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Understanding your Pension Investments

Updated: Jan 27, 2023

It’s time to start contributing to your pension again as the suspension/holiday period provided for under the National Pensions (Amendment) Act, 2020 has ended. Employees and companies must restart contributions payments starting with October earnings.

With the recent market uncertainty caused by the COVID-19 pandemic, you may be thinking more about how your money is being invested by your pension provider. You’ve probably come across the following terms if you’ve done a bit of research on investment strategies:

  • Combating volatility by dollar cost averaging

  • Staying balanced across asset classes (e.g. stocks, bonds, etc.)

  • Diversifying across markets and sectors

  • Buying low and selling high

Knowledge of financial markets and investment tactics aside, choosing where and how to invest on your own can require an investment of quite a bit of your time as well.

One of the major benefits of pension providers such as the Chamber Pension Plan is that they leverage the expertise of established investment advisers to take away any guesswork you might otherwise encounter when investing on your own, so you don’t have to worry about mastering a variety of investment strategies such as those listed above. Lifecycle Funds Chamber Pension Plan offers “Lifecycle” Funds (also known as “target date” funds). Based on your age and projected retirement date, these funds reflect your changing needs throughout your working life by automatically adjusting the combination of assets they invest in to reflect your evolving investment needs and goals. In other words, the funds automatically shift the balance of your investments toward less risky assets as you near retirement.

Generally, pension plans offer a range of funds for you to choose to invest in. Chamber Pension Plan’s Lifecycle Funds simplify that fund selection. When you join the plan you are automatically allocated, based on your age, to the Lifecycle Fund representing your expected target retirement date. However, you have the flexibility to move to a more conservative Chamber Pension Plan Lifecycle Fund at any time. Fixed Income vs Global Equity The combination of assets that the Chamber Pension Plan’s Lifecycle Funds invest in are categorised as ‘fixed income’ and ‘global equity’.

Fixed-income investments provide payments (in the form of interest) to investors in set amounts at fixed intervals. Some of the most common types of fixed-income products are corporate or government-issued bonds (more specifically the latter, treasury bonds or “t-bonds”). They are considered more conservative (i.e. less risky) investments than stocks because they are not as sensitive to events that can cause fluctuations in financial markets (such as economic downturns). Additionally, US treasury bonds are widely accepted as particularly secure investments due to backing by the US federal government. The Chamber Pension Plan’s fixed income manager is Income Research + Management.

Global equity refers to an investment in stocks from around the world that earn dividends. Although subject to market fluctuations, these investments are generally better for long-term investment to provide higher rates of return. BlackRock is the global equity manager for the Chamber Pension Plan. How Our Lifecycle Funds Work for You By using a combination of fixed income and global equity, Chamber Pension Plan’s goal is to diversify the portfolio of investments for each Lifecycle Fund to increase their total value over the long term. Over time, a Lifecycle Fund gradually adjusts the mix of asset classes to become more conservative as you approach the year in which you expect to need your retirement assets.

Put simply, those further from retirement have more time to benefit from riskier investments that pay higher returns over longer periods whereas those closer to retirement will require more stable investments to limit losses in the short term.

Therefore, Lifecycle Funds that are targeting retirement at a later date will have a higher percentage of equity investments in an effort to maximise returns over a longer term.

Conversely, funds that are targeting retirement at an earlier date will have a lower equity allocation and a higher percentage of fixed-income investments in an effort to minimise the risk of capital loss. Each fund is rebalanced on a quarterly basis to maintain the target asset allocation.

When you invest in the Chamber Pension Plan Lifecycle Funds:

  • You can be sure that your pension account is broadly diversified and professionally managed.

  • You don’t have to remember to adjust your investment mix or make any transfers as your target date approaches – it’s done for you.

  • You don’t have to monitor your account to be sure you are not straying from your investment strategy — the Chamber Pension Plan Lifecycle Funds keep you on course.

Follow the link to learn more about our Lifecycle Funds.


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