Allen & Overy Pension Scheme
You are not currently logged in
Login here
Understanding the Lifecycle Options

The Lifecycle options invest your account according to a set program, aiming to manage the four kinds of risk associated with pension investment.

The Lifecycle options aim to provide good levels of investment return when you are younger, while aiming to protect the capital value and pension value of your account as you approach retirement.

There are three Lifecycle options on offer which target different forms of benefit in retirement.

  • A Multi-Asset Lifecycle Strategy, designed primarily for members who wish to take flexible drawdown at retirement (note that this would involve transferring your funds to an external arrangement at retirement).
  • An Annuity Lifecycle, for members targeting annuity purchase (and taking 25% tax free cash) at retirement
  • A Cash Lifecycle, for members targeting full cash out on retirement

Each Lifecycle option has two phases:

  • The accumulation phase is when your account is aiming for growth and strives to reduce missed-opportunity cost risk.
  • The pre-retirement phase when your account is aiming to protect you from capital value risk and, depending on the Lifecycle, annuity risk.

The Lifecycle options, agreed by the Trustee who takes advice from a professional Investment Adviser, are designed to produce suitable mixes of investment returns and risks for the majority of members, but they may not be appropriate for your individual circumstances. You should bear in mind that the Lifecycle options will not necessarily produce higher benefits for you than the other investment funds on offer, nor should you think of them as low risk options.

What are the advantages of a lifecycle approach?

The Lifecycles are designed to take into account the changing investment objectives and risks of a typical member over time. As you approach retirement, your investment objectives and risks will change. This means that the way your pension savings are invested should also change. Each Lifecycle option is designed to take these factors into account and automatically manages the investment of your savings over time.

Your retirement savings should be viewed as a long-term investment and the Lifecycle approach may help you to maintain a suitably long term focus for investing your assets. One example might be the temptation to switch out of equity investments after a market fall, which may mean that you miss out on the longer-term potential for investment growth. The Lifecycle options are designed to maintain appropriate levels of risk for a typical member over each stage of your savings journey.

A Lifecycle approach may appeal if you don’t want to take a 'hands on' role in choosing how your savings are invested as your investments will be automatically switched into less risky investments in the years leading up to your PRA. If you choose a lifecycle approach you should still keep a regular check on how your fund is performing and be comfortable that it continues to be the right choice for you.

The switching takes place over a ten year period so that only small amounts of assets are switched in any one month. Ideally, you would indicate your PRA more than ten years before. However plans change and you can update your PRA at any time. Note that if you are within ten years of your PRA such a change will lead to a larger one-off switch in your investments.

What are the disadvantages of a lifecycle approach?

The Lifecycle options are designed to manage investment risk over time based on a typical member of the Scheme and do not take into account your individual circumstances or any specific investment objectives or preferences you may have. You should therefore take time to decide which investment approach is right for you.

The Lifecycle options do not allow for market timing as your investments will be automatically switched on a monthly basis in line with a pre-determined strategy. For example, if a Lifecycle strategy starts to switch you out of growth assets after a significant fall, this may limit the amount of growth achieved by your fund over the long term which could impact the value of your retirement benefits.

Note that if you do not keep your PRA up to date then the fund switches may happen too early or too late relative to your requirements. If you select a Lifecycle option then you should notify your pension provider if you intend to change your PRA.

In summary, the Lifecycles provide you with a simple option to manage your key investment risks over time. However this approach may not suit everyone. The right strategy for you very much depends on your individual investment objectives and attitude to risk, and how you will choose to take your benefits at retirement. If you are comfortable making investment decisions yourself or if the strategies and timescales do not suit your own needs or risk tolerance, then you may wish to consider investing via the self- select fund options available through the Scheme.

Go to top of page

Note – for members that have been auto-enrolled to the pension scheme post 1st May 2008, your Employer Core contributions will be invested in the Multi-Asset Lifecycle option until such time as you process an investment switch by logging in to the 'My Pension' section of this website.

If you do not instruct the Trustee otherwise, this is the investment option you will be assigned.

The Self-Select option

As well as the Lifecycle option, you can choose the Self-Select option.

The individual funds are shown by clicking here.

Switching periods

Click on the graph below for charts that show what the three Lifecycle options are assuming your Planned Retirement Age is 65.