You probably know roughly how much is in your pension.

But do you know where that money is invested?

Do you know how much you are paying in charges? Do you know what level of investment risk you are taking? And does your pension still reflect when and how you actually plan to retire?

For many people, the answer to at least one of those questions is probably, "I'm not sure."

That's understandable. Pensions aren't always the easiest things to get your head around.

But there is one reason in particular why your pension deserves more attention.

Investment growth could make up a significant part of your pension

Research from Standard Life highlights just how important investment growth can be to the value of a pension over the long term.

Standard Life says that as much as 65% of the final value of a pension at retirement can come from investment growth.^*

To put that into perspective, Standard Life modelling highlighted by Which? suggests that a £100,000 defined contribution pension could be made up of approximately:

• £65,000 from investment growth^*
• £18,000 from your own contributions^*
• £13,000 from employer contributions^*
• £4,000 from tax relief^*

In other words, around two-thirds of the pension pot could come from investment growth, rather than the money you and your employer have paid in.^*

That's a pretty important point.

We often think about a pension as something we simply "save into". But your pension isn't just a savings account. The money is invested, and how those investments perform over many years can have a significant effect on the eventual value of your pension.

It also explains why understanding your pension matters.

You don't necessarily need to become an expert investor or spend your evenings following the stock market.

But it is worth knowing what your pension is invested in, what level of risk you're taking and whether your investment strategy remains appropriate for your circumstances.

And that brings us to an important distinction.

Being more hands-on with your pension doesn't necessarily mean changing your investments more often.

It can simply mean paying attention.

1. Do you know where your pension is invested?

A pension isn't simply a pot of money sitting somewhere waiting for retirement.

Your pension is generally invested in a range of assets, which could include shares, bonds and other investments. The precise mix will depend on the pension and investment fund you have chosen.

If you have a workplace pension, you may still be invested in your provider's default fund. Which? reports that around 90% of pensions are saved in default funds.^†

This isn't necessarily a bad thing. Default funds are designed to provide an investment approach for a broad range of savers.

But it does mean you should understand what your pension is doing.

Different investments have different levels of risk and potential for growth.

The important thing isn't necessarily to become an investment expert. It's to understand what you own and why it is there.

2. Don't judge your pension by what happened last year

It's tempting to look at your pension statement and focus on whether the value has gone up or down.

But pension investing is generally a long-term exercise.

Markets rise and fall, sometimes significantly. A fall in value doesn't automatically mean that your pension is unsuitable, just as a strong year doesn't necessarily mean you've found the perfect investment.

Regularly changing investments because markets have moved can mean making decisions based on short-term events rather than your long-term objectives.

Being more engaged with your pension doesn't mean constantly buying and selling investments.

It can simply mean understanding how your pension is performing, reviewing it in the context of your objectives and making sure the level of investment risk remains appropriate for you. Investments and pensions are designed to help grow your money for the future over the longer term. You should keep in mind that both are exposed to market movements, meaning values can go down as well as up, and you may not receive back the full amount invested or saved into a pension.

3. How much are you paying in pension charges?

Charges are another important consideration.

Pension charges can include the costs of managing your pension and investments, and even relatively small differences in annual charges can make a difference over a long period.

Research highlighted by Which? using Vanguard modelling illustrates this. In an example involving someone earning an average UK salary and contributing £250 a month from age 25 to age 66, assuming 6% average annual growth:

• A 0.5% annual fee resulted in a projected pension of £465,000.
• A 1% annual fee resulted in a projected pension of £406,000.
• A 1.5% annual fee resulted in a projected pension of £355,000.

That doesn't mean the cheapest pension is automatically the right pension.

A pension should be considered in the context of its investments, features, charges, flexibility and how well it meets your needs.

But it is worth knowing what you are paying.

4. Is your retirement age still realistic?

This is one that can easily be overlooked.

When you originally set up your pension, you may have had a particular retirement age in mind.

Perhaps you planned to retire at 60.

But life doesn't always follow the plan.

You might now expect to work until 65 or 67. Or perhaps your circumstances have changed and you'd like the option of retiring earlier.

This matters because some pension investment strategies are designed around your expected retirement date.

As retirement approaches, some providers may gradually move investments towards lower-risk assets. This is often known as "lifestyling".

The idea is to reduce the potential impact of a major market fall shortly before you retire.

But if your pension provider thinks you're retiring at 62 and you actually intend to work until 67, your pension could potentially spend several years following an investment strategy based on an outdated retirement date.^†

Your pension should reflect your plans — and your plans can change.

5. Does your pension still match your life?

Your financial circumstances today may look very different from when you first started paying into your pension.

You may have:

• Changed jobs
• Built up several different pension pots
• Increased or reduced your contributions
• Received a pay rise
• Started your own business
• Changed your expected retirement date
• Taken on new financial responsibilities
• Started thinking more seriously about passing wealth to your family

All of these things can affect your wider financial plan.

This is why a pension shouldn't necessarily be considered in isolation.

It is one part of your overall financial picture.

A pension review can help you look at how your existing arrangements fit alongside your other investments, savings, income and retirement objectives.

How much might you actually need for retirement?

Knowing how much you have in your pension is important. But it is only half of the question.

You also need to think about what you want your retirement to look like.

Quilter's latest calculations, based on the Pensions UK Retirement Living Standards, estimate that a single person could need a pension pot of around £691,000 for a comfortable retirement, compared with around £413,000 for a moderate retirement.^‡

For a couple, Quilter estimates around £389,000 per person for a comfortable retirement and around £208,000 each for a moderate retirement.^‡

These figures aren't targets that everyone needs to achieve. The amount you may need will depend on your individual circumstances, including your other savings and investments, State Pension entitlement, housing costs, desired lifestyle and when you plan to retire.

But the figures do highlight an important point.

Knowing what you have in your pension is only part of the picture. You also need to understand what you might need it to provide.

Rather than simply asking, "How much is in my pension?", it can be more helpful to ask:

"What sort of retirement do I want, and am I on track to fund it?"

That is where retirement planning can be particularly useful.

6. Being hands-on doesn't mean doing everything yourself

There is a misconception that taking control of your pension means becoming an expert investor.

It doesn't.

You don't necessarily need to spend your evenings studying stock markets, choosing individual shares or constantly changing your pension funds.

Being hands-on can simply mean knowing:

What you have.

Where it is invested.

What you are paying.

What level of risk you are taking.

When you expect to retire.

And whether your pension is still working towards the retirement you want.

For some people, that may be enough to give them greater confidence in their existing arrangements.

For others, particularly if they have several pension pots, more complex financial circumstances or aren't sure whether their current arrangements remain suitable, professional financial advice can be valuable.

Your pension shouldn't be something you simply forget about

A pension can be with you for decades.

During that time, your circumstances, priorities and plans can change considerably.

That doesn't mean you should constantly change your pension investments.

It means you should occasionally step back and ask whether everything still makes sense.

Are you comfortable with the level of investment risk?

Are the charges reasonable for the service and investment options you're receiving?

Are your pension investments appropriate for your timeframe?

Is your retirement age up to date?

And perhaps most importantly, is your pension helping you work towards the retirement you actually want?

If you're unsure, it could be worth having your pension arrangements reviewed.

Could your pension benefit from a review?

At Pivotal Financial Planning, we help clients understand their pensions and investments as part of their wider financial plans.

We can look at your existing arrangements, help you understand how they are invested and consider whether they continue to meet your needs and objectives.

You don't have to become an investment expert to take more control of your pension.

Sometimes, the first step is simply understanding what you already have.

If you're unsure whether your pension is still right for you, find out how Pivotal Financial Planning could help.