Friends Life - Lifetime Investment Programme

w00519772

I have had a Friends Life pension plan since August 2013. All of my pension is invested into the following fund: http://funds.ft.com/uk/Tearsheet/Summary?s=GB00B442NG68:GBP

I was thinking about changing to this pension fund: http://factsheets.financialexpress.net/frle/N0R8.PDF. I called Friends Life yesterday and they said that I would have to opt out of the 'Lifetime Investment Programme' first. I asked what this meant and the operator did not know. What is the Lifetime Investment Programme?

I Googled it and found this: http://www.professionalpensions.com/professional-pensions/news/1560638/friends-provident-launches-lifetime-investment-programme. I am still a bit confused though. The link suggests that the programme gives you more flexibility. At the moment I invest in the default fund, which means there is no flexibility. They are asking me to opt out, however I believe they should be asking me to opt it.

mania112

There's a process called Lifestyling attached to your pension at present (FL have branded it Lifetime Investment Programme).

This means that as you approach retirement, the investments will gradually derisk and become less volatile - normally quite a good idea.

If you go off piste from the default range of investments it will switch off the lifestyling. Not the end of the world though, if you're going to keep an eye on things.

The fund you're proposing is known as an Absolute Return Fund and personally i don't like them, especially if you're looking at putting 100% of your pension into one.

Generally, an absolute return fund aims not to return negatively over a period of time. Sounds obvious right? why don't all funds aim to do that?

Sometimes it's not worth the risk not to lose a bit now and again, in exhange for a steady, less volatile growth over the longer term. For example, markets are down now, but most other funds aren't nervous and will ride it out, lose a little now and gain again in the future.

An Absolute Return fund has a mandate to always grow and can take exceptional risks to do so. All for only a moderate return, in truth.

Assuming your pension fund isn't huge at this time, i'd stick with the defaults.

w00519772

mania112 wrote: »

There's a process called Lifestyling attached to your pension at present (FL have branded it Lifetime Investment Programme).

This means that as you approach retirement, the investments will gradually derisk and become less volatile - normally quite a good idea.

If you go off piste from the default range of investments it will switch off the lifestyling. Not the end of the world though, if you're going to keep an eye on things.

The fund you're proposing is known as an Absolute Return Fund and personally i don't like them, especially if you're looking at putting 100% of your pension into one.

Generally, an absolute return fund aims not to return negatively over a period of time. Sounds obvious right? why don't all funds aim to do that?

Sometimes it's not worth the risk not to lose a bit now and again, in exhange for a steady, less volatile growth over the longer term. For example, markets are down now, but most other funds aren't nervous and will ride it out, lose a little now and gain again in the future.

An Absolute Return fund has a mandate to always grow and can take exceptional risks to do so. All for only a moderate return, in truth.

Assuming your pension fund isn't huge at this time, i'd stick with the defaults.

I am thinking about opting out of the program so that I can invest in more adventurous funds. Friends Life say that I can opt back in at any time? Are there any benefits of staying in a lifetime program except to manage risk?

dunstonh

Are there any benefits of staying in a lifetime program except to manage risk?

It automatically reduces investment risk as you get closer to retirement. So, if you plan a full withdrawal (or buying an annuity) then it can have an advantage if you dont personally control your investments.

if you plan drawdown (remaining invested for life) then its not really necessary.

w00519772

dunstonh wrote: »

It automatically reduces investment risk as you get closer to retirement. So, if you plan a full withdrawal (or buying an annuity) then it can have an advantage if you dont personally control your investments.

if you plan drawdown (remaining invested for life) then its not really necessary.

Why can it help if you do not control your investments. Is it because there is less risk meaning it is less likely you will have to wait for investments to rise to cash in?

I am 33 years old.