Severn Trent Pension Scheme - PRAG

Spotlight on investments.......
Is it time to review
your investment choices?
When you joined Pension Choices, you were given the choice
of investing your contributions using either FreeModel (where
you make some of the investment decisions) or LifeModel
(where you leave all of the decision making to the Scheme’s
investment manager).
Here is a reminder of how LifeModel works:
• You tell us when you want to retire (your Target
Retirement Age).
• In the early days, when you are more than 10 years away
from your Target Retirement Age, your contributions are
invested in equity funds (eg, company shares), with the
aim of maximising the growth of your personal account.
• During the 10-year period before you reach your chosen
retirement age, your investments will be gradually switched
out of shares and into bonds.
• In the final three years, your contributions are switched into
the Cash Fund, so that at your retirement 75% is invested
in the Pre-Retirement Fund and 25% in the Cash Fund.
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Things to consider
LifeModel aims to minimise the impact of a downturn in
the stock markets on your pension when you are nearer
your Target Retirement Age, by switching your personal
account over to less volatile investments such as bonds
and cash in the 10 years before you retire (known as the
‘lifestyling period’).
However, if stock markets rise in the 10 years before you
retire, this can mean that your account will not be as large as
it would otherwise have been.
Also, if you enter this ‘lifestyling period’ at a time when share
prices are low (as they are now), then you will to some extent
be ‘locking in’ the losses to your account caused by the
stock market falls. On the other hand, you will be giving your
account some degree of protection against further falls in the
stock market.
The Trustee has set up LifeModel in a way it believes will
work well for the majority of Pension Choices members,
but it may not be the best option for your individual
circumstances. If you are unsure whether LifeModel is
the right strategy for you, we recommend you speak to an
independent financial adviser.