One of the most important things to decide is where you would like contributions to your personal pension to be invested. This decision is up to you, and can make a big difference to the eventual income you have in retirement.
It is important for you to understand your investment options so that you are comfortable with the decisions you make.
You should read as much information and use as many tools as you can, including the pensions calculator. You may also want to seek help from an Professional Financial Advisor if you are unsure, though they will charge a fee for this advice. If you select your own investment funds, in the years approaching retirement you may wish to review them to ensure that they remain appropriate. You can find out more information detailed under the 'investment strategy' section on the Orbit online platform.
The decisions you make about the funds you would like to invest in probably depends on your attitude to risk. Equities and Property are seen as the most risky types of assets but can provide the biggest return over the longer term. Bonds and Cash are the least risky but typically provide smaller returns in the long run.
Although you are encouraged to take an active role in deciding on the funds contributions should be invested in under the Sopra Steria GPP there is a default investment approach where contributions are automatically invested in if you do not make any specific investment decisions. The default is known as a 'Lifestyle' investment approach. This type of investment strategy is set-up to make changes to the investment profile of your fund automatically as you approach retirement. As you get closer to retirement your fund is gradually moved from funds which are considered to be less risky in the short term. It is a way of protecting your pension from market volatility that exists if you are invested in equities (stocks and shares) as your approach retirement.
Your contributions are invested in a broad range of asset classes, including equities (stocks and shares), and other potential higher growth investments while you are more than ten years from your Target Retirement Age (TRA). The aim is to build up the value of your pension fund during this period by way of investment returns as well as by the contributions paid into the GPP. Within ten years of your TRA your investments are automatically switched to bonds and cash type investments that offer more stable returns and aims to protect the value of your accumulated personal pension. Click here for more details about the Sopra Steria GPP Default Ten Year Lifestyle Investment Approach. This default was introduced from 1 January 2014 and if you joined the GPP before this date you would have been invested in the previous default - the Sopra Steria GPP Six Year Lifestyle Investment Approach and more information can be accessed here. The approach was replaced as the default based on investment advice received by Sopra Steria. If you are still invested in this approach you are encouraged to review whether the default remains appropriate for you or whether the new default approach is more appropriate.
Whichever funds you choose, it's important to remember that the past performance of any fund or investment is not necessarily a guide to how that fund or investment may perform in the future and that the value of your investments can fall as well as rise. A pension fund is intended to be a long-term investment, and there can be no guarantees regarding the level of retirement benefits the plan will provide. If you are unsure as to the sustainability of a particular fund you should seek Professional Financial Advice.
It is important that you set your Target Retirement Age early on, as the 'Lifestyle' strategy uses this date to make the gradual movements in your investments. The default Target Retirement Age when the personal pension plan was set up is age 65. If you want to change your Target Retirement Age, you should contact the Lifestyle helpdesk at Lifestyle@orbitbenefits.co.uk.