Can I design my own pension?

Some workplace pensions give you some choice over the funds that comprise it: but you can also open up a pension of your own if you want complete freedom.

Greening a workplace pension

Some – although currently too few – pension providers allow you to choose from a selection of decent green funds within the terms of your current pension plan. Think of these as building blocks the provider’s investment advisers think will work well together. You may find it daunting to pick your own funds but they will provide guides and often a team to talk to. These curated funds tend to come from the same small group of established sustainable fund managers. They typically have similar holdings and offer similar returns, so you won’t lose out too much if you happen to choose one of the funds that performs slightly less well than the others.

One of the Go Invest Green team, for example, has customised their Aviva pension by choosing from a set of well-regarded green funds from Liontrust, Jupiter, their own Stewardship range and other respected names.

Self-Invested Personal Pensions (SIPPs)

You can open a Self-Invested Personal Pension – a SIPP – to select the funds that make up your pension. This frees you to mix and match funds, trusts, bonds and direct holdings in individual companies as you wish.

With great power comes great responsibility of course: you will be responsible for ensuring your portfolio is calibrated appropriately, with the right mix of assets according to your position in your own journey towards retirement. You’ll no longer benefit from the ‘lifestyle strategy’ built into a professionally managed pension, designed to move along a ‘glidepath’ as you move closer to retirement, gradually moving from shares to safer assets like bonds.

That said, there’s plenty of advice out there to help you make your own decisions. If you’re prepared to do your own research you can often do better than the relatively cautious approach offered by off-the-shelf products: after all, no-one cares as much about your pension as you! For example, if retirement is a long way off, you can take control of your pension now, and possibly move it back to a managed lifestyle plan in the future, when most or all of them have been thoroughly greened.

Investment self-education

Whether you are choosing funds within the parameters of a professional managed pension, or making your own selections within the context of SIPP, you should look carefully at its past performance and its holdings. Funds are obliged by law to make available a factsheet listing the top 10 stocks of which it is comprised, its asset allocation (the relative mix of shares and bonds), its performance relative to the benchmark, and other useful information. The top 10 holdings will tell you a lot about just how green it is. You’ll find the factsheet on your pension platform, or just by looking for the fund name through a search engine.

If you are serious about managing your own pension you will of course be motivated to do your own research on what funds to buy, and what mix of assets you should hold. You can find out a lot, for example, just by searching on terms like ‘best asset allocation for my age’. And by reading the excellent Good Investment Reviews on the Good with Money website.

Like the many others who do it, you will learn a lot about personal investment over time. You could start by taking control of just a proportion of your current pension funds as you take your first steps.