Pensions – definitions – Cash funds

Cash funds are straightforward deposit accounts that pay interest. While the investment is safe because the face value of the investment will not fall, its real value will be eroded by inflation. 

Cash is usually used only when scheme members approach retirement but can also be useful to switch to when other markets such as equities look uncertain or when an investors wants to time or stagger an investment purchase. A few defined contribution pensions use cash as their default fund, which is regarded as a mistake, or as the NAPF describes it ‘sub optimal’.

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