Returns on the lifecycles in 2021

Published: 21 January 2022
Your pension capital is invested in lifecycles. BeFrank arranges that for you. The return on your investments depends on the lifecycle in which you invest and the risk profile that you have chosen. This blog tells you more about the returns in 2021.

Returns in the accrual phase

Generally speaking, all lifecycles have achieved positive returns. However, we did see that taking investment risks was rewarded in 2021. The returns on the (very) aggressive risk profiles were higher than those of the neutral and (very) defensive risk profiles.

The Passive Lifecycle
In the Passive Lifecycle we saw a positive return. This is in line with how the overall market has performed. In the Passive Lifecycle, the market is tracked as closely as possible on the basis of an investment mix that matches your risk profile.

The Active Lifecycle
The Active Lifecycle achieved the highest return in 2021. In this lifecycle, the investments are actively managed by a fund manager. The adopted strategies ensured a good return over the past year.

The Sustainable Lifecycle
The Sustainable Lifecycle did less well in 2021 compared to the other two lifecycles. In the Sustainable Lifecycle we choose not to invest in certain companies, sectors and asset classes. This was less successful last year compared to the overall market.

Returns in the risk reduction phase

As your retirement date approaches, we reduce your investment risk. The starting moment of the risk reduction depends on your risk profile. We reduce the investment risk by increasingly investing in Matching Funds. These Matching Funds keep your total pension value as stable as possible. They have a relatively low investment risk, and they protect you against a fall in interest rates. After all, the lower the interest rate, the more expensive it is to buy a pension. So if interest rates fall, the Matching Funds will yield more because the purchase of a pension becomes more expensive. If interest rates go up, the Matching Funds will yield less because the purchase of a pension will become cheaper. This means that these funds ensure that your pension capital remains as stable as possible as you approach your retirement date

Interest rate increase in 2021

Interest rates went up in 2021. This means that buying your pension is cheaper than at a lower interest rate. As a result, you can see that the Matching Funds have achieved a negative return. This may worry you, but that is exactly what the Matching Funds do: yield less when interest rates rise and more when interest rates fall. This means that your pension capital remains stable. And your pension benefit is about the same as the benefit you would receive if interest rates had gone down.

Difference by risk profile
Even in the risk reduction phase, the more aggressive risk profiles achieve higher returns. The level of your return also depends on your risk profile. For example, if you invest with a very defensive profile, your risk reduction phase starts 19 years before your retirement date. But if you invest with a very aggressive profile, the risk reduction phase starts 9 years before your retirement date. In that case, your risk does decrease, but not as much as with a defensive profile. You have more chance of a higher return, but also more chance of a negative return.

Continuing to invest after your retirement date
If you have indicated that you want to continue investing after your retirement date, you have a better chance of higher returns in the risk reduction phase. This is because a greater investment risk is taken if you want to continue investing part of your pension later. In 2021, a choice to opt for continued investment after retirement resulted in higher returns. Please note that this choice can also lead to poorer returns at times when the stock market is not doing so well.

Constant insight into investment returns
Did you know that at BeFrank you can keep track of your investment returns 24/7? It’s easy with our app and on your personal pension page. Handy!

Good to know

At BeFrank, we invest your pension capital on a diversified basis. We invest throughout the world in numerous companies, sectors and investment categories such as equities and bonds. This diversification limits your risk. We automatically lower the risk associated with your pension capital investments as you get older. We then put your money in less risky investments that will be less affected by sudden price drops. Will you retire within a year and want to incur less risk? You have a few options.

Check your investment risk

At BeFrank, you decide how much risk you are willing to take with your pension investments and how we invest your pension capital. The choice is up to you. Use our Profile Selector to easily determine which investment risk suits you. Take the test today.

We have compiled this information for you with great care, you cannot derive any rights from it.