Taking Control of Your Pension
If you’re a member of the money purchase section, it’s
worth remembering that a higher fund means more pension in your
pocket when you retire, so it’s important that you take an
active interest in how your contributions are invested.
As mentioned in our article Planning for Retirement, the amount
of a money purchase pension isn’t fixed, but depends on the
value of your retirement account (contributions plus investment
return) and the amount of pension you can buy for each pound in
your account (which will vary as the cost of buying an annuity
changes).Therefore it’s important that you take an active
interest in how your account is invested and how your investments
are performing.
Investing for retirement needn’t be daunting – the
basic aims are to:
•
maximise your fund at retirement; while
• protecting the
level of pension you can buy.
It’s worth knowing that equities (i.e. company shares) have
historically produced the best long-term returns. However, they
are volatile and therefore carry more risk (prices can move up
and down quite quickly, sometimes by large amounts). Other assets,
such as bonds and cash, have more stable prices, but at the expense
of likely lower investment returns over the longer term. However,
if you’re a long time from retirement, short-term movements
in prices may be less of a concern because your fund has time to
recover.
Lifestyle Options
To help you achieve the aims mentioned above, the Scheme provides
three Lifestyle options - known as the Cautious Lifestyle option,
the Consensus Lifestyle option and the Consensus Plus Lifestyle
option - all of them structured to achieve this balance automatically,
but offering different levels of risk (i.e. exposure to price
volatility) as you approach retirement. These options remove
the need for you to make individual investment choices and switches.
Instead, investments are automatically selected depending on
how close you are to normal retirement age (age 60). Funds are
gradually transferred from equities to gilts and cash over either
five or ten year periods ending at Normal Retirement Age.Your
Lifestyle options are described in more detail in your Investment
Choices booklet. You can obtain a copy from your local HR contact
or from the pensions website www.kgbd.co.uk.
Self-Select funds
You may prefer to manage your own investments by switching your
retirement account between a number of funds selected by the Trustees
to offer a wide range of investment types. However, there is no
automatic switching as you approach Normal Retirement Age, and
you must make any such arrangements yourself.
Self-select funds may be the right choice for you if:
•
You
want to be actively involved in managing your account
• You
want to take more risk or less risk in your investment choice
• You
plan to retire earlier or later than your Normal Retirement Age.
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