Many funds today give their members the right to choose between various investment options for their retirement savings. The question is, are members best qualified to choose an investment portfolio or combination of portfolios which are best suited to their needs? It has been found that in many instances the wrong choices have badly affected returns and the eventual retirement fund pot.
This is one argument against member choice. Another argument against is the issue of cost. By giving individuals separate choice, administrators charge a higher fee for the extra work involved. In itself this serves to erode retirement savings.
The case for investment choice is that the individual member should be able to select an investment portfolio which suits his or her particular needs instead of having to be invested in one which has been arbitrarily selected for the group as a whole. In theory, then, investment choice also means that a member can review from time to time the various investment options in line with changing needs, the lifecycle and even general economic circumstances.
What is clear with members’ investment choice is that decisions regarding available options must be well informed ones. It seems to us, therefore, that members are well advised to discuss their employer fund investment options with their financial planners first so that the correct decisions can be made. The choices made need to be monitored and here, funds which offer investment options to their members need to provide all the necessary information for well informed decisions to be made.