Principles of looking after a pension............

Choosing your investment funds carefully
Investment funds vary enormously in the amount of investment risk the managers take and in the returns produced. Because of the compounding effect, just a few % points extra return per annum can have a large impact on the eventual size of your pension.
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Reviewing fund performance regularly
Many factors can alter the investment return of a pension fund and most occur without the investor being aware. Some of the more obvious are a change of manager, a change of owner (e.g. sale of one Insurance company to another), a change of fund objectives and risk profile. It means that a fund giving an acceptable level of investment return can over time change to one giving a very poor level of return. >>More info...

Having a mix of assets appropriate to your “attitude to investment risk”
The main asset classes available are deposit, fixed interest funds, commercial property funds and equity funds. Each has their pros and cons. Long term equities have always given the best return but are subject to the ups and downs of the market. Deposits have always given the worst return in the long term but are absolutely stable. A mix of assets is needed reflecting the amount of investment risk you are comfortable with. >>More info...

Managing the investment risk
The investment risk of your pension portfolio is defined by the proportion you have in the different asset classes, but this is not static. For example, your attitude to investment risk might mean that an appropriate mix of assets for you would be 50% in equities, 25% in property and 25% in fixed Interest. In a period of good equity returns this could soon become 75%+ in equities. This asset mix is inherently less stable and is now inconsistent with level of investment risk you are happy with. The portfolio needs to be “rebalanced” to bring it back to an asset split that is consistent with your attitude to investment risk.

Protecting your savings as you near retirement
The investment risk needs to be reduced as you approach retirement - the last thing you want is a market downturn knocking 30% off your pension just before you retire. Some pension contracts will do this automatically, most don’t.