How often should you review your pension?

We look at how often you should review your pension or other retirement savings to ensure you're on track.

Barings Asset Management recently conducted a survey of 1,600 non-retired adults in Great Britain. Based on the results, it estimates that 16 million Britons have never reviewed their pension plans.

Another four million haven't reviewed their pensions for at least three years. Around half of those last looked at their pension plans more than ten years ago.

The most likely result of never reviewing your pension is that you'll find later that you will be deeply disappointed with the results.

Pension providers are happy to take massive fees out of your pot for years and years while you're blissfully unaware. Those fees might seem small to you at perhaps 1.5% per year, but those - plus hidden costs added on - could easily reduce the amount you might get from your pension in the long run by a third or even half.

It's obvious that if you don't review your plans, you're likely to be disappointed in the long run.

Don't review too often

However, you can go too far the other way.

Nationwide Building Society recently revealed that fewer than one in ten of us knows exactly how much is in our pension pots.

Speaking as someone who has been investing with above-average success for 14 years, I think this is a good thing. If you always know exactly what's in your pension pot, you're worrying about it far too much.

Pensions are long-term investments. Worrying about how day-to-day opinion is moving the price of the investments doesn't make sense.

Nationwide adds that nearly four in ten know roughly what's in their pots, which probably means they're not agonising over it too much. This 40% have the right idea. You should always have a rough idea and you should know what that means for you in the future.

Don't over-review your other retirement savings

In August I wrote Saving in a pension? You're as well off on benefits, which showed how the benefits system is, for many people, a disincentive for saving in pensions at present, which is why more and more people are choosing to save in share ISAs. Under current rules, this gives you full control over your money.

You can invest in share ISAs just as easily as with pensions, and with the same wide investment choice, despite the name share ISA.

However, since you can access the money now, the temptation is to review share ISAs too often. If you want to know how your shares and other assets are doing on a weekly or daily basis, you're probably going to be a serious victim of your own psychology.

Investing for the long term invariably involves huge bubbles and dramatic falls, all encouraged by the mindless media and the experts they wheel out to mimic each other, saying that this bubble will never end or that the apocalypse is here, depending on which way the market is swooping.

These climbs and falls can be euphoric or terrifying respectively, but they should be neither.

Such emotions just lead you to start piling more money in when prices have risen too high, or moving your money somewhere safe when you should be buying more, because prices have plummeted to bargain levels.

You should either be going against both the professional and amateur crowd – which is invariably wrong when it moves heavily en mass – or making no changes to your plans at all.

And the third bowl was just right

Too many reviews and you're likely to get burned. Too few, and your pension pot will go cold.

I think that reviewing once per year is, like a warm bowl of porridge, just right. That's provided, for safety reasons, you're investing in dozens of different investments (which could all be wrapped up in a single investment fund) and provided you keep the costs down.

By investing for the long-term in investments such as this, at low cost, you can expect to beat most amateur investors and do better than most professional fund managers too.

The great part with this strategy is that you don't need to make many changes very often. You just continue to pay in regularly, riding the waves as the market bounces up and down on the latest opinion, but as the economy – and business on the whole – keep on going.

You can read more on choosing investments like this in Two simple ways to invest better in shares and How to get higher investment returns with low risk.

How to do your annual review

Every year for this website I try to make improvements to my guidance on reviewing your pension or other retirement savings. This helps you to estimate out how much income you'll need when you stop work, and how much you should save each year in order to achieve that income.

Doing this exercise annually is necessary, because you might need to adjust your contributions, particularly if you realise that your needs in retirement are likely to be a bit different to previous expectations.

You can read my latest guide on reviewing your pension in How much you need to save for retirement.

More on pensions:

Auto enrolment: the alternatives to NEST

Avoid this 'solution' for disappointing pensions

NEST auto-enrolment pension: what it means for you

No, you can't retire on £50,000!

Government reconsidering £140 State Pension plan