All the money in your pension pot is invested into fund(s) or a lifestyle profile. This is so your money can grow over time. However, there are risks with this and returns are not guaranteed.
Funds are designed to invest in particular assets - these could include commercial property, company shares and/or bonds. On your behalf, a fund manager will use your money to invest in a particular fund with the aim of maximising growth. However, as with all investments, this is not guaranteed. The value of your pension pot could fall as well as rise and there's a risk that you may get back less than you put in.
Depending on what your employer offers you, you can invest in a range of funds suited to your attitude to investment risk. For instance, if you're concerned about losses on the money you put in, you could opt for lower risk funds. Risk is primarily assessed on the types of assets that the fund invests in. Some are more volatile than others.
You can read our guide to help you understand the relationship between risk and reward. Your guide to risk and reward
Find out more about what you're invested in and how to make any changes by visiting the Your scheme information section.
You can't get rid of risk completely, but it's possible to manage it successfully. For instance, you could "spread the risk" by investing in a combination of high, medium and low risk funds. Saving your money in a range of assets means that, if something happens to one of your investments, your overall loss is reduced as it's balanced out by your other investments. Again, there is no guarantee that you will get the returns you're hoping for.
This is an investment strategy that automatically adjusts where your pension pot is invested as you approach your selected retirement age. A typical lifestyle profile is designed to offer the potential for growth in the long term but as you get closer to retirement, your money is gradually moved into funds that are more stable. The investment strategy can also be targeted to suit a particular retirement outcome.
If you're unsure about the kind of investment fund to choose, you may wish to seek financial advice. Visit unbiased.co.uk to find a financial adviser near you. Please note advisers usually charge for their services.