Your portfolio
Laura Miller says switching out of the default fund in your
pension and into a racier option could be the biggest step you
take towards achieving your retirement goals
Risk of default
S
avers risk missing out on tens
of thousands of pounds at
retirement because they are
stuck in the wrong pension
fund. But a quick fix is available that
can increase the value of your pot –
and better still, it is usually free.
Most workers earning more than
£10,000 are auto-enrolled into a
company pension scheme. Employees
pay in a minimum of 5 per cent and
their employer must contribute
another 3 per cent, at least.
Yet industry commentators often
point out this will only fund a very
basic standard of living in retirement.
They recommend paying in at least 12
per cent and ideally a figure closer to 15
per cent. Many employees, stretched
after a decade of stagnant wages, say
these figures are unrealistic.
One solution that won’t break the
bank is dumping your workplace
pension scheme’s default fund and
picking a racier option that is likely to
return more in the long run.
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“The twin methods of
boosting your income in
retirement are shovelling
more money in and
boosting the returns from
your investments”
“In fact, it’s probably the best-kept
secret in pensions that boosting your
investment returns is even an option.”
According to analysis by Hargreaves
Lansdown, someone with earnings
of £30,000 from the age of 22 can
expect a retirement fund of £209,000
(adjusted for inflation) at the age of 68
Nathan Long, senior analyst at
Hargreaves Lansdown, says: “The
twin methods of boosting your
income in retirement are shovelling
more money in and boosting the
returns from your investments.
“Most people are sick to death of
hearing about having to pay more
money in.
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