Pensions Week: Step 2 – How to Check Your Pension’s Performance (And What it Actually Means)

Ready for a richer retirement?

Avoiding underperformance can add thousands to your pension pot. Let’s check what your performance has looked like so far before we take any further steps.

How to check your performance

1. Retrieve your fund name (from step 1)
2. Enter it into our performance checker here
3. Check your 5-year cumulative return
4. Check where it sits relative to similar funds in your risk category

What is a cumulative return?

Cumulative return simply shows how much your money grew in total over a set period.

If a fund has a 5-year cumulative return of 40%, it means:

If you had invested £10,000 five years ago and left it alone, you’d have around £14,000 today.

It doesn’t mean it made 40% every year.

It means that after all the ups and downs, the total growth added up to 40%.

It’s the full journey, not the yearly breakdown. And remember, it tells you what happened – not what will happen next.

The results you are given will compare your fund with the best and worst performers in your risk category, so you aren’t comparing apples with pears.

Red flags to be aware of when checking your fund’s performance include:

Consistently bottom quartile versus similar funds
Underperforming global markets or benchmarks over long periods
Poor performance even during strong market years

Things to consider if you’re close to retirement include:

• If you’re within 5-10 years of retirement, volatility (your fund fluctuating to extremes) may indicate that you’re not in the right fund.
• Large losses close to retirement are tricky to recover from
• However, being too cautious too early can limit your growth.

What not to do

• Don’t switch funds based on one bad year
• Don’t chase last year’s best performer
• Don’t move without understanding your risk

Remember, one bad year is not a reason to switch. But if you are experiencing consistent poor performance, it may be time to review your options.

Now you know how your fund has performed when compared to others in the same risk category, it’s time to find out if you’re in the right risk category.

Check out step 3 in our 30-second series.

This content is for educational purposes only and does not constitute personal financial advice. Always consider your own circumstances before making changes to your pension, and seek regulated advice if unsure.