Ask Jenny Ross: My retirement basket is not growing, what should I do?

Respond: It looks like you are paying into a defined contribution pension, the most common type of private pension where the money you pay is invested and the value of your pot when you retire depends on how much you have invested and how. the investment paid off.

The idea is that the money you invest will grow in the long run and leave you with a healthy retirement basket, but this is not guaranteed. All investments carry some degree of risk, so pensions can go up or down in value.

The fall of the stock market as a result of the pandemic, and more recently the war in Ukraine, will negatively affect the value of many pension funds. For savers who are still far from retirement, this is not a problem, as they have enough time to reverse bad results before they need to cash out their savings.

Unfortunately, this may not be the case for you. You don’t say when you plan to get your pension, but it’s more likely to be sooner rather than later if you’re 66.

Most pension contributors invest in their scheme’s “default fund”. They are intended for a wide range of savers, but tend to put your money into more cautious investments - not necessarily the best option for younger savers who are willing to take on more risk in the hope of higher returns.

But in your case, choosing a higher risk investment now may exacerbate your problem rather than solve it, as your pension will have limited time to recover from any drop in value.

Instead, the best approach for now is probably to sit back. The longer you can afford not to touch your pension, the more time it will grow, although again, this is not guaranteed.

Investment growth (or lack of it) is not the only thing that can affect the value of your retirement savings. Charges are also important. Although the performance of your investment will fluctuate over time, you will still have to pay retirement contributions. Even a seemingly small difference in costs can significantly affect the value of your bank over time.

Pension advisory firm Profile Pensions has calculated that lowering the general pension rate to 0.4% per annum from 1.2% could save you £18,239 over 20 years (based on a pension of £50,000 rising by five per cent). in year).

Programs must tell you how much they charge you, and you can find this information on your provider’s website or in your annual report. (While you check your statement, make sure that your contributions actually went to your fund - in case something went wrong). If you find that your costs are high, you may want to consider switching to a cheaper scheme.

The fees for self-invested personal pensions (Sipps) are significantly lower than the fees for other defined contribution pensions, but you need to be confident in your own investment decisions.

Before taking any action, consider talking to an independent financial advisor who can provide you with personalized advice to help you reach your retirement goals. If you’re concerned about the costs involved, there’s also Pension Wise, a free, unbiased government referral service available to anyone aged 50 and over with a fixed pension.

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