Your pension is not static - so do a health check

Pension reviews are essential
Michael Kennedy

HAVE you ever earned £1,000 for an hour's work?

You'd be surprised the number of people who have. They do it by meeting their financial adviser once or twice a year for a pension review.

Pension reviews are essential, because the pension company handling your workplace or personal pension doesn't just hold the money for you; it invests it onwards, with a large proportion of it invested in the stock markets via investment funds.

The problem is that not all investment funds are firing on all cylinders, meeting their investment targets and growing your money as strongly as they could for you.

This brings us to the investment research company Bestinvest, which keeps an eye on the investment funds where our pensions are invested, and allows financial advisers to see which are the strongest-performing funds, and which are not.

Bestinvest's latest report (August 2022) identifies 31 funds they classify as under-performers or ‘dog' funds. Dog funds are those which have missed their growth targets – known as their ‘benchmark index' – by five per cent or more in each of the last three years.

The good news is that funds companies are doing a lot better than they used to (there were 150 dog funds in January 2021), but our current batch of dog funds still hold a total of £10.7 billion. Three of these funds have over £1 billion each and are run by investment companies who rank among the household names in the finance industry.

Bestinvest, never ones to shy away from a cheesy dog metaphor, have described the situation as ‘pawful'.

If large amounts of your pension savings are invested in one or more of these dog funds, you are missing out on growth you would have had if your money had been in top-performing funds. Given how large and well-known some of the dog funds are, you could well be one of the many missing out.

You could call them ‘invisible losses' - the thousands of pounds you would have had in your retirement pot, if you had asked your financial adviser to fine-tune your pension once or twice a year to make sure your money was better invested.

There is an easy remedy to improve this situation, which is where that hour with your adviser could earn you £1,000 or even more, over the long term. Your adviser can lift the bonnet on your pension and check where your money is invested.

He or she can then switch your money into funds that are doing well, thus eliminating those invisible losses and turning them into visible and very measurable gains. Over time, the compound growth you gain will make a considerable difference to your financial outcomes and, ultimately, translate into a better lifestyle in your retirement.

Given that the difference between the best and the worst funds can be enormous, asking for a health check on your pension could mean you will have thousands more in your pension pot, when you come to retire.

As you see, your pension is not static. It is not something that can be chucked into the bottom drawer and forgotten about. Otherwise your savings could be languishing in under-performing funds for years, and you'd have no clue about the income and growth you're missing out on.

Perhaps it might be a good use of your time to ring a financial adviser and take a look inside your pension, to make sure your money is working hard for you?

:: Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005. Further information on Facebookat Kennedy Independent Financial Advice or at