The option to switch portfolios can only be exercised by members who intend to retire in three years.
"The reason for offering the option to members with a three year time period to retirement is because the conservative portfolio's main objective is to preserve the money that has been accumulated and members with more than three years to retirement should be more focused on growing the money than focusing on capital preservation," said Moemedi Malindah, BPOPF General Manager Investments. Concerning the advantages and potential benefits of switching to the preservation portfolio,
Malindah explained that the switch helps with the preservation of the capital amount, as the member is not exposed to more risky asset classes and the resultant sudden changes in investment returns.
"The member is not exposed to any currency risk," he said.
About the disadvantage of switching to the preservation portfolio, he said on a comparative basis, during periods of strong equity market performance, the pre-retirement switch portfolio may be outperformed by the active member and deferred pensioner portfolio, hence delivering lower returns. "Once the member switches to the pre-retirement switch, their investment shall not benefit from any favourable currency movements," Malindah said, further explaining that no decision reversals will be accepted.
BPOPF Chairman Carter Morupisi said members nearing retirement have a lower risk appetite and therefore their main investment concern is capital preservation. He explained that the pre-retirement switch is therefore a strategic step meant to provide such members with an opportunity to shift to a conservative investment environment to preserve what they have accumulated over the years.
Morupisi said this should allay members' fears of sudden substantial reductions of their fund credits occasioned by market downturns on the eve of retirement.
"Such unfortunate scenarios are undoubtedly, a great inconvenience to our members," he said.