Nearly half of employees who are paying into their workplace pension are unaware of where their savings are invested, even though it could make a big difference to retirement income.

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According to research carried out by Wealth at Work, 49% of working adults with a defined contribution pension said they didn’t know what their pension was invested in, with nearly one in three (29%) admitting they didn’t even know their pension was invested.

Jonathan Watts-Lay, director at Wealth at Work, said: It’s worrying that our research shows that many people don’t realise that a pension is an investment, or even that they have a choice over how their money is invested in their pension. Particularly concerning is that this worsens for those approaching retirement (age 55+), as at this point people need to consider how they plan to generate a retirement income and ensure their pension investments are aligned with this.”

If you haven’t actively chosen where you want your retirement savings to be invested, then usually your money will go into what’s known as a ‘default fund’. These funds will automatically move your funds into lower risk investments as you near retirement, through a process known an ‘lifestyling’.

This essentially means your pension savings are gradually switched out of typically more volatile assets such as stock and shares and into a mixture of bonds and cash. If you’re not sure whether your plan does this, check with your employer or pension provider.

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You might decide that you’re more comfortable accepting a higher level of risk for longer if, for example, you’re planning to retire later in life, although there are no guarantees that this will bring a higher level of rewards. That said, it’s vital to remember that even a small difference in the performance of your pension investments can have a significant impact on the value of your pension. According to calculations by Hargreaves Lansdown, a 35-year-old with a £20,000 pension pot could have a fund worth around £26,800 at 65 if their investments grew by 2% a year. However, the fund might be worth around £64,000 at 65 if their investments grew by 5% a year or around £149,000 if they grew by 8% a year (in all cases after factoring in an assumed annual charge of 1%).

Alice Shaw, wealth planner at Succession Wealth, said: “A missed opportunity for many pension holders is failing to choose how their pension is invested. Some people leave this decision in the hands of their workplace or pension provider. Firstly, you should know that you don’t have to hold a pension with the provider your employer has chosen. You can ask them to pay into a different pension, allowing you to choose the provider while considering the type of funds they offer and the fees they charge.

“Secondly, many pension providers will give you several options for investment strategies. If you’re in the default option, you could achieve higher returns with a different strategy (though this will usually mean taking on more investment risk). However, you should be aware that this may not be appropriate in all circumstances, depending on your attitude to risk, particularly if you are close to retirement.”

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If you’re not confident about where your pension is invested, or you want recommendations as to where to invest your money, it’s usually a good idea to seek professional financial advice. An adviser can help ensure you are making the best choices for your retirement based on your individual circumstances.

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