Application Portal
PensionCalculator.org has teamed up with financial professionals to provide you with access to the best annuity rates, expert advice on pension enquiries, pension release and other retirement issues.
Click the links below to begin the application process.
The Risks of a Company Pension
Pensions are a long-term investment – their value is likely to go up and down over time – and, if you look at the performance of stocks and shares over a long period, they tend to increase in value with greater potential to continue to increase than less risky investments such as cash or bonds. However, with a company pension your money is effectively invested in shares and no financial products, including pensions, are ever risk-free. While your pension pot has the chance to grow over time, it also means the value of your pot can go down. Here are some important things to consider regarding the risks entailed in company pensions:
Investments can go down
Many pensions are invested in stocks and shares, the value of which changes over time. This means there is an element of risk involved. Although there is the potential for your pot to grow, it is also likely that it will sometimes not increase as much as expected. Sometimes, it may even go down in value.
Limited choice
In some pension schemes, you do not have the option to choose what type of fund you want to invest in. It is not possible to choose a lower risk or choose a level of risk you feel more comfortable with. This could be a problem if you are approaching retirement, have built up a good pension over time, and do not want the risk as you are about to receive the pension.
Negligence claims
If you are not approaching retirement and are taking a long-term view of your pension, you may not need to worry so much about the value dipping in the short term. However, playing it too safe with pension fund investments could make trustees and actuaries subject to negligence claims.
Complicated controls
Although the Government has put an increasing number of controls in place which are designed to minimise the risks, the rules are complicated and differ depending on the type of pension and who runs it. The Financial Services Authority (FSA) regulates the providers of personal pensions and the Pensions Regulator (TPR) regulates company pensions.
Limited compensation
If you are in a salary-related company pension, the Pension Protection Fund (PPF) has been set up to compensate you if your employer goes bust and its pension scheme cannot afford to pay you your entire pension. This compensation is currently 90 per cent of your expected pension, but it is subject to an upper limit.
As not all pension schemes provide the freedom to choose what type of fund you want to invest in, you may wish to research your options or speak to a professional.
Related Articles
