Pada seeks views on investment strategy

The personal Accounts Delivery Authority (Pada) is consulting on the investment approach for personal accounts.

Issues covered in its Building personal accounts: designing an investment approach paper include the investment objective and design of the default fund, and investment for members nearing retirement. The default fund is likely to be invested across a range of assets to reduce risks associated with the performance of a specific asset class. Steve Herbert, head of benefits strategy at Origen, said Pada’s approach should not be driven by the financial crisis.

“Members need to have some exposure to the stock market if they are going to get a return.”

Pada is also seeking views on the merits of target date funds. Some say these may be cheaper to run than life styling funds. Both switch member’s pension pots out of higher-risk assets as they get closer to retirement. Target date funds target a specific year while lifestyling aims for a specific age.

Employers can respond until 7 August 2009 at: