Unit-linked pension contributions are used to buy units in a pooled fund (or funds).
Unit-linked pensions are invested in a variety of funds. The funds are grouped together in sectors, representing the style, area and risk level in which the relevant pension fund has chosen to invest.
As the value of the units may fall and rise during the period of investment, care is taken to 'spread' the investment in a variety of ways to obtain the best return commensurate with prudent investing.
Most companies will allow for the switching of funds at any time during the life of the investment. This becomes more relevant as retirement approaches and the riskier funds are often seen as less attractive than the more cautious funds.
Towards the end of the period the unit-linked fund is usually moved to a fixed investment where the increases are lower but guaranteed.
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