SHPS | Defined Contribution

Amber

Age: 23

Salary: £14,000

Investment knowledge: none and is not interested in learning

Priorities: would rather be spending money on a holiday

Amber is a long way from retirement so has the time to ride out any ups and downs the stock market might experience. If interested, Amber might consider investing in shares. Shares could increase significantly in value but also hold some risk of falling in value. The Lifestyle option might be a good choice for Amber as it takes away the need for any investment knowledge and Amber's investments will be moved to safer funds automatically as Amber approaches their selected retirement date.

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Red

Age: 42

Salary: £21,000

Investment knowledge: reads the Financial Times daily and is actively interested in the stock market

Priorities: needs safe investments that will grow over time

As Red has an interest in investing, Red might want to select funds from the range available rather than using the Lifestyle option. Red still has time to ride out poor investment performance, so might want to take some risks. However, Red will want to review the investment choices regularly to make sure they are performing well.

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Blue

Age: 59

Salary: £24,000

Investment knowledge: knows the basics

Priorities: wants to protect pension savings

Blue is looking forward to retiring in the next few years and is planning to take 25% of their pension savings as a tax-free cash lump sum. Because of this, Blue moves 25% of the savings into cash to protect this value. However, it will have limited growth. Blue might also want to consider moving the rest of his pension savings into safer investments such as bonds as retirement gets nearer. Bonds are the investments that are most closely linked to annuity prices, making them a good place to invest as retirement approaches.

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