Case study: FirstGroup focuses on age for pension investment strategy

FirstGroup has designed the investment strategy for its contract-based defined contribution (DC) pension schemes to take account of an employee’s age and appetite for risk.

The transport operator, which runs two contact-based DC plans in the UK, has devised a series of investment options based on these criteria and has created several age-based default funds. This means staff who do not decide about investment when they sign up to the scheme will end up in a default fund, designed specifically for their age group.

John Chilman, director of reward and benefits at FirstGroup, says: “We have adopted many of the [strategies] that we adopted on the defined benefit (DB) side. They are diversified and not just looking at equities and bonds, but also have some global diversifications and diversified growth, so people get a decent reward for the risk they are taking.

“Some schemes just have a default fund. If an employee does not tick anything, they are going to be in this, whereas our scheme tries to force the employee – based upon age and attitude to risk – into a certain investment.”

On the other hand, if pension scheme members want to make their own choices, they can make selections from the 2,000 funds that are offered alongside the organisation’s contract-based DC pensions.

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