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Pensions
By Mike Freer, of BWCI
A READER has just got in touch to say that they have passed their probation at work and that they can now join the pension scheme.
Their manager has told them that it’s a defined contribution scheme and that they have now got the pension scheme form to complete.
They have to decide how to invest the contributions and don’t know what to pick. They say that there is a long list of options and that they don’t want to pick the wrong one.
This can be a bit overwhelming and many people feel like this. 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.
