Which employee Pension???

maf20

Hi

I've recently changed employers and have been offered one of two pension schemes. These are: -

Lifestyle Investment & Individual Investment.

There isn't a huge amount of detail attached to the Lifestyle Investment but the Individual Investment offers me the following options: -

Investing a percentage in: -

Adventurous Pathway Fund
Index-Linked Bond Fund
Money Market Fund

Can anyone advise me on which option I should take?

Thanks

EdInvestor

Hi Maf

Could you tell us a bit more about the pension offer ?You say there are two.Do you mean two types of schemes or one scheme with two types of investment choices?

Can you tell us which life insurer is involved and also how much you and your employer will contribute to the scheme?

maf20

Hi, thanks for the reply.

I'm 29 so currently this means I will be contributing 3% and my employer 6%. There are two choices available to me. A Lifestyle Investment and Individual Investment. I will quote word for word my employee handbook.

"Lifestyle Investment - The contributions are invested in the pathway fund for the majority of your membership of the plan. As you approach retirement your contributions will be gradually switched out of the Pathway Fund into the Index Linked Bind and Money Market Fund.

The 'Lifestyle Investment' has been specially selected by the Trustees to try to maximise returns when you are young and minimise volatility as you get older. However, it is important to remember that the lifestyle option offered by the Plan is unlikely to be appropriate to all Plan members."

The Individual Investment - You can choose your own split between the three funds available: -

Adventurous Pathway Fund - this fund invests in UK and non-UK equities. Although past performance is not a guide to future performance, historically this type of investment has given the highest returns over long periods but also the highest variability of returns over short periods.

Index-Linked Bond Fund - This fund invests in index-linked gilts. The value of this broadly reflects insurance company and annuity rates and also helps protect that part of your individual account near retirement which will be used to buy your pension.

Money Market Fund - This is a cash fund. The capital value can not go down so this helps protect and matches that part of your individual account near retirement which you may take as tax-free cash. Historically over long periods in the past, cash has produced lower returns than from other funds. However, past performance is not necessarily an indicator of future performance."

That is word for word

If selecting the latter option I am required to state how much percentage I would invest in each sub heading.

I am employed by the Rugby Football Union. It appears the life insurer is thread needle pensions (https://www.threadneedlepensions.co.uk )It also states that if I wish to dispute any part of the plan I should contact: -

PAN Trustees Limited
3 Castlefield Court
Church Street
Reigate
Surrey
RH2 0AH

If you require further information then please let em know.

Many thanks for your help

dunstonh

Lifestyle funds are a good idea in principle but they dont seem to set the world on fire in the early years.

As for choice of funds, they have once for each risk area so it really depends on what your risk view is. Some will be happy with the high risk funds, some will prefer the low risk funds. You can pretty much rule out the money market fund at this time (unless you are paranoid about being run down by a bus or being eaten by spiders).

Debt_Free_Chick

dunstonh wrote:

Lifestyle funds are a good idea in principle but they dont seem to set the world on fire in the early years.

In the early years it should be an equity investment - in this case the Adventurous Pathway - to take advantage of the potential of the highest possible returns.

Adventurous Pathway seems to be a global equity fund with a reasonable target to outperform the benchmark by 1.5% pa

http://www.threadneedlepensions.co.uk/html/pdf/wr_adventurous.pdf

Debt_Free_Chick

maf20 wrote:

Hi

I've recently changed employers and have been offered one of two pension schemes. These are: -

Lifestyle Investment & Individual Investment.

There isn't a huge amount of detail attached to the Lifestyle Investment but the Individual Investment offers me the following options: -

Investing a percentage in: -

Adventurous Pathway Fund
Index-Linked Bond Fund
Money Market Fund

Can anyone advise me on which option I should take?

Thanks

At younger ages, your future investment term is at its longest. With a long time horizon, its generally considered that you can take more risk e.g. your investment rises by 10% pa and then falls by 30%. The 30% fall may not be a problem for your eventual investment as there are many years in the future when it can recover.

Although opinions differ, many advocate investing in equity based funds at younger ages. They are often described as "high risk" as the value can fall quite dramatically.

The Pathway Fund is an equity fund.

Lifestyle is not a single fund - it's an investment strategy that tries to match the type of investment to your age. So you should find that up to the age of 50 or 55, your pension fund would be invested in equities and after that I would imagine that Lifestyle would gradually switch your investments out of Pathway so that by the time you reach NRA your fund would be invested 75% in the Index Linked Bond Fund and 25% in the Money Market Fund.

The reason for this is that you can take 25% of the total fund as a cash sum. By having 25% in the Money Market fund, this matches the amount you can take as cash. The 75% in the Index Linked Bond Fund is a relatively good match for using that part of the fund to buy an annuity.

A Lifestyle fund would not be appropriate if you intend to drawdown the income when you retire, rather than buy an annuity.

HTH

EdInvestor

Very poor choice of funds, I would complain to the trustees and ask for a bigger selection.

Here's the other funds Threadneedle offers:

http://www.threadneedlepensions.co.uk/html/funds_price.asp

You may like to check their performance.

maf20

great, thanks for the advice. Do you think there is a particular choice in this list I should request?

EdInvestor

Hi maf,

Haven't got time to go through them all, sorry, but a quick look at the property fund suggests that you could consider putting some of the money in that.