Participants in the MPF must switch from a savings to an investment mentality if the scheme is to be successful for their retirement, according to a financial expert. Sree Srikanth, LGT Asset Management marketing director, said most people failed to invest wisely. Even if someone saved 10 per cent of their pay and invested sensibly to generate real rates of return over inflation, it was unlikely to ensure a comfortable standard of living in retirement. 'If they don't invest sensibly, which we think will be the case, and they put money into a conservative [investment] product, there is a real risk they are going to fall behind [inflation] and it's going to be no better than keeping money in a savings account,' he said. 'That is exactly the trap everybody in the industry and the MPF Authority is trying to avoid.' Mr Srikanth said the reality was most people were not well-versed in finance and investment and to make the MPF scheme more relevant, choices had to be offered in a language the average person could understand. Investment houses such as LGT would be offering the conservative Capital Preservation Fund, designed to preserve investors' capital plus returns of three or four per cent a year. There would also be a balanced fund designed for eight to 10 per cent returns annually during the next 10 years and a growth fund which would return slightly more. Mr Srikanth said investment managers needed to be honest about possible end results of investing in various types of funds. Investors were likely to get higher returns from more aggressive funds like balanced and growth if they invested for long periods. However, during shorter periods, of one to three years, the returns from these vehicles could be volatile and even negative. 'This is going to scare a lot of people as they have seen the volatility in markets,' Mr Srikanth said. 'There is going to be a herd mentality to invest in the Capital Preservation Fund which will preserve capital in nominal terms but is unlikely to do them much good as an investment vehicle in the long term.' He said as the inflation rate in the SAR was currently about six per cent and the Capital Preservation Fund gave a return of about four to five per cent, this vehicle would hardly help investors keep pace with inflation. This was not the correct approach to a retirement savings plan as savings carried a heavy cost as time went by and it was difficult to make up for lost time, Mr Srikanth said. 'Time is the biggest ally as it gives you an opportunity to acquire an average cost which is acceptable. 'If you buy at a high cost for three years and the market corrects, then you don't panic and stay with the strategy of buying low for another two or three years, you get an average price which is acceptable. 'Quietly, as the market goes up, albeit with fluctuations over a 20 or 30-year period, if you don't look at your statements on a quarterly basis, you could be pleasantly surprised.'