An employee’s basic contributions are invested automatically in one (sometimes two) of three investment portfolios.
- Growth portfolio which has a strategic allocation of 70% equities, 9% alternative Investments, 18% bonds and 3% cash.
- Balanced portfolio which has a strategic allocation of 45% equities, 11% alternative investments, 41% bonds and 3% cash.
- Conservative portfolio which has a strategic allocation of 65% bonds, 19% equities, 13% alternative investments and 3% cash.
In which portfolio(s) an employee’s contributions and pension account are invested will depend on his/her personal risk profile. Specifically, it will depend on three key factors: the employee’s age, income range and marital status.
- Younger employees have a longer time horizon to invest and more time to make up any short-term drop in their investments – so they can tolerate more risk.
- Employees nearing retirement have fewer years left to save for retirement and less time to recoup any losses – so a more conservative investment strategy makes sense.
- Employees who earn more save more (because pension contributions are based on income). As a result, they are in a better position to withstand a short-term drop in investments.
- The pension assets of married employees need to be invested on a slightly more conservative basis because two people may have to depend on that pension in retirement.
This profile approach to investing is designed to help ensure the balance between investment return and investment risk reflects an employee’s individual financial needs.
There is one exception and that is for an employee/member who is approved by the board of trustees as being a qualified investor. Such qualified investors are permitted to choose which portfolios their basic contributions are invested in.
Personal profile changes
A change in an employee’s personal profile may lead to an automatic change in his/her Silver Thatch investment portfolio. Each time an employee passes a key “threshold” (i.e., age, income range or marital status), his/her pension account may be reallocated to a different portfolio(s). Future basic contributions may also be redirected.
A transfer from one portfolio to the next will typically take place over an eighteen month period. Moving the funds over an eighteen month period helps to avoid large and unexpected changes in the value of an employee’s investments. The transfer of assets between portfolios is designed to ensure that an employee’s investments continue to reflect his/her individual circumstances.Here are some examples:
- When a married employee earning $50,000 turns 60, investments will start shifting from the balanced portfolio to the conservative portfolio.
- When a 30-year-old, married employee earning $38,000 gets a raise that pushes his/her income above $40,000, investments will start shifting from the balanced portfolio to the growth portfolio.
- When a 26-year-old, unmarried employee earning $27,000 gets married, investments will shift from the growth portfolio to the balanced portfolio.