Pension Fund Performance
So that begs the question, which pension fund should you invest into?
Not all pension funds are going to deliver the same returns to investors – that fact is true over any given period of time, no matter how long or short.
Some funds will be more disproportionately impacted than others by wider economic factors like prevailing interest rates, inflation, unemployment and conflict.
Some funds will have higher fees, costs and expenses than others, which impact long-term investment returns.
But what’s critical to understand is that the performance of the pension fund(s), which you select to invest in, is going to directly influence how much money you have in your pension pot upon retirement.
There’s a lot to consider, and unfortunately, there’s no ‘one size fits all approach’ because personal finance is personal.
What pension fund you choose to invest in is a decision that should be made in the context of your own personal and financial circumstances as an individual.
However, here are some thoughts that you might find useful.
If you would like to see how different funds perform in the Irish market you can check out our article on the best pension funds in Ireland.
Generally speaking, the younger you are, the more risk you can afford to take on.
In classic investment terms, that would mean opting for a pension fund that provides you with more or less 100% exposure to equities.
Why? Well because equities have provided the best long-term returns to investors for decades. However, equities are typically presented as the ‘highest risk investments’ on any boilerplate marketing material provided by the investment firms, which usually results in the uninformed staying away from them.
But this, in the opinion of the National Pension Helpline, is the downfall of many people who are investing for retirement.
Yes, in the short-term, equities are riskier than the likes of government bonds.
But this is a pension we’re talking about – for someone in their twenties, they won’t be accessing this cash for 40+ years, and so there is no ‘short-term’.
What we should be talking about is the long-term, and over the long-term, equities are arguably the least risky investment in many ways.
Remember, Buffett implies investment risk to be defined as the risk of our money not growing by a sufficient percentage. Over long-term periods, equities significantly reduce that risk.
The real risk for you, as a future retiree, is your money not growing at an annual rate that at least keeps up with the rate of inflation.
By choosing to not invest in equities at a young age, that risk has a greater chance of becoming reality by age 60.
As I’m writing this article, inflation rates globally are at multi-decade highs, and while it won’t stay like this forever, these are the kind of economic situations which eat into your retirement savings.
So you need to be doing everything in your power to try and maximise your chances of having sufficient retirement savings to maintain your standard of living when you retire.
There is definitely a time and place for conservative investing, where you might transition your pension fund selection over to ‘safer’ assets like cash and high-grade bonds, specifically if you are approaching retirement.
But, in the opinion of the National Pension Helpline, your younger years are not such a time.