Ups and downs are normal
It’s important to remember that investment volatility is expected and the Collective Plan has been designed with this in mind. The Collective Plan targets higher return investments that might go down in the short-term but are estimated to deliver higher growth over the long-term.
Although investment performance has an impact on benefit adjustments, the impact is not directly proportional. For example, a 10% fall in the value of the assets would not mean a 10% reduction in benefits.
How does this impact my Collective Plan benefits?
Your income for life can go down, but if the value of the assets were to fall, this doesn’t mean your income for life would go down. This is because investment performance is just one of the things which determines your income for life adjustments. You’ll get your next annual adjustment letter in early 2027, letting you know how much the adjustment will be.
As for your lump sum, this is guaranteed, so it cannot go down.
If you have Additional Voluntary Contributions (AVCs)
AVCs are directly impacted by investment performance. Again, volatility is expected. The default AVC investment strategy is designed to invest in higher return investments when you’re a long way from retirement and then protect the savings that you’ve built up by gradually moving your money from higher risk investments to lower risk investments as you get closer to retirement.
How do the annual adjustments work?
If you’d like to know more about how the annual adjustments work, Venetia Trayhurn, the Collective Plan Chair, has written a valuations blog.