Some schemes give investors the option of gradually switching out of equities to less volatile fixed-interest or deposit-based funds in the final years.
But Family Assurance, the Brighton-based friendly society, has launched a bond to take lump sums in the 10-year run-up to retirement with a preordained wind-down. It starts with 60 per cent in gilts and cash and 40 per cent in the Morgan Grenfell UK Equity Index Tracker unit trust.
After three years the equity content is scaled down to 30 per cent, moving to 20 per cent for the two or three years before retirement and a total switch into gilts and cash for the final two.
Investors can choose the mix themselves if they do not want to follow this path.
The Retirement Countdown Bond takes a minimum of pounds 2,000 and can be used as a vehicle for a personal pension or a top-up for those in a company scheme.
One actuary points out that the gilts market is also volatile and those wanting to lessen their exposure to equities should put funds into cash.
Ian Ferguson, pensions executive with the Bristol financial advisers Hill Martin, says the principle is sound but he would take an individual approach and judge the right time to switch from one investment to another.
Meanwhile, Kean Seager, of Whitechurch Securities, says that it seems an over-cautious approach. He would only move a pension fund 60 per cent in gilts and other fixed interest securities in the last three or four years before expected retirement.
When Abbey National launched a deposit-based pension in July 1988 critics said that in the long term equity-based investments would far outperform a deposit-based fund. But anyone who had invested their money there for the past four years would have done better than someone invested in equities.
The rate has been as high as 14.5 per cent, but it has now come down in line with falling interest rates. The fund is no longer open to new investors.
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