UK Fintech PensionBee, an Online Pension Provider, Shares Investment Diversification Strategies

The team at UK’s PensionBee, an online pension provider, notes that one of the most well-known tips for managing your finances is the “not all your eggs in one basket” strategy.

As mentioned in a blog post by PensionBee, it’s always a good idea to diversify your investments.

While explaining why it may be advantageous to diversify your investments, the PensionBee team says that if you’ve got your pension invested in the same type of investment you’ll be “more exposed to the pros and cons of that particular investment.” That’s because you’ll have “no other types of investments to balance those pros and cons,” the Fintech firm explained while adding that by investing your pension “across several types of investments,” you can achieve diversification.

As noted in PensionBee’s blog post, most pensions are “already diversified, across a range of locations and asset classes.” According to the Fintech company, this means your retirement savings “could be invested in company shares, bonds, cash, property and other assets, across the globe, depending on the plan you’ve chosen.”

The company also mentioned that this approach means that “any decline in one type of asset or location can be offset by growth in the others, with the aim of achieving not only balance, but ultimately growth over the long-term.”

Addressing a question about what a diversified portfolio might look like, PensionBee explained that all investments “fall within groups known as ‘asset classes’.”

They added that certain aspects of your investment such as the duration of investment, growth potential, inflation protection, level of risk, market volatility, will “vary depending on the asset class.” And there isn’t really a “perfect” investment, with each having their advantages and disadvantages, the company clarified..

Here are some common asset classes that your pension could be invested in:

Equity

Equity investors use funds to purchase part of firms, “particularly through stocks” and “depending on how these company shares perform the investment can rise and fall,” the PensionBee team noted while adding that if the company “performs especially well then they usually pay out small sums of money for holding shares, also known as dividends.”

While sharing some of the potential  benefits of equity investments, PensionBee noted:

  • More likely to produce higher returns
  • Likely to grow in line with inflation

Going to mention the potential downsides of equity investments, the company shared:

  • Higher level of risk
  • Greater exposure to market volatility

Fixed income

Fixed income investors “lend money to companies or governments in the form of bonds or debt funds,” PensionBee explained while adding that  “often they receive fixed interest initially and are repaid their original investment when the investment duration ends.”

Going on to share the benefits of fixed income investments, the company noted:

  • More likely to produce higher returns
  • Likely to grow in line with inflation

While commenting on the downsides of fixed income investments, the company shared:

  • Longer duration of investment
  • Higher level of risk

(Note: for more details on this update from PensionBee, check here.)

PensionBee’s “most popular” pension plan – Tailored – is reportedly invested in 3 core asset classes – equity and fixed income – which are “likely to have a higher return” and cash which is “likely to have a lower return”.

As mentioned in PensionBee’s blog, this plan is unique because it invests your funds “differently as you go through life – which could be suitable for anyone not wanting to make regular investment decisions – moving your money into safer investments as you get older.”

You may learn more about the performance of the PensionBee plans so far this year, here.

As noted by the Fintech firm:

“Your pension is a long-term investment. This gives you plenty of time to top it up, track its progress, and plan for your retirement. Doing this for several scattered pension pots could be hard to keep track of, which is why consolidating them into one plan could be worth considering.”

With PensionBee each of their plans is “specially designed to suit different savings needs – including our Fossil Fuel Free fund.” You may register with PensionBee and be enrolled in their  Tailored Plan.

However, you may select the plan that’s “right for you and switch for free at any time,” the company confirmed. You “only pay one simple annual fee taken from your pension pot. Annual fees range from 0.50% to 0.95% depending on the plan you choose,” the company added.

The PensionBee team further noted that your fees are “halved for any amount above £100,000 to reward saving e.g. our Tracker Plan costs 0.25% for any amount over £100,000.” They also mentioned that you may “check the diversification of each of our plans and decide for yourself which plan is best-suited to your needs.”

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