On your retirement date, your pension capital will become available. You will use that amount to buy pension benefits. How does that work exactly? Everything you need to know about retiring.
The amount of your pension is affected by the following two things:
- The results of your investments
- The interest rate at the time you buy your pension benefits
Fluctuations in interest rates
When you’re buying your pension, bear this in mind: the lower the interest rate, the lower your pension will be. At BeFrank, we use matching funds to protect pensions to a large extent against the effect of interest rates.
If interest rates go down, the value of these funds rises. And vice versa: if interest rates rise, the value of the matching funds will fall. However, you will still be able to purchase roughly the same pension.
That way, we protect your pension against fluctuations in interest rates and you know where you stand.
Fluctuations in equities
Investing involves risks. Stock values fluctuate, for example due to the coronavirus pandemic.
Therefore, for all our risk profiles, the closer you come to your retirement date, the less risk we take on your investments. We invest less and less in return funds (which carry greater risk) and more and more in matching funds (which carry less risk).
Taking less risk
If you’re going to be retiring within a year and you want to take less investment risk, change your risk profile to ‘very defensive’. You can do this through your personal pension page. We will start investing your pension capital in matching funds only, rather than in return funds.
The value of these funds may still rise or fall, but this does provide more certainty about the amount of your pension. If you opt for a ‘very defensive’ risk profile, your expected pension benefits will hardly be affected at all by developments in the financial markets.
Wondering whether a ‘very defensive’ risk profile is right for you?
Check your investment risk first by completing the Profile Selector on your personal pension page.
For more information about retiring, take a look at the following pages: