If you have 20 or more years until you retire, you might be inclined to target high-growth investments with all of your pension money, and this remains a tried and tested approach for the vast majority of savers. But there are circumstances in which you could consider investing part of your pot via a more balanced allocation.
James Baxter, managing partner of wealth manager Tideway, suggests that if your pension reaches a value worth around 15 times your annual contributions, you could consider combining it with a slightly lower-risk approach. This would reduce the risk of large falls in value of this portion in any given year, and the size of the pot would mean your annual return, on average, could still exceed what you are putting in. “A good compounding return will have a bigger impact than future contributions," he says. "Consider a risk/return trade-off for the accumulated fund to avoid a big capital loss that may set planning back many years."
Even in this case, you should continue to put new contributions into higher-risk, growth-focused investments. If these contributions are a regular, fixed amount of money they will benefit from ‘pound cost averaging' - when you contribute the same amount each month, and so over time average out the valuations at which you invest.