Making the right investment decision is one of the most important things that a member of a defined contribution pension schemes will make. With the right advice and expertise, making that decision can be simplified. Zurich has a long heritage of out performance through actively managing the asset allocation within funds and this outperformance can deliver real value to members.
A new market leading approach to DC default strategy, Personalised GuidePath (PGP) is the first investment strategy in the Irish market that allows pension scheme members to personalise their strategy in three ways. It is developed to cater for the diversity in large defined contribution pension schemes and makes use of Zurich's suite of multi-asset risk rated PRISMA funds - a suite of five funds managed to stay within the volatility bands in the ESMA risk rating scale.
PGP facilitates employees to personalise their risk preference from low to high during the growth phase, how they want to take their benefits at retirement and the date they plan on taking their benefits. All of this can be done online through a dedicated portal.
Risk and return
There are three growth stage options (high, medium, low risk / return) for members to choose from, depending on their risk appetite. The member can use Zurich's Risk Profiler on their online dashboard to find out which strategy is most appropriate for their risk appetite. The dashboard also has a warning mechanism to highlight if someone is invested in assets which are not appropriate to their risk appetite. The member can change their selected growth stage at any time before retirement.
Trustees could opt for medium as the default choice. Members can then validate this choice or switch to high or low with the support of risk profiling tools in the dedicated PGP portal.
Members can also choose their mix of benefits at retirement - cash, annuity and ARF. Many schemes choose 25% cash and 75% either ARF or annuity for all members. However, some trustees of schemes may decide that different cohorts of members are allocated different default splits depending on how they might take their benefits. For example, a higher weighting towards ARF may be appropriate for members with legacy DB benefits. Members can then choose a different mix with the support of the tools in the dedicated PGP portal.
At five years to retirement, the member enters the de-risking phase. During this phase their funds gradually switch into their pre-selected mix of benefits to target at retirement. Zurich will communicate with members prior to the commencement of the de-risking phase to encourage them to personalise their target benefit mix and will continue to engage with them to make sure they are happy with their selection.
Strategy end date
Trustees may decide to set the strategy end date in line with the scheme's normal retirement age at the outset. Members can then select a different end age depending on when they wish to take their benefits. Again, this can be actioned through the dedicated PGP portal. They can choose to change the strategy end date at any time allowing flexibility for early or late retirees.
Personalised GuidePath is designed to ensure members can easily understand how the strategy works, and the choices open to them. Members are encouraged to personalise to suit their preferences as engagement with members is a core element of PGP.
Zurich's online interactive employee retirement portal and unique dashboard are designed to bring pension schemes to life and to help members look forward to a great retirement.