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Investing basics

As a member of a workplace pension, you're an investor. This is because when you join your workplace pension, your contributions are automatically invested for you in the plan's default option. This is a good option if you prefer to let experts make the investment decisions for you. However, you can choose to select your own investment funds from the range your plan offers.

What is an investment fund?

A fund pools money from lots of investors. The fund manager then spreads that money across a variety of investments.

You can choose from a range of funds managed by Fidelity and other leading fund managers. These focus on different sectors, regions and types of investment. Whatever funds you choose, you benefit from the investment expertise and management of a professional fund management team.

Learn about investing

Types of investment

The different types of investments are often referred to as ‘asset classes’ – some common examples include company shares (or ‘equities’), bonds, property and cash.

The performance of different asset classes will naturally vary over time. As they all have their own unique characteristics, wider market conditions and world events will affect them differently. That’s why it’s important to spread your money over a range of investments – it enables you to manage the risk of your pension savings falling in value if one asset class is out of favour. Investors usually call this strategy ‘diversification’. Diversification aims to manage the investment risk. It cannot eliminate it.


Diversification is essentially the principle of ‘not putting all your eggs in one basket’.

If you spread out or ‘diversify’ your pension savings across several different type of investments, in line with your retirement goals and risk tolerance, you’ll be in a better position to withstand any potential losses from a single asset class.

Watch the video to learn how diversification can help in times of market volatility.

Watch time: 1 min 30 seconds

More about the main asset classes


Risk and return

The relationship between risk and return is one of the most important aspects of investment. For you as an investor, risk relates to the possibility that you may not achieve your financial goals or that you get back less than you invest.

Generally speaking, the greater the risk you are prepared to tolerate, the more potential there is for your investments to grow. Past performance is not necessarily a guide to future performance, the performance of investments is not guaranteed, and the value of your investments can go down as well as up, so you may get back less than you invest.

The risk-return spectrum

This image shows a spectrum from investment types with lower risk and less growth potential, towards those carrying higher risk, with the potential for higher growth.

Risk-return and your workplace pension

When it comes to your workplace pension, you may choose to invest in the plan’s default strategy, where risk-return is already considered. Or you may decide to choose your own investment options. In this case, your tolerance for risk will help you decide which type of investments to invest in.

Investing when your retirement is some way off

Investing in assets with a higher potential for growth but greater risk is an option. The long-term effects of compound growth may also work in your favour.

Investing when you are nearing retirement

As you approach retirement, you may want to lower the level of risk. This will reduce the possibility of your pension savings falling in value, just when you need to start using them.

Volatility vs risk

Watch this video to see examples of how some people view the relationship between risk and return.

Watch time: 1 min 25 seconds

Active and passive – different styles of fund management

Whichever asset classes you are thinking of investing in, it is likely that you will have a choice of active and passive funds:

  • With an active fund, there is a manager who decides which investments your money should be channelled into. They will use their experience and skill to choose the investments. The fund charges are likely to be higher than those on a passive fund, in order to pay for the fund manager and the research and analysis they have access to.
  • passive fund simply attempts to match the performance of a stockmarket index, such as the UK’s FTSE All-Share, or the Dow Jones in the US. The allocation of investments in the fund is based on the investments that make up the index. There is less human decision-making than there is with an active fund, so charges are typically lower.

Important information

It is a good idea to review your pension investments on a regular basis to make sure that they are right for your retirement goals. None of the information above is a personal recommendation for any particular investment and it’s important to remember that the value of investments can go down as well as up, so you may get back less than you invest. If you are unsure about whether your investments are suitable for your circumstances, or you need advice on any of the options available to you, we recommend that you speak to an authorised financial adviser.

Next steps

Review your investments

Log in to PlanViewer to see where your workplace pension is invested

Build healthier savings

Our tools and calculators can help you work out how healthy your finances are today and how much you should be saving for tomorrow.

Make changes to your investments

Learn more about how to self-select your own investments.