When I put money into a pension, where does it go?

I was at the Society of Financial Planners annual conference last week and the personal finance journalist Jill Kerby spoke about the public’s view and experiences of financial products. Looking from the inside out, I can see big changes and a lot more transparency than before but that obviously isn’t shared with the public.

Then today, someone asked on AskAboutMoney.com, where their money goes when they make a pension contribution. This shocked me that people put money away for years without knowing where it was going. So we are going to have a look at where your money goes when you join a pension scheme, explaining the main asset classes (types of investments) that you can invest in.

Stocks, Shares, Equities

Stocks, shares and equities are all names for the same thing, shares in a company. When you become a shareholder, you own a small bit of that company and share in its rewards and losses. Pension funds are huge investors in the stock market, buying up large percentages of companies.

Typically, they invest in companies such as Apple, Microsoft, Johnson & Johnson. Large companies that sell products all over the world. A lot of the companies are US based because that is still the largest economy in the world but they will invest in companies in countries all over the world.

If you want, you can say you just want to invest in US companies or just European or Japanese companies or any region or just some sectors.


Bonds are loans to governments and companies. Instead of a government going to a bank and looking for a massive loan, they go to the stock market and look for loans, where they can get the loan for cheaper. They are interest only loans, with the capital paid back at the end of the loan term. Bonds are traded on a daily basis and the price goes up and down, so even if you are getting an annual interest payment (coupon), if you buy it at too high a price, you may not get your money back.

Again, you can just invest in just government bonds or just corporate bonds or ones from different regions. You can also buy bonds that are short term loans or longer term. All have different expected returns.


If you ever go to an retail park on the outskirts of a city, they are probably owned by a pension fund. Or a lot of the retail or office blocks in the main cities are also owned by pension funds. That is the scale of the level of the purchase power that these funds are at when it comes to purchasing property. They are looking for long leases for these properties so they don’t have a high turnover of tenants and changes to the property.

They tend to stay away from residential property but Irish Life recently made the news in buying residential apartments. They didn’t just buy some of the apartments in the old Notre Dame site in Churchtown, the bought every single one of them.

Property funds tend to be more localised and mainly invest in Ireland as that where their expertise is. Some funds invest in the UK too who have similar laws to us and we have seen some dip their toe into the European market. But without expertise on the ground, it is easy to make a mistake.


A cash fund in a pension doesn’t just place money on deposit. They will leave some money on deposit but will also used short term dated bonds and other money market instruments that are a cash equivalent.

There are lots of other funds available, some that are quite complex, so make sure you understand what you are investing in before you put your money into it. If you invest in quality funds over a long investment period, you will get ups and downs but you should make money in the long run. Keep it simple and don’t panic!

If you have any questions about your pension fund, send me an email at steven@bluewaterfp.ie