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Pensions
By Mike Feer, of BWCI
HAVING answered a question last month about different types of pension schemes, the reader has been back in touch to confirm that they are in a defined contribution scheme and have the form to complete.
They now have to decide how to invest the contributions and don’t know what to pick, highlighting that there is a long list of options and that they do not want to pick the wrong one. It can certainly be a bit overwhelming when presented with such a long list of options, and many people are not sure how to proceed.
However, most schemes will provide a default investment option. If you choose that option, you may need to give an indication of when you might want to retire.
The default option (which might also be called the lifestyle option) will automatically invest your pension savings in lower-risk assets as you get closer to your chosen retirement age. If the scheme doesn’t ask for the date when you think you might retire or you don’t answer the question, it will be assumed that you will retire at the normal retirement age specified in the scheme.
If you choose the default option initially, you would normally be able to change your mind at a later date.
However, in most pension schemes, between 80% and 90% of members would typically be invested in the default option.
