I've got a People's pension balanced investment profile. Is my Global Investments Fund a good choice?

06 August 2021

Question by Raquel

I've got a People's pension balanced investment profile, Global Investments (up to 85% shares) Fund. Is it a good choice? Should I choose a cautious profile Global Investments (up to 60% shares) Fund?

Answered by James Greenly

Hi Raquel

When picking the right investment approach for your Peoples Pension, you have two options. The first option is you can simply pick one of three ‘investment profiles’ – the three descriptions are:

• Adventurous
• Balanced
• Cautious

It appears to me as though this is the approach you’re currently taking, and you are in the ‘balanced’ profile. This portfolio is the default option when your pension is opened, so it may well be that you simply haven’t yet changed the investment approach.

What this means is that the Peoples Pension will automatically switch your investments into lower risk choices once you are 15 years away from retirement. The closer you get to retirement – the more defensive your investment become. This is often referred to as a ‘glidepath’ approach. Whether this approach is right for you will all depend on your individual circumstances, including how you plan to access your pension in retirement, and what other savings and investments you have.

You will be able to find a lot more information directly via this link: https://thepeoplespension.co.uk/investing-your-pension/

The second option is to ‘self select’ your own investments from 8 available funds. You can mix and match different funds or go 100% into a single fund.

For example, you could go 100% into the ‘Global Investments (up to 85% shares)’ fund, which is actually what you’re currently in – the main difference here is that you would stay invested in this fund and it wouldn’t automatically move into lower risk assets once you’re 15 years away from retirement.

I would only suggest you self-select if you’re comfortable with taking on the responsibility of your own investment choices. Over a long enough time period (minimum of 5+ years), history tells us that the more you have invested in global companies (equities), the higher your returns will be. We also know though that investing in the stock market can be a bumpy ride, so you will need to be comfortable with the prospect of seeing the value of your pension go up and down (life hack – the best approach here is to not check the value more than once a year!).

Once you’re still working and saving, volatility (the ups and downs of the stock market) is less of an issue, however once you reach retirement and need to start withdrawing a pension, volatility can become an issue. This is because most people typically take a monthly income from their pension, and if the stock market has a wobble (which we know it will every few years), then your pension value might temporarily fall, which could mean you need to withdraw slightly less to ensure the sustainability of your income.

This is not advice, and I would always suggest you seek advice from a qualified financial adviser. If you would rather not go down the route of speaking to an adviser, then I would say it’s best to stay in your current strategy. Having up to 85% in equities should give you decent long-term performance, and you have 15% in more defensive investments to help balance things out.

Make sure you do your research before switching out of the balanced profile – luckily there are not thousands of funds to pick, so by dedicating an hour and reviewing the fund fact sheets, you should be in a good position to decide if you want to ‘DIY’!

You can find the fact sheets here: https://thepeoplespension.co.uk/investment-downloads/

I hope this helps clarify things, however, please feel free to reach out if you need any more guidance.

Answered by

James Greenly

Chartered Financial Planner

I am a Chartered Financial Planner at Capital Asset Management, a boutique financial planning and wealth management firm based in the City of London.