Canada Strife

By THIS IS MONEY
Updated:

 

I have two pension funds - one with Canada Life, which does not guarantee a fixed sum on maturity and one with Sun Alliance, which does. After ten years, the Canada Life pension is worth less than I have paid in. Should I continue paying, transfer to a more secure pension fund, or just stop contributions? Also will the guaranteed basic sum with Sun Alliance be paid out, even if the market stays low over a long period ? EC, London

Rachel Faulkner, independent financial adviser and pension strategist at Torquil Clarke says: The Canada Life pension fund appears to be a unit-linked fund, which is likely to invest in a range of asset classes including stocks and shares.

Your contributions buy units in this fund and the value of these units can fall as well as rise depending on the value of the underlying assets, so you can see that the recent stockmarket falls will have affected your pension fund.

If you want to reduce the exposure to equities, then consider transferring to some of Canada Life's less volatile funds such as fixed interest and cash.

Since you are several years away from retirement, you can afford to take a long term view so I suggest you stay investing in equities to benefit from any potential stock market recovery. You may also wish to check how this fund has performed against others in its sector.

In addition, since you are investing on a regular basis, you benefit from pound cost averaging. This means when unit prices are high, you purchase fewer units, but when they are low you purchase more.

This evens out the ups and downs of the market.

The Sun Alliance plan appears to be a with-profits pension fund, since you talk about a 'guaranteed basic sum'. The amount that would be paid out to you at retirement depends on any provisions within the contract so check your policy document.

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