“And in the end it’s not the years in your life that count. It’s the life in your years” – Abraham Lincoln
Pensions and investments are important financial tools that can help individuals plan for their financial goals.
The aim of investing money in a pension is to help grow the money into a larger amount. After any contributions, this will have the biggest impact on how much you will have available when you retire. Find out about the investment options and what to consider when building up money in a pension. Pensions are long-term investments.
You can’t usually touch the money in your pension pot until the age of 55 at the earliest, and you might not need the money until much later when you stop working. This means you can invest the money differently from money that you know you’ll need in the short term, for example to pay a bill next month. When investments fall in value (as they do from time to time), it’s worth remembering that values do tend to go up over time although this is not guaranteed.
If you have several years before you’re planning to draw your pension, there could still be time for your pot to recover from falls in the stock market that occur in the short to medium-term. When considering pensions and investments in the UK, it’s important to seek professional financial advice and we can help you choose the right options for you.
For the money in your pension pot to grow so that it’s worth more to you in the future than it is now, it needs to outpace inflation.
If it doesn’t, the spending power of your money will go down. Even when inflation appears low, over the long-term those small increases can add up to a lot. This means your money today will buy a lot less in future years. Low interest rates mean that if you invest your pension pot in cash, you might even find that it’s earning less than inflation. This causes the real value of your pot to fall.
Inflation is particularly important to take into account for pensions as they can run for such long periods of time. This means you need to consider investment types that aim to produce better returns than inflation.
Most default funds are designed to do this for you.
Pensions and Investment advice is undertaken by Donna Bourne
The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.