Aside from how much you pay into your pension in the first place, your pension’s fund performance is likely to be the most important factor in how much you get at retirement.

Since the best performing fund can often outperform poor performing funds by several percent, performance is often seen as one of the key factors in choosing a fund over and above the charges you pay. The flipside of this is that a lower cost contract guarantees that the savings in the annual management fee go into your pocket. Past performance is no guarantee to future performance, but when you’re looking at two pension funds charging you the same fees, one with an excellent track record and another that has failed to perform, performance becomes a key factor in making the right choice.

Fund choice and the individuals managing the underlying funds change regularly so it’s important that you regularly review your funds. Getting caught with an outdated proverbial dog of a fund after a star manager has moved on to another company can seriously impact on your final retirement fund.

Ensure that you have made the right choice
Whether you’re looking for affirmation that you’ve chosen the right funds with your current provider or looking to find out what else is now available and that you have the most appropriate pension for your needs, a formal review of your pension with an adviser can give you the insight and reassurance that you’re doing the right thing.

With Profits Funds and their Performance
Nearly all pension providers offer a with profits fund, the idea being that your returns are smoothed out avoiding the rollercoaster highs and lows of stockmarket funds. These can be very difficult for the layperson to compare since the anticipated returns are based on a range of factors such as:

• The pension provider’s size
• The performance of the underlying fund
• The financial strength of the pension company
• Its asset allocation (how much is invested in shares, gilts, property or fixed interest)
• The company’s policy of applying a Market Value Adjustment (MVA) in times of poor performance