Investments are a way of making your money grow before you retire. There is a risk and reward balance to investing. Often the higher the risk, the higher the reward. Different types of investments include cash, property, government bonds and equities (the stock market). In a pension scheme you invest your money so that it can increase in value during your working life to give you benefits in retirement. If you don’t invest it, it won’t grow.
Over time, inflation can chip away at the value of your money. For example, the cost of a pint of milk, a newspaper and a loaf of bread costs more now than it did 10 years ago. By investing, your money can not only try to keep pace with the cost of living, but it could grow faster and earn you extra money.
Pensions are invested over many years so if your investments grow then over the years the extra money will grow as well.
But don’t forget that investments can go down as well as up, as we have seen in recent weeks.