How to review your pension

But you can't switch off altogether, your retirement is one hell of a savings goal and you'll need to monitor it regularly to ensure you are on track.

Keeping tabs on your pension's growth is easily done. Most pension providers now have investor-friendly websites that allow you to monitor how your funds are doing. But that doesn't mean you need to obsess - in fact keeping too close an eye on your pension could even be counterproductive, encouraging you to over-react to the minor wobbles your fund will invariably suffer.

"Check that your funds are doing ok once a year," suggests Justin Modray, IFA at Candid Money. "But if you are in or approaching retirement you might want to up that to twice a year as things start getting a bit more crucial." A good prompt is your pension statement dropping through the letterbox.

So how do you go about reviewing your pension? As a starting point look at how all of your individual funds are doing. Even if you are only invested in your provider's default fund you still need to keep tabs on it. But don't look at the funds in isolation. Compare them against their benchmark and other funds within the sector - is your fund outperforming its peers, keeping pace with them or lagging?

If your funds aren't performing well, Ben Willis, head of research at Whitechurch Securities says you need to establish why your money has fallen before you make any rash decisions. "There could be several reasons for why a fund is underperforming, the asset class could be out of favour. However the aim of constructing a pension portfolio is to a achieve diversification.

"Therefore most diverse pension portfolios  will consist of funds covering several asset classes sectors and regions. The object of this is that while some of the portfolio may not be generating returns, other areas will be and that the overall portfolio will generate positive returns over the long term."

And, if it is the asset class that is underperforming, selling out at the bottom could be the worst timing. "Many asset classes that lose value over a prolonged period can be attractive to new investors seeking opportunities. If this occurs you can often see the asset class recover and recover strongly," he explains.

However, sometimes it will be the fund, rather than the sector or asset class that is underperforming. In these cases you need to give the fund manager time to prove their worth – switching out at the first wobble could see you miss out on any recovery or may be symptomatic of a long term game plan – but if underperformance is consistent it can make sense to jump ship and switch to a better performing rival.

The five-minute guide to reviewing your pension portfolio

Are you on target?

As part of your pension review you also need to check your total valuation to see if your savings are on target. Laith Khalaf, head of corporate research at Hargreaves Lansdown suggests you make use of some the tools your pension provider offers on its website. "Use a pension calculator to give you an idea of what impact any under or over-performance will have on your eventual fund."

If your fund is off target it's worth taking a closer look at what you are invested in and your asset allocation. "Pay attention to the funds you are invested in. Performance is a critical component but you also need to check if your investment strategy is correct. Are you invested enough in equities for example," Khalaf adds.

While your overall investment strategy is key to growing your pension, the reality is that the vast majority of us still need to pay more in. Whether you've been paying off debts, battling with childcare costs, or building your cash reserves, the chances are you will need to play catch up at some point.

Simply paying more into your workplace pension is the most straightforward option – but if you are on a final salary scheme there are a number of factors you may need to consider first. Equally if you really want to take control of your savings it may make sense to go it alone and set up your own savings plan.


More about