Jenny Lowe uncovers those pension gems that will boost your retirement income.

For those of you who stumbled across this column last month, you will have read (with great interest, I’m sure) the shocking returns that the largest pension funds have been delivering.

Those figures were enough to turn people off pensions forever, but it remains the case that saving in a pension is the best way to ensure a decent level of income in retirement, especially if you take the time to invest your pension well.
If you know where to look, you can find funds that will turn your pension savings into an impressive pension pot. The idea is that the manager will use their expertise to pick shares that will outperform the market, and ultimately boost the value of your pension.

You can pick as many funds as you like, but if you have an older-style pension you may find that the range is limited.
In fact, you might only be able to access in-house funds run by your pension provider. Newer pensions and self-invested personal pension schemes (SIPPs) will allow a much wider variety of what are often better-performing funds.

Mitigating risk
If you still have many years left before you retire, it makes sense to invest your entire pension in the stock market. This does come with its risks, but it will maximise the potential for capital growth.

Then there is the question of where to invest, because you have the opportunity to invest in just about any market, anywhere in the world. For instance, if you fancy putting money in Latin American emerging markets, you’ll find a range of funds that can do that for you.

Ultimately, the name of the game is diversity. What you don’t want to do is put your entire pension pot in a China fund, because if things start to go wrong there you will suffer and there will be nothing to offset the losses. You could instead pick a collection of funds that give exposure to the UK, global and emerging markets, as well investing in small and large companies.

So let’s take a look at what has done well so far. Given the growing importance of emerging markets, many of the top-performing funds over the past five to ten years have been heavily exposed to these economies. For example, Fidelity’s South East Asia fund, Gartmore China Opportunities and JP Morgan Emerging Markets all appear in the top ten based on performance.

Playing the commodities markets
Other areas, however, such as commodities, have also been a major play. The JP Morgan Natural Resources trust has delivered 165.64 per cent over five years, and the BlackRock Gold & General fund has had a stellar five years, offering a staggering 203.31 per cent return.

The income space has also been quite reliable for pension investors. Those in the Invesco Perpetual High Income fund would have fared well over the past decade, as would those who opted for the Aberdeen Income fund. Of course, If you’re one of the lucky few who have a final-salary pension, the investment decisions will be made for you, providing guaranteed benefits when you retire, For the majority, however, the decision is up to you, so make sure it is the right one.