It's only natural for pension sponsors and trustees to be careful with members' money. But when it comes to your default fund, minimising investment risk is often not a safe choice. We'll help you understand your options - and tailor your strategy to your people.
Often, employers will simply accept the default fund offered by their chosen provider - it feels like an easy, ready-made option. While in general these provider default funds may be sufficient, Aon's view is that many of them invest more cautiously than they need to during the early years of the pension life-cycle, while a member is younger.
But from an investment perspective, there is such a thing as too little risk. And if your fund doesn't grow in the way you hope, your employees could end up with the risk of having too little money to retire comfortably.
Bespoke tailoring vs off-the-peg
It all depends on your people. In the early stages of pension investment, the biggest risk is too little return. But closer to retirement, it's more important to give some certainty over the outcomes your employees can expect - and give them enough flexibility to make good decisions that make use of new pensions freedoms.
Simply, there's no such thing as "one size fits all". And that means taking an 'all-purpose investment strategy' off the peg, might not actually be the most appropriate choice for your workforce.
Talking your strategy over with an experienced, impartial pensions expert, who'll look for the best strategy, and take the time to understand your people, and their goals, could add significant value.
Thankfully, we have plenty of those. And they'll help you find your perfect fit:
- Compare default fund options
- Balance investment and governance risks
- Choose an appropriate default strategy - or design your own
- Ensure employees have the flexibility to enable good outcomes at retirement
- Establish regular investment reporting and controls
Your pension scheme's needs are unique, because your employees are. We'd love to hear about them - and help you provide for their futures. Email us on firstname.lastname@example.org, or call 0344 573 0033.