Investment options

Some pension plans are structured so that the investment profile of the underlying investments changes over time. For instance, at outset the plan might be invested mainly in adventurous funds, which have greater potential for growth but are more volatile. During the course of the plan, the proportion invested in adventurous funds would reduce to be gradually replaced with more cautious funds, up to the point closer to maturity (and retirement) when the funds are completely invested in secure funds. The aim of such plans is to increase growth in the earlier years and then to concentrate on security in later years, to avoid a drop in value just before retirement.

Some people prefer to have more active control over their pension plans and they are able to choose from a wide range of investment funds, which can usually be switched at any time. Some diversification amongst equity, bond and property funds is usual and helps protect against extreme movements in any of these markets. In addition, it is possible to invest according to the amount of risk that each individual is prepared to take.