Bucket List #31

Learn to sail

Now that I've retired, Chamber Pension Plan allows me to CHASE ADVENTURE!

Our Pension Funds

What is a Lifecycle Fund?

At Chamber Pension Plan our pension funds are called Lifecycle funds, and are based on your age and your projected retirement date. The reason we have different funds for different age groups is that as you age, your investment risk tolerance, portfolio time horizon, and investment goals normally change. Lifecycle Funds reflect your changing needs throughout your working life by automatically adjusting the combination of assets they invest in based on your age to reflect your evolving investment needs and goals.

Chamber Lifecycle Funds

Each of the Chamber Pension Plan’s five Lifecycle Funds available under the plan contains a mix of investments linked to a specific target retirement decade, and each target retirement decade corresponds to a specific investment time horizon.

The Chamber Pension Plan’s five classes are called Lifecycle Funds, because they are designed to match where you are in your work life – the amount of working time left before you will need to start using your savings and the way your investment goals are expected to change over time.

The five Chamber Pension Plan Lifecycle Funds are:

  • Chamber 2025
  • Chamber 2035
  • Chamber 2045
  • Chamber 2055
  • Chamber Income

Objective of the Chamber Pension Plan Lifecycle Funds

The Lifecycle Funds use professionally determined investment mixes that are tailored to meet investment objectives based on various time horizons. The objective is to strike an optimal balance between the expected return and risk associated with each fund.

Investment Strategy

The Chamber Pension Plan Lifecycle Funds’ strategy is to invest in an appropriate mix of equity and fixed income securities for a particular time horizon, or target retirement date. The investment mix of each Chamber Pension Plan Lifecycle Fund becomes more conservative as its target date approaches.

The strategy assumes that:

  • Investments with higher expected returns (equities for example) also normally come with a higher risk of loss;  it is widely believed by investment experts however, that if you hold those investments for a long enough period, well-selected equities will deliver a higher total return.
  • The greater the number of years you have until retirement, the more willing and able you should be able to tolerate risk (fluctuations) in your pension account value to pursue higher rates of return.
  • For a given risk level and time horizon, there is an optimal mix of equity and fixed income securities that provide the highest expected risk-adjusted return.

Fund Composition

Each of the Chamber Pension Plan Lifecycle Funds has a target asset allocation. In other words, each is made up of the combination of equity and fixed income portfolios which maintain an optimal balance of investment risks and rewards for a particular time horizon.  Here is a graph representing the 2016 target allocations for the Chamber Pension Plan Lifecycle Funds:   

 

Each year, the Chamber Pension Plan Lifecycle Funds’ target asset allocations automatically change, moving towards a less risky mix of investments as the target date approaches. So if you are invested in one of the Chamber Pension Plan Lifecycle Funds, you will notice that as you get closer to your target retirement date, your allocation to the riskier assets (equity securities) will get smaller while your allocation to the more conservative assets (fixed income securities) gets larger. This feature continues until your target retirement decade, after which the proportions are frozen at 75% fixed income and 25% equity.

The rate of change in the target asset allocation is gradual as the funds approach their target dates. For a visual representation of how the asset allocations change over time, have a look at the following graph.

Note: The graph illustrates the asset allocation changes for a member who began investing in the 2055 lifecycle fund at the age of 21.

The Chamber Lifecycle Funds employ a multi-manager approach with six underlying investment management firms - each managing a portion of the Funds. This provides an additional layer of diversification and risk management for the Chamber Lifecycle Funds.


Lifecycle Funds Operation

When a Lifecycle Fund has reached its target date, its composition will be the same as the Chamber Income Fund.

The Chamber Income Fund:

  • Is the most conservative of the Chamber Lifecycle Funds.
  • Focuses on capital preservation while providing a small exposure to equity securities in order to reduce inflation’s effect on your purchasing power.
  • Is designed to produce a higher level of income for participants who plan to start withdrawing from their pension account in the near future and for those who are already receiving annual payments from their account.
  • Has a set asset allocation that does not change over time (75% fixed income securities; 25% equity securities).
  • The progression from a target date Chamber Lifecycle Fund to the Chamber Income Fund is automatic – you don’t have to do anything.

New Lifecycle funds will be added for distant target dates as they are needed.

Risks

When you invest in the Chamber Pension Plan Lifecycle Funds:

  • You are subject to the investment risks associated with equity and fixed income securities.
  • Your account is not guaranteed against loss, nor is it assured of any level of return. The Chamber Pension Plan Lifecycle Funds can have periods of gain and loss, just as the equity and fixed income markets.

Rewards

Pension Lifecycle Funds simplify 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.  To add some flexibility, at any time, you can move mandatory contributions to a more conservative Chamber Pension Plan Lifecycle Fund.

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.

Why Use the Chamber Pension Plan Lifecycle Funds for my Retirement Account?

Use the Chamber Pension Plan Lifecycle Funds if you are looking for a simple, low maintenance way of investing money in your pension account. The Chamber Pension Plan Lifecycle Funds make the investing process easy for you because you do not have to figure out how to diversify your account or how and when to re-balance.

The Chamber Pension Plan Lifecycle Funds are designed so that 100% of your pension account can be invested in the single Chamber Pension Plan Lifecycle Fund that most closely matches your working time horizon.

 
Five Funds ExplaineD

 

CHAMBER LIFECYCLE FUND

INVESTMENT OBJECTIVE

INVESTMENT MIX (THE BALANCE BETWEEN EQUITY AND FIXED)

Chamber 2055

If you were born in the 1990s

 

Maximise savings growth

Diversify to reduce risk without sacrificing return

The investment mix in these funds adjusts over time. For example, the 2045 fund started with an investment mix of 90% stocks and 10% fixed income investments in 2006 but has been rebalanced every year to slowly include more fixed income investments and fewer stocks.



Chamber 2045

If you were born in the 1980s

 

Chamber 2035

If you were born in the 1970s

 

Seek strong growth

Reduce risk over Chamber 2015 time

Chamber 2025

If you were born in the 1960s

 

Chamber Income

If you were born in 1959 or earlier

Avoid sharp market declines

Preserve real spending power

Minimise annuity purchase risk

 

This fund's investment mix is maintained at 75% fixed income and 25% equity in the assumption that the target withdrawal date is always five years or fewer from the current date.