So do you know where your pension cash goes?

You can have a say in how your money is invested, writes Melanie Bien

Ask anyone in the street who their pension provider is and they might just be able to tell you. But ask them which funds their money is invested in and you are likely to draw a blank.

Ask anyone in the street who their pension provider is and they might just be able to tell you. But ask them which funds their money is invested in and you are likely to draw a blank.

Many of us don't even realise we have a choice: we assume the pension fund manager makes these decisions on our behalf. After all, surely this is what our annual fee is for?

But all money purchase schemes do offer a choice. And if you don't make a decision, you end up with the default option. This will result in your money being invested in a cautious, middle-of-the-road, balanced managed fund or, even mor e conservatively, an index tracker.

The default option is rarely the best one. A single type of fund can't suit all the different investors: it may be too risky for your own tastes or not exciting enough. When you near retirement, your investments will be shifted into safer havens such as corporate bond funds and gilts. While it is wise to take on less risk as you get older, again, these may not suit your particular needs.

Many pension holders who haven't got much investment experience end up with the default option because they don't know any better. However, Norwich Union, the UK's largest insurer, is hoping that its decision to launch a range of 21 new pension funds will raise awareness among clients and encourage them to think about where their money is invested.

The insurer's new range is certainly extensive, covering all levels of risk from low/ medium to high. Fourteen of the funds draw on the expertise of external managers, including Fidelity, Investec, Newton and Schroders. There are also three "unfettered" fund-of-funds, letting investors spread risk over a wide range of funds.

Norwich Union is also providing access to three of its own products - the Corporate Bond, Managed High Income and World Leaders funds. And investors who are comfortable with high risk will now be able to opt, as well, for Merrill Lynch's UK Dynamic fund.

This breadth of choice should mean that the pension accurately meets the holder's needs.

"We anticipate that the increased diversity of investment will prove to be popular with customers, giving them a wider degree of choice to meet their needs," says Iain Oliver, the head of pensions development at Norwich Union.

"The addition of these new funds is a significant step in the development of our pension offering. They have been selected to complement the existing range, giving access to a greater range of investment classes and policies from Norwich Union and a selection of managers."

But how do pension holders, most of whom have little knowledge of investment, pick the right funds? Could too much choice be more of a hindrance than an advantage?

Tom McPhail, the pensions research manager at independent financial adviser Hargreaves Lansdown, says the information we need is out there - we just have to look for it.

"There is a shed load of data about pensions on the internet, on websites such as our own or TrustNet's," he says. "Many intermediaries put a lot of qualitative analysis about funds into the public domain. You have to remember that you won't automatically get this from the pension provider."

He recommends that investors take stock of their pension fund at least once a year. A useful prompt is the legal obligation on providers to send each scheme member an annual statement setting out where their money is invested, how much their fund is worth at that time and what they can expect to get on retirement.

Generally, there are no restrictions on switching within your fund, although this hasn't always been the case.

Some providers still charge members a fee, usually about 1 per cent of the fund, so find out if this is the case. If so, you may decide it's not worth moving your investments around.

If you have a stakeholder, you won't be charged for switching.

While there is little point switching on a regular basis for the sake of it, it is worth considering moving your money if you've been stuck in an under-performing fund for some time. Mr McPhail points out that billions of pounds of pension money is tied up in funds that perform consistently poorly.

"It's time people took an interest in where their fund is invested, because the difference between good and bad performance is huge."

www.hargreaveslansdown.com; www.trustnet.com

Independent Partners: 10 top tips for retirement. Get your free guide here

Arts and Entertainment
Friends is celebrating its 20th anniversary this year
tvSeries celebrates 20th anniversary
Sport
Yaya Touré (left) and Bayern Munich’s Spanish defender Juan Bernat
footballToure's lack of defensive work is big problem for City
Voices
voicesApple continually kill off smaller app developers, and that's no good for anyone
Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

PROMOTED VIDEO
Sport
Wembley Stadium
footballNews follows deal with Germany
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Sport
Andros Townsend is challenged by Vladimir Volkov
football
Arts and Entertainment
Rapper Jay Z performs on the Pyramid Stage at Glastonbury in 2008
musicSinger sued over use of the single-syllable sample in 'Run This Town'
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Audit Manager Central Functions

    To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

    Credit Risk Audit Manager

    Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week