Only 22% of pension members actively choose their investments

pension members investment choices

Only 22% of pension members actively choose their own investments, despite the fact that doing so can dramatically boost investment returns, according to research by financial services organisation Hargreaves Lansdown.

The research, released on 12 July 2018, analysed the activity of 58,000 workplace pension members. It also revealed that only 16% of women across all age groups choose their own investments, compared with 26% of men.

The research also found:

  • The average annual returns of the top 10 funds picked by those who make an active choice regarding their pension investments surpass the average returns of default funds by 4.75%.
  • More than 25% of pensions members aged between 40 and 49 make active investment choices. The figure for those aged between 20 and 29 falls below 15%.
  • Boosting investment returns by 1% per year has the potential to increase a member’s pension by nearly £60,000 by the time they reach retirement.
  • 47% of those with a pension of more than £25,000 choose their own investments, whereas only 5% of those with a pension under £5,000 do so.
  • More than 45% of those members who choose their own investments access information through a combination of both face-to-face meetings and online access.

Nathan Long, senior pension analyst at Hargreaves Lansdown, said: “Many people don’t think of themselves as investors, but as soon as you are put into a workplace pension, that is exactly what you become. If you make no choices at all, your pension savings will go into a default fund. These are designed to be conservative one-size-fits-all solutions, but most workplace pensions will offer some different choices.

“People tend to choose their investments after their pot has built up a little or they have been a scheme member for a number of years, but you don’t have to wait; after all, it’s your money and the choices you make can massively boost your retirement prospects. Getting started is easier than you think. Most investment brokers have their list of the top investment funds available and provide tips on how to choose something that suits you. For those who lack the time or confidence to take up the investment reins, paying for financial advice can be worthwhile.”