance writer Kay Brown knows just how important it is to keep an eye on your money. Find out more about pension review services and retirement advice now by following her on Twitter.