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Help me choose an investment strategy

If you are comfortable choosing from a small range of investments for your retirement savings and uncomfortable changing your investments at different life stages, these strategies might suit you.

The Trustees have created a range of strategies to offer different potential for growth and appetite for risk.

There are also a range of Income Alignment strategies, which aim to match your investments with how you plan to take an income from your savings. 


These strategies do not provide a guaranteed return. However, they are designed to manage some of the investment risks for you, as you approach your target retirement age.

As mentioned the strategies are made up of two parts:

  • the first is to choose a strategy for the period when you’re looking to grow your savings, and
  • next is to think about how you might use your savings to buy an income and choose an Income Alignment strategy which lines up to this.

Let’s look at the two parts and the choices you have.

Growing your pension pot

For the majority of your working life, you’re looking to build up enough savings to give you an income for when you cut back or stop working. This can be achieved by saving as much as you can afford and investing in assets with the potential to grow your money.

You’ll also likely to consider the level of risk  you feel comfortable with. Remember the value of your investments could go down, as well as up.

The Trust offers five growth strategies. Each strategy is designed to target a different level of long term (more than five years) growth, while minimising the investment volatility you may experience.

Life Stage Strategy

If you don’t make a choice you are automatically placed in the Life Stage strategy. This strategy assumes that you’ll take a quarter of your fund as cash when you retire and take the remainder as a flexible income. This invests wholly in global stock markets, until you are within 27.5 years of your target retirement age. It then moves your savings gradually to a mix of 70% in global stock markets and 30% in gilts and bonds. You can find out more about this strategy here.

The Cautious

This is the lower risk of the five growth strategies. It invests 55% of assets in global stock markets, with the balance invested in a range of other assets to reduce the impact of stock market volatility.

The Balanced

This invests 70% of assets in global stock markets, with the balance invested in a range of other assets to reduce the impact of stock market volatility.

The Adventurous

This invests 85% of assets in global stock markets, with the balance invested in a range of other assets to reduce the impact of stock market volatility.

The Aggressive

This strategy is entirely invested in global stock markets. This is the most aggressive (and risky) of all the strategies.

Preparing how and when to take an income

The aim of the Income Alignment strategies is to reduce the impact of volatility on the value of your retirement savings as you near the point you start taking an income. To do this, your savings are automatically shifted into investments which match or closely match how you’re going to use your savings to provide an income.

 

When you decide to start using your retirement savings to give yourself an income, you have a number of choices to suit your needs:

  • take a quarter of your savings as a cash sum, with no tax to pay (current rules for retirement savings plans, allow most people to take 25% of their savings free from tax)
  • buy a pension from an insurance company (called an ‘annuity’) to provide a guaranteed income for life
  • keep your savings invested and take a regular income, as and when you need to
  • take some or all of your savings in cash, at or shortly after your target retirement age  

You can use more than one of these ways to take an income – whatever suits your needs.

You can choose from one of seven income alignment strategies to match how you plan to take as income:

If your income goal = flexibility to vary your income

100% flexible income

You expect to keep all of your retirement savings invested and take a series of cash payments to provide your income. This strategy recognises this preference and maintains the chosen growth strategy past your target retirement age.

75% flexible income plus 25% cash

You expect to take a quarter of your retirement savings as a tax free cash sum and keep the rest invested and take a series of cash payments to provide your income. In the three years prior to your target retirement age, this strategy gradually moves a quarter of the investments in your growth strategy to the cash fund.

If your income goal = certainty

100% annuity

You expect to use all of your retirement savings to provide a guaranteed income for the rest of your life – an annuity. In the five years prior to your target retirement age, the value of your Personal Account in this strategy will gradually switch into the annuity preparation fund.

 

75% annuity plus 25% cash

You expect to take a quarter of your retirement savings as a tax free cash sum and use the rest to provide a guaranteed income for the rest of your life – an annuity. In the five years prior to your target retirement age, the value of your Personal Account in this strategy will gradually switch into the cash and annuity preparation funds.

100% inflation-linked annuity

You expect to use all of your retirement savings to provide a guaranteed income for the rest of your life, with some protection from inflation – an inflation-linked annuity. In the five years prior to your target retirement age, the value of your Personal Account in this strategy will gradually switch into investments which move in line with the change in price of an inflation-linked annuity.

75% inflation-linked annuity plus 25% cash

You expect to take a quarter of your retirement savings as a tax free cash sum and use the rest to provide a guaranteed income for the rest of your life, with some protection from inflation – an inflation-linked annuity. In the five years prior to your target retirement age, the value of your Personal Account in this strategy will gradually switch into the cash and investments which move in line with the change in price of an inflation-linked annuity.

Your income goal = cash at retirement

100% cash

You expect to take all of your savings as a single cash lump sum. In the five years prior to your target retirement age, the value of your Personal Account within this strategy is gradually switched into the cash fund.

How the Income Alignment strategies work

As you approach your target retirement age, the money invested in your growth strategy is gradually switched in to investments which aim to match how you plan to take an income. The switches are carried out automatically every month, so you don’t need to take any action during this period.

If you don’t make a choice, your Personal Account will be invested in the 75% flexible income plus 25% cash strategy.

 


Target Retirement Age

It’s important, particularly when using an investment strategy, to ensure your target retirement age is roughly when you plan to start taking an income from the Trust. It’s automatically set as your State Pension age, but you can change it at any time online, using My Account, or by contacting us.
 
If you are already in the Income Alignment phase, or make changes which mean your investments will move into the Income Alignment phase, your Personal Account will remain invested in the existing assets until the next switching date.

You can make your choices online via your account, by completing this form or by contacting us. This does not have to be your final decision, you can of course change your investment strategy at any time and as many times as you want, free of charge through the same channels.

It’s important, once in a while, you check your investment choices are still right for you, particularly if your personal circumstances change.