Investment Techniques for Building Personal Pension: A Guide for Frank

Build Up Your Personal Pension with Effective Investment Techniques

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Question

Frank, age 55, is considering adopting a lifestyle investment technique as he aims to build up his personal pension prior to retirement. He should be aware that:

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A. B. C. D.

ABD

Frank, who is 55 years old, is considering adopting a lifestyle investment technique to build up his personal pension prior to retirement. Lifestyle investing involves gradually shifting investments from higher-risk assets, such as equities, to lower-risk assets, such as bonds, as an individual approaches retirement age. This approach is designed to reduce the impact of market volatility on the pension fund as it nears the time when the individual will start to draw from it.

Now, let's look at the given answers to determine which is correct:

A. The asset mix of the fund will be adjusted automatically on pre-determined dates

This statement is true. Lifestyle investing involves an automatic adjustment of the asset mix of the pension fund. The frequency of the adjustments may vary, but they are typically made on pre-determined dates.

B. His ongoing exposure to equities will reduce with lifestyling

This statement is also true. As mentioned earlier, lifestyle investing involves a gradual shift from higher-risk to lower-risk assets. As Frank approaches retirement, his exposure to equities will decrease, and his exposure to bonds and other lower-risk assets will increase.

C. After 10 years, a maximum of 25% of the investments will be in bonds

This statement is false. The specific asset mix and the timing of the adjustments will depend on the individual's pension fund provider and their investment strategy. There is no specific rule that after 10 years, a maximum of 25% of the investments will be in bonds.

D. Lifestyling is likely to be appropriate if he intends to purchase a conventional annuity with his entire fund.

This statement is generally true. Lifestyle investing is typically appropriate for individuals who intend to purchase a conventional annuity with their pension fund. This is because conventional annuities provide a fixed income for life, and therefore, individuals may want to reduce the risk of market volatility in their pension fund as they approach retirement.

In summary, statements A, B, and D are generally true, while statement C is false.

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