# Which Investment option for my pension?



## Aaron (18 Mar 2010)

Ok I need a little advice from anyone who understands anything about pensions and investments.

I’m joining the company pension scheme and they have a choice of 6 investment options where I can choose just one or I can choose a mix from the 6. I’ve read up on the 6 options but to be perfectly honest other than the fact that there is a greater risk to some of them they mean absolutely nothing to me. 

The options are as follows:

*The ILIM Consensus Fund (Medium to High Risk & Default Option) *invests in a balanced portfolio of Equities, Bonds, Property and Cash. The investment strategy adopted is based on the average asset allocation for Managed Funds in Ireland. Having implemented this asset allocation, the fund’s stock selection matches the appropriate benchmark index. 
The ILIM Consensus Fund provides you with the opportunity to pursue “real” long term investment returns, in line with the market average for Managed Funds, subject to the volatility inherent with investments in “real assets”. The average asset allocation approach helps to avoid manager selection risk. Please note however that the fund is not guaranteed and values may fall as well as rise.
The fund is suitable for members who are willing to ride out stock market ups and downs, both locally and internationally, in order to potentially get higher long-term returns, but who likes the stabilising effect of some non-equity investments.
The ILIM investment management fee is 0.40% p.a. of your Pension Fund Value. There is no bid offer fee charged by ILIM. 


*The ILIM Active Global Equity Fund (High Risk Option)* invests entirely in International Equities (although a small amount may be held in Cash at any given time for operational reasons). The investment strategy, country allocation and stock selection are decided by ILIM.
This fund permits you to adopt an aggressive investment strategy for your Pension Fund. Whilst it offers you the highest growth potential, it is subject to a larger volatility risk than the Consensus Fund and consequently is not recommended for members close to retirement.
The fund is suitable for members who are willing to ride out stock market ups and downs, both locally and internationally, in order to potentially get higher long-term returns.
The ILIM investment management fee is 0.60% p.a. of your Pension Fund Value. There is no bid offer fee charged by ILIM. 

*The ILIM Active Long Bond Fund (Low Risk & Pension Protection Option)* When a member reaches retirement, they must use the bulk of their fund to provide an annual pension for their lifetime, by purchasing an annuity. The cost of an annuity, and therefore the amount of pension provided, is directly related to long-term interest rates. Fixed Interest Bond values tend to move broadly in line with annuity rates. In other words, if annuity rates are falling Bond values will tend to be increasing and vice versa. Therefore, although the Long Bond Fund does *not* protect the capital value of the investment, it does protect against changes in annuity rates leading up to retirement.
The fund is suitable for members who are due to retire in the next 5 years or less, who have built-up sufficient funds to provide their benefits, and who now wish to attempt to protect the fund’s pension purchasing power in the years leading to retirement.
It may also be suitable for members who wish to avoid the volatility inherent in Equity markets. The Long Bond Fund does not provide capital security (the value of the investment may fall) but does provide an investment return that is not linked directly to stock-markets.
The ILIM investment management fee is 0.25% p.a. of your Pension Fund Value. There is no bid offer fee charged by ILIM.

*The ILIM Cash Fund (Low Risk & Capital Protection Option)* aims to provide capital security, while providing returns that reflect interest rates generally available on money markets, by investing in low risk, short term Fixed Interest Securities. The main objective of the fund is to safeguard the value rather than seeking to maximise investment returns. 
The fund is suitable for members who are close to retirement and wish to secure the value of their fund. It may also suit members who wish to secure part or all of their fund in a capital guaranteed fund for a period of time, while accepting that the potential returns will be low.
The ILIM investment management fee is 0.25% p.a. of your Pension Fund Value. There is no bid offer fee charged by ILIM.

*The Eagle Star 5 * 5 Global Fund (Higher Risk Option)* is a Concentrated Equity Fund which invests in a very small number of stocks, but is not as diversified as broader equity funds. For example the manager may invest in only up to 25 stocks from a world market of over 1,800.
The expected returns are higher as the stocks chosen are potential best performers. However the higher expected return comes at a price of significantly higher volatility. This fund would be highest risk option for all the funds on offer in the Scheme but has the potential to deliver the highest returns.
The fund is suitable for members who are willing to ride out stock market ups and downs, both locally and internationally, in order to potentially get higher long-term returns. This is a high risk/high reward choice for investors.
Eagle Star have an investment management fee is 0.55% pa of the Pension Fund. There is no bid offer fee charged by Eagle Star.

*The KBC Dividend Plus Global Equity Fund (High Risk Option)* is a fund where the manager holds shares in companies that consistently pay above average dividends. Funds that invest in high yield shares typically have a value bias and compared to a broad equity portfolio display reduced risk and increased income.
The fund seeks to achieve their objective by investing in high yielding equities or shares in companies that consistently pay above average dividends. The fund typically has a lower risk level than other equity funds on offer within the Scheme.
The fund is suitable for members who are willing to ride out stock market ups and downs, both locally and internationally, in order to potentially get higher long-term returns.
KBC Asset Management, if the chosen provider, have an annual management fee of 0.61% and there is also a bid offer fee of 1.5%.


Now I don’t mind a bit of risk. Pensions are a long term investment but I’m just wondering what way any of you would split your contribution over the above options.

Sorry if this is a little long but thanks in advance for any help.

Also if this would be better suited in the Investments forum can a mod please move it?


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## Shirazman (18 Mar 2010)

Loads of variables to be considered there.

Including (off the top of my head)

What age are you?

What age do you hope to retire at?

How risk averse are you?

Is this likely to be your sole source of income when you retire?


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## Aaron (18 Mar 2010)

Hi I'm 27 and will probably not be retiring till I'm at least 65 and yes this will probably be my sole income when I retire unless I'm lucky enough to win the lotto between now and then but I don't see that happening anytime soon.

I don't mind a certain amount of risk in the long term as long as the potential rewards make it worth it.


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## tenchi-fan (19 Mar 2010)

Hi Aaron.
Straight off rule out the "low risk" funds. They are only designed for people approaching retirement (5-10 years before retirement.)

Retiring at 65 is optimistic given the monkeys running this country. 

The consensus fund - well that's what half the country is in and over the long-term it's medium risk. Personally, I'm in consensus but I'm considering switching to a high-risk option because I want to have a large fund when I retire!


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## asdfg (19 Mar 2010)

> I'm considering switching to a high-risk option because I want to have a large fund when I retire!


Remember with high risk you could lose everything incl capital. If you are considering a lot of high risk options you need to have some low to med risk.


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