As you get closer to retirement, the relative importance of each type of risk changes. The following guidelines will help you understand your investment options as you approach retirement.
When you are a long way from retirement...
You will usually be looking for good investment growth.
Capital value risk and annuity price risk (click
here for details) should
normally be less important to you. What you should be concerned about is
limiting the inflation risk and missed-opportunity risk in the investments
you choose.
This is because, as you are earning and have time on your side, you probably
have the ability to ride out, and hopefully recover from, any ups and downs
of the financial markets and can aim for higher returns without undue concern.
At this point you may wish to consider investing in equity-based funds and
any other funds you think may generate higher returns over the long-term. |
When
you are closer to retirement...
Since April 2015, a change in the law means that you now have much greater flexibility around how you choose to access your retirement savings.
This is a big decision and should influence where you choose to invest. As you approach retirement, it is important to consider your options. If you are unsure, you may wish to seek independent financial advice. However you are planning to access your savings, as you approach retirement you will probably want to protect the value of your investments from falls in the markets. Capital value risk and, if you plan to buy an annuity, annuity price risk (click
here for details) are normally more important to you at this stage in your career. To help protect your fund against these two risks, you can consider investing in assets which have lower risk relative to equities, such as bonds and cash.
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Choosing your retirement date
Because the Lifecycle options
change how your account is invested according to how long you have before
retirement, it is important to select a Planned
Retirement Age, so switching between funds takes
place at the right time. The Normal Retirement Date at Allen & Overy
is your 65th birthday. You may be able to draw your pension earlier with
the agreement of Allen &
Overy, and with that in mind, you can select a Planned
Retirement Age between
age 55 and 65 for Lifecycle*.
* If you are a DC member who joined the Scheme
before 1 April 2010, you have the right to retire at age 62. If you
continue as an employee of Allen & Overy beyond age 62 you may continue
in membership of the DC Section on the same terms as applied before
age 62. You may select a Planned Retirement
Age between 55 and 65 for Lifecycle. The charts here show what
the three Lifecycle options are, assuming your Planned Retirement Age
is 65.