In our weekly series, readers can email in with any question about retirement and pension savings to be answered by our expert, Tom Selby, director of public policy at investment platform AJ Bell. There is nothing he does not know about pensions. If you have a question for him, email us at [email protected].
Question: I’ve been saving regularly for the past decade or so in my workplace pension. I haven’t really got any knowledge of investments, so I’ve just kept my money in the “default” fund, which has performed quite nicely despite the chaos which seems to engulf the globe every couple of years. However, I’ve been reading about these so-called “Mansion House” reforms and I’m worried my pension might be about the get riskier. Is there anything I can do?
Answer: If you are employed in the UK, chances are you will be automatically enrolled into your workplace pension scheme and investing your money in that scheme’s “default” fund.
This is an investment vehicle designed to meet the broad goals of the entire scheme’s membership and as such will not be tailored to your personal goals or risk preferences. Each auto-enrolment default fund will take a slightly different investment approach, but all have to meet certain government-mandated standards, including complying with a 0.75 per cent charge cap.
square MONEY Should I withhold my son’s inheritance until he’s more responsible with money?
Read More
Every pension scheme used for auto-enrolment must offer its members a default fund and, if you do not choose to opt out and you take no action, this is where your retirement money will be invested. Some schemes will offer a choice of alternative investments, such as higher-risk funds or funds that aim to align with certain environmental, social and governance, or “ESG”, goals, but they are under no obligation to do so.
If you haven’t already, it’s worth checking to see if there are alternatives available from your provider that might better meet your preferences.
More broadly, firms are required to automatically enrol all eligible workers into a qualifying pension scheme and ensure that at least 8 per cent of ‘qualifying earnings’ is contributed to that scheme, with 4 per cent coming from personal employee contributions, 3 per cent from your employer and the final 1 per cent via pensions tax relief.
In 2025/26, the minimum earnings contributions are based on are between £6,240 and £50,270, although many companies offer more generous terms than this. To be eligible for automatic enrolment, you need to be aged between 22 and state pension age (currently age 66) and earning at least £10,000 a year, although those outside these parameters have the right to opt in if they choose.
Is the government going to force my pension scheme to take extra risks?
As you note in your question, the Government is very focused on driving more pension money into “productive” UK assets such as private equity vehicles, with the aim of boosting investment in the economy and ultimately driving long-term economic growth.
These reforms have so far primarily focused on consolidating people’s pensions, with the theory being that larger schemes will be more able to invest in “illiquid” assets in the UK, such as building roads or upgrading nationally important infrastructure.
A number of pension schemes have also committed to voluntarily increasing the proportion of member assets invested in these “productive” UK assets between now and the end of the decade. While the Government has not mandated schemes do this, reports suggest the threat of this has influenced these providers’ decision to shift their approach.
Although the government has repeatedly claimed this will be a ‘win-win’, with members enjoying bigger pensions and the UK economy benefiting from more investment, there is no guarantee that this change in investment strategy will deliver better investment performance than the status quo.
And there is a clear risk that conflating political goals with people’s pensions will mean the former gets prioritised over the latter.
None of this is cause for panic, however. We are talking about a relatively small proportion of your pension being allocated this way – likely between 5 per cent to 10 per cent – and the shift is likely to take place over a number of years.
If you aren’t comfortable with this, you should speak to your provider to see if there are alternative investment options available. If there aren’t, you could choose to transfer your existing pension to a private pension like a SIPP, although you’ll need to speak to your existing scheme to see if this is possible and you will likely not be able to direct future auto-enrolment contributions to this scheme which may mean you lose out on your employer’s contribution.
SIPPs offer much more choice and many are available at low cost, although they aren’t covered by auto-enrolment regulations, including the charge cap.
Read More Details
Finally We wish PressBee provided you with enough information of ( Should I move my pension from the ‘default’ fund? )
Also on site :
- Diddy trial live: Ex-girlfriend ‘Jane’ describes what happened during sex parties after judge denies mistrial request
- Chart-Topping '90s Rocker, 59, Stuns Fans With Unexpected Side Career
- Hershey's 'Iconic' Chocolate Flavor 'Fuels' New Release