The freedom of Personal Investment

Our standard practice is to invest the pension capital according to the lifecycle principle. The employer may have included the choice of Personal Investment in the pension scheme. Does the participants have investment experience themselves? Do they want the freedom to invest their pension capital themselves? Do they want to decide what risk they are willing to take? In that case, they can opt for Personal Investment.

Who is Personal Investment suited for?

It is advisable for participants to first establish the pension amount they have accrued thus far. And also how much they think they will need at their retirement date.

Personal Investment carries risks

With important matters such as retirement, only take risks that suit your financial situation:

• The participant wants to select the investments completely independently and be responsible for ensuring that the investments fit their situation. The participant has sufficient knowledge and experience in investment.
• The participant agrees to the additional costs associated with Personal Investment as soon as they adjust the investments.
• The participant follows developments regarding investments. If the market changes or the personal situation changes, they will adjust the investments accordingly.
• The participant wants a chance to accrue a higher pension capital and has insight into the possible returns and risks of investing – the participant runs the risk that the pension benefit could also be lower.

It also means that the participant is responsible for adjusting the distribution of investments towards their retirement age.

This is how Personal Investment works

Once the participant has determined that Personal Investment is a suitable option, they can proceed with the next steps.

Step 1: establish the investment profile

The participant has to complete a questionnaire on their personal pension portal. This questionnaire is about their willingness to take risks. It also includes questions about their knowledge of and experience with investing. The outcome is a risk profile, the investment profile. This indicates the participant’s personal limits for investing responsibly. This is not advice, but a guideline. The investment profile is valid for five years. After that, the participant will create a new profile.

The table below provides a description for each investment profile.

Investment profile	Description
1. Very defensive	You consider the certainty of a specific lower return more important than the chance of a higher but uncertain return.
2. Defensive	You realise that investing in the long term is advisable, but you want to minimise the risks as much as possible.’
3. Moderately defensive	You are aware of the investment risks and wish to invest in shares with a limited part of your pension capital.
4. Moderately aggressive	You are familiar with the opportunities and risks of investing. In fact, you would like to invest more in shares, but you still see it as too big a risk.
5. Aggressive	If the stock market goes down once, you are not worried right away. You do not need your pension capital for the time being and you know that there is a good chance that the fall in prices can be made up in time.
6. Very aggressive	You aim for higher returns over quite a long period. You do not panic if the prices fall sharply. After all, you expect to a achieve sufficient return over time.

Step 2: determining the distribution of the investments

The participant determines the distribution of their investments. That distribution falls within the limits of their investment profile. It is divided over four categories:

• Shares (high risk)
• Alternative investments (average risk)
• Bonds (low risk)
• Cash and cash equivalents (very low risk)

Step 3: composing the investment portfolio

Before the participant determines their investment portfolio, we recommend that they first read this: the General Investment Conditions and the investment information for each investment fund that can be found in pension portal. The participant then chooses a distribution of mutual funds. This distribution fits within their investment profile. If the participant invests outside of their profile, a warning will appear in their pension portal. This notifies the participant that they should adjust their investment portfolio.

Investing the pension capital with less risk

In this case, the participant has the option to invest in the Liquidity Fund. This is a listed investment fund. The fund purchases short-term bonds from various banks. This enables participants to diversify the risks of their investments. The interest payments of the Liquidity Fund are approximately equal to the market interest rate.

Important: risk spreading

By spreading the investments across different investment categories, the participant spreads the risk, including by choosing multiple investment funds from different regions within these investment categories. The table below shows how investments are made in the different investment categories within the investor profiles.

Investment category	Investment profiles
	Very defensive	Defensive	Moderately Defensive	Moderately aggressive	Aggressive	Very aggressive
Shares	0%	20%	35%	55%	75%	90%
Alternative investments	0%	0%	0%	0%	0%	0%
Bonds	90%	70%	55%	35%	15%	0%
Cash and cash equivalents	10%	10%	10%	10%	10%	10%

Please Note: if the participant chooses to invest with a lower risk, the chance of achieving a return is smaller. Their pension accrual may then be lower. If they find it difficult to assess these risks, Personal Investment is not suitable for them.

Good to know

• The investment mix can be adjusted as often as the participant desires. We process orders within 3 business days. The participant pays a transaction fee for the purchase and sale of shares.
• The participant can always opt for lifecycle investment again.
• The participants will see the following on their personal pension portal:
  • current prices,
  • how much pension capital they are expected to have accrued by their retirement date, and
  • an indication of the pension they can purchase with it.
• We recommend that participants regularly check whether their investments are accruing enough pension capital to buy a good pension later on. If necessary, they can then still make adjustments in time.

The risks of Personal Investment

Risk of a lower pension than expected

The participant is responsible for accruing pension capital. The amount of their pension capital largely determines the amount of pension they will receive later. This pension may be lower than expected. The risk of too low a pension lies with the participant.

Reducing the risk of investments yourselves

They can do so by spreading their investments over several investment funds from different investment categories. They may also start investing more defensively as they approach their retirement date. The investment risk and the reduction thereof is the responsibility of the participant.

Reducing the interest rate risk yourself

When the participant retires, they buy a fixed or variable pension benefit with the accumulated pension capital. In general, the higher their pension capital, the higher their pension benefit. However, the level of a fixed benefit pension also depends on the interest rate at the participant’s retirement date. When interest rates are low, the participant can use their pension capital to purchase a lower fixed pension benefit than when interest rates are higher. The interest rate risk and the reduction of that risk are the responsibility of the participant.

The costs of Personal Investment

There are a number of investment charges with Personal Investment:

• Management costs

  These are deducted annually from your employee’s pension capital. This is a percentage of the invested capital. The pension scheme rules state the average management costs. Employers can find the pension scheme rules on the employer portal. Participants can find the regulations on their personal pension portal.

• Running costs

  Costs incurred by investment funds for managing, keeping, registering and administrating the investment funds. These costs differ from one investment fund to another. They are deducted from the returns realised. This can be found on the participant’s personal pension portal.

• Transaction costs

  These are costs that we, Centraal Beheer PPI, incur for buying and selling shares. We also deduct these costs from the returns realised. They can also be found in the pension scheme rules on the personal pension portal.

More information

For the participant:

• On their personal pension portal: information about the contributions and the current value of the participant’s investments;
• In the pension scheme rules: the costs and conditions of the pension scheme;
• On his Uniform Pension Statement that we send him every year.