2. What happens to the money I pay into pensions?

The money you spend on retirement buys you rights to money in the future. When you pay national insurance , some of your money buys you rights to a state pension – this is known as a defined benefit pension because you know what you’re getting. You may also have a right to a defined benefit pension from your employer.

But most of the money we’re spending on pensions today don’t buy us a right to a pension but a right to a share of a fund – known as “units”. These units have a price which changes every day. That’s because the fund is invested in companies, and properties or in loans and depend on what people are prepared to pay for them.

Generally investments go up and over time the investments that will go up most will be the investments that from day to day go up and down. Shares in companies are a good example of investments that are risky in the short term but provide value for your money over 10 or 20 years.

Most of us won’t choose where our money is invested, we’ll leave that to experts and use what they call the default fund. The default fund will change the way you are invested so your fund price becomes more stable as you get close to getting your money back. The people who choose the default funds you invest in have to explain themselves to regulators and increasingly to the people like you and me who are investing in funds.

Many people – especially younger people – want to know that the people who choose the funds and manage the funds chosen, choose responsible investments. We want the people who benefit from our savings to behave ethically, in the interests of the wider society and that they are well governed.

There’s a lot that can be said about what makes for a good or bad fund but one thing is for sure, the more you pay in charges, the harder it is for you to get value for your money.

AgeWage scores generally tell you how well your investments have done. We will help you to understand how much you are paying to have your pension pot managed and we we can help you understand whether your fund is managed responsibly.