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How to select your pension funds

There are literally thousands of pension funds to choose from, specializing in all sorts of things from multi asset funds, to UK small cap companies, to specific commodities, to funds invested in particular geographical regions of the world.

So, how do you go about choosing a pension fund?

Once again, it might prove very useful to work with a professional to do this. Financial Advisers will have fund analysis tools at their disposal that will allow them to select funds or asset classes that are appropriate to an individuals needs

If you have experienced financial advice concerning regulated products before, you will be aware of risk profiling.

What risk profiling does is analyse your objectives and needs, and capacity for loss, through a series of questions and discussion, and then categorise a client into a risk class, such as;

  • Defensive
  • Cautious
  • Balanced
  • Growth
  • Aggressive

Risk Profiling and Pension Funds

A client might have a different risk class for different investments, such as a short term investment risk class, and a long term investment risk class.

The reason risk profiling is completed, is that (quite rightly) the FCA requires that an individual is given advice that reflects their financial needs and objectives and capacity for loss. If this wasn’t done, then advice could be given that was too risky, or too conservative, and simply wouldn’t do what it was supposed to.

The way this translates into how a fund is selected for a pension might work along the following lines;

PensionExplain funds

Defensive Fund

14-33 rating FE risk (FTSE 100 is rated as 100 on FE risk)


  • 20% equities
  • 60% fixed securities
  • 20% other

PensionExplain funds

Cautious Fund

23-47 rating FE risk (FTSE 100 is rated as 100 on FE risk)


  • 30% equities
  • 30% fixed interest
  • 40% other

PensionExplain funds

Balanced Fund

36-63 rating FE risk (FTSE 100 is rated as 100 on FE risk)


  • 52% equities
  • 16% fixed interest
  • 32% other

PensionExplain funds

Growth Fund

44-73 rating FE risk (FTSE 100 is rated as 100 on FE risk) typically 7.7% return 


  • 67% equities
  • 24% other
  • 9% fixed interest

PensionExplain funds

Aggressive Fund

67-84 rating FE risk (FTSE 100 is rated as 100 on FE risk) typically 8.5% return 


  • 94% equities
  • 6% other

Author’s note;

So, as you can see, the more aggressive the risk class, the higher the content of equities, and the lower the content of fixed interest securities.

A financial adviser is allowed to select funds that overall reflect the risk profile of a client. In some instances (quite often with High Net Worth Clients) this can be a very hands on process involving Discretionary fund managers formulating asset allocations and management systems that reflect the bespoke needs of the client, and the constant evolution of these needs (ongoing management), we provide this service contact Cambridge Pensions.

However, let's talk about the investment needs of the majority of investors….

Most people want a pension that gives them access to the full range of income drawdown options at age 55, and, want to be invested in funds that gives them as much growth as possible, without taking undue risk.

This is why I personally like multi-asset funds.

Why Multi-Asset Funds?

It is possible to invest into Multi-Asset funds through different types of tax wrappers whether that be pensions, ISAs, or General Investment Accounts.

Multi-Asset funds can be invested in through different types of tax wrappers whether that be pensions, ISAs, or General Investment Accounts.

The Multi-Asset fund manager is not restricted to one asset class or sector and therefore is able to invest in a wide range of asset classes (equities, government gilts, corporate bonds, as well as alternative asset classes such as gold and hedge funds).

The fund manager will move the investment mix within the portfolio to take advantage of prevailing market conditions or position the fund defensively in turbulent economic times. Constant rebalancing is done to ensure that the fund remains appropriately invested within a client’s risk profile.

A financial adviser selects Multi-Asset funds, based on asset allocations that meet defined investment criteria, financial strength of the fund management company, fund manager track record, and fund performance. A financial adviser can add tremendous value by completing this due diligence, and by having the investment analysis tools to compare fund performance. If an investor remains invested in the funds which are best performing in that risk profile class, then over the course of time, the client will benefit from improved returns. In modern times, on the appropriate wealth management platforms it has now become possible to change funds free of charge. By employing a financial adviser to manage this process over a lifetime, significant value can be added.

If you are wondering how to choose a Pension Fund or for more information regarding Pension Funds and Risk profiling please contact Cambridge Pensions today.

While we keep information on the website as up to date and as accurate as possible, the information on this website does not form part of our advice process. Cambridge Pensions Ltd cannot accept any liability for any decisions made by a client or member of the general public based on any information contained on this website. The value of your investments can go down as well as up and you may get back less than has been paid in.