Deciding how to invest your pension funds can be a difficult, yet important task.

Lisa Jackson, chief operating officer of MPS Limited, says investing your pension is not as difficult as one may think. In fact, she adds, all it takes is a little pension education. Below she gives a few tips to Melissa Fox<$> for those who may be a tad pension illiterate.

The questionnaire is for your own protection.

When it comes time to invest your pension, your employer will usually give you a package of information from the insurance company which includes a special questionnaire designed to help you understand what type of investment you will be most comfortable with; conservative, moderate or aggressive.

“The questionnaire is designed for those people who are not investment savvy,” Ms Jackson explains. “It assists you in determining what you are by testing your knowledge of investing.

“If your answers are more on the negative side then you should be more conservative. But if you are saying, ‘I have no problems taking 20 percent risk and if the market falls by 10 percent I’m comfortable’, then you are aggressive and that’s how you should invest.”

The way that the products are run, if you choose to invest aggressively, by the time you are 65, your aggressive fund will have become a little more conservative because the fact that these monies are expressly needed for your retirement has been taken into account. When you feel your money should be more tightly controlled, you can also revisit the questionnaire and your investment options.

Keep abreast of the changes in the market but do not panic. <$>

“You may choose a conservative fund over an aggressive because you feel it is too risky but conservative funds aren’t doing that great right now,” Ms Jackson says. “At this point, it’s best to be aggressive. You also have to understand that pension assets are not run like regular accounts- they are actively managed by investment managers who are aware that these monies are designated for retirement.

“As much as your monies may be in an aggressive equity fund, the investment managers continually monitor that equity to ensure it is not taking too many hits. It will take some hits, but you have to realise the history of this funds performance. Yes, it may be going down right now but historically it always comes back up.”

Pension investments are not like savings accounts.

You do not earn the principle: “With a savings account you put $10,500 in, you get that back,” Ms Jackson explains.

“You can come out with $10, 500 if the market has gone up, but if it has gone down and you lose $1,000, you will come out with $9,500.”

“The difference with private investments and pension investments, however, is that the investors dealing with pension assets realise that these are long-term. You as a member of the plan need to realise this as well. Generally, from the moment you start working you have to be in the plan. You have to be comfortable with the investment allocation that you’ve chosen or has been chosen for you.”

Ask questions.

“I’ve been in the pension industry for quite a few years and I still talk to people who have no understanding of what they are doing, from what they are receiving to what their investments are,” Ms Jackson notes.

“It’s all about education. A lot of times people will say, ‘Well I don’t know what to ask!’ which is very true but as long as there is open communication between the company and the investor, the questions will come to you.

“Basically, the only time people will call is when they see a paper loss. It’s rare to get a call when their money is doing well.”

Be well aware of your investment choice.

“If the questionnaire says that you should be conservative but you decide that you want to be aggressive and the markets plunge next week, don’t call me in a panic,” Ms Jackson warns.

“You should have followed what the questionnaire told you because it is designed to tell you what type of investor you are. If you did, now you wouldn’t be panicking.”