How to choose your own pension investment options

If you have a defined contribution pension, most providers will let you choose your own investments. But the range of investment options available to you might differ between schemes.

You can use our tool to find out your pension type or ask your provider.

You cannot choose your own investments if you have a:

• defined benefit pension (often called a final salary or career average scheme) or
• collective defined contribution scheme. 

If you’d like this option, you could consider setting up a separate pension scheme like a personal pension.

If you have a defined contribution pension and are considering choosing your own investments, check if you’re happy with your pension provider’s ‘ready-made’ or ‘default’ fund. This is where your money is typically invested automatically. 

These are often known as ‘lifestyle’ or ‘target date’ funds, with professional fund managers looking after your money for you. This means they can use their experience of investing to:

• spread your money across a range of investments
• check your retirement money won’t be reduced by inflation
• factor in fees and charges. 

Default funds usually include a range of investments that meet the needs of most scheme members. This can provide a good balance between simplicity and growth potential.

Many default funds will make investment choices based on your expected retirement date.

This usually means your pension provider will take fewer risks with your money the closer you get to retirement, as there’s less time to recover any investment losses.

For example, your pension provider might:

• invest in riskier investments when you’re younger – these are likely to grow over longer time periods but might go up and down in the short-term
• move your money to more stable investments as you near your retirement age, like government bonds and cash.

A default fund typically assumes you’ll take all your pension money out at a certain age or date, so none is left invested.

This is usually at either:

• the date you’ve chosen – called a selected pension age
• your scheme’s normal pension age if you have not chosen – this depends on your scheme’s rules but is often the same as your State Pension age

This means you might want to:

• change your selected pension age if you’re planning to retire earlier or later than your provider currently expects – you can usually access your pension from age 55 (rising to age 57 from April 2028)
• choose a different way to invest your money if you’re planning to take a flexible retirement income – where you access some of your money and leave the rest invested until you want to take it out (known as pension drawdown).

For more information on your options, see our guide What can I do with my pension pot?

We also offer free and impartial Pension Wise appointments to explain the different ways you can take money from your pension pot.

Before deciding to choose your own investments, make sure you’re comfortable with the concept of investing your pension money.

Remember:

• your investments can go down and up in value, so there’s a risk you’ll get back less than you’ve paid in
• you cannot usually access your pension until at least age 55 (rising to 57 from April 2028)
• you'll pay charges for each fund you invest in – even small differences in fees can make a big difference to your final pension value over time.

This means you’ll need to consider many things while managing your pension investments, including:

• the level of risk you’re willing to take – lower risk investments are less likely to fall in value, but your money will typically grow at a slower rate
• how best to spread your money between different types of investments or levels of risk
• how much your money needs to grow each year to beat inflation – the rate prices increase by over time (£1 now will buy you less in the future). 

For more help and information, see our guide A beginner’s guide to investing.

Your pension provider will usually offer different funds you can choose from, often containing different types of investments such as:

• stocks and shares (equities), where portions of different companies are bought and sold – this is usually higher risk but typically has greater growth potential over time 
• government and corporate bonds, where investors lend money to governments or companies – this is typically lower risk and can provide more stable returns
• commodities and property, where something physical is bought and sold, like gold or gas – this can offer an income and diversification
• cash – this is lower risk but usually gives lower returns.

You can usually choose to invest in one fund or spread your money over a number of funds.

To help you decide, your pension provider should clearly list information such as:

• how each fund is invested
• the fund management charges you’ll need to pay – usually a percentage charged yearly
• if the fund is high, medium or low risk. 

They should also show how the fund has performed in the past. Just be aware that this is not an indicator of how well the fund will perform in the future.

You can often choose funds that help to reflect your personal values.

For example, ethical and sustainable funds typically contain investments that:

• avoid certain industries – like gambling, tobacco or mining
• focus on good environmental, social and governance (ESG) practices.

There are also religious (faith-based) funds that usually invest according to specific religious principles, such as investments that follow Islamic law (Sharia) and avoid interest and certain industries.

Just be aware that:

• these funds might perform differently to others that are less restricted on investment choice
• the definition of ‘ethical’ or ‘sustainable’ can vary between providers, so always check what a fund invests in before choosing it.

When choosing pension investments, you might have the option of:

• active funds where the choice of investments are decided by a fund manager
• passive funds that track a specific market or index, such as holding shares in the top 100 companies listed on the London Stock Exchange – called the FTSE 100.

Passive funds usually have lower fees, but active funds are designed to outperform the market rather than track it – though there are never any guarantees.

You do not need to choose between the two, you could decide to include a mix of both passive and active funds.

If you’re happy to choose your own pension investments, your pension provider will normally have an online platform or mobile app you can use to select your investment options, or you can call them.

You could also consider paying a financial adviser to give you advice on how to invest your pension or ask them to manage it for you. Our guide can help you find a pension or retirement adviser.

Another option is robo-investing, where your funds are automatically chosen for you based on the amount of risk you’re willing to take. This is usually based on a risk questionnaire you’ll complete when you sign up.

The right investments for you will depend on your personal situation and how much risk you’re willing to take.

When deciding, consider:

• how long you have until you’d like to retire
• how comfortable you are with ups and downs in value 
• how much you need your pension to be worth to provide the retirement income you’ll need
• how involved you want to be – whether you want to manage your investments yourself or leave it to professionals.

If you’re further from retirement, you might choose to take more risk as there’s longer to recover from any drops in value. But as retirement becomes closer, many people choose to reduce the risk to try and protect what has been built up.

Diversification means using a mixture of investments to balance the risk. For example, if some investments go down, hopefully the others will stay the same or increase.

This can also help to protect against market shocks and generate smoother returns over time.

Rather than putting all your money into one type of investment, a diversified pension might include:

• UK and international shares
• government and corporate bonds
• property or infrastructure assets.

Most pension funds you can choose from are already diversified, but always check you’re comfortable with the spread of investments in your pension.

Pension scams can cost you your retirement savings. Scammers might try to pressure you into transferring your pension or investing in unsuitable products.

Do not access, transfer or change your pension because of:

• a call, visit, email or text you did not ask for
• promises of high or guaranteed returns
• pressure to act quickly
• an offer to let you access your pension before age 55.

These are all signs of a potential scam to steal your money. You might lose all your retirement savings and have to pay an expensive tax bill.

Instead, always do your own research and check any firm you’re considering dealing with appears on the Financial Conduct Authority’s Firm Checker

You can also contact us for free and impartial pensions guidance.

For more information, see our guide How to spot a pension scam.

At least once a year, it’s worth checking you’re still comfortable with your chosen fund’s:

• risk level
• performance (how much your pension money has changed), and
• charges and fees. 

You can find this information on your annual statement. You might want to check more frequently the closer you get to retirement, or if you’re managing your pension investments yourself.

For help investing your pension later in life, see our guide Investing in retirement.