Investment strategy – relating to the Plan’s default investment option and self-select options

The Trustee’s long-term investment objective is to offer suitable investment options with appropriate liquidity which will generate income and capital growth. These, together with new contributions from members and the Employers, will provide a fund at retirement which members can use to provide a retirement income through methods such as income drawdown or buying an annuity. The Trustee aims to meet the long-term objective by:

  • Identifying appropriate investment managers.
  • Providing a range of investment options which aim to meet members’ differing personal investment requirements to satisfy their differing risk appetites and risk profiles.
  • Monitoring Legal & General Investment Management (LGIM) as the Plan’s main investment manager and the manager of the default arrangement.
  • Setting a general investment policy, but delegating the responsibility for selection of specific investments to LGIM.
  • Seeking advice, as appropriate, from the Plan’s advisers.

Find out more

Read about the Plan’s Statement of Investment Principles dated July 2019, which includes details of fund options.

Lifestyle option

For members who do not make an active investment decision on joining, the Trustee currently makes a default arrangement available. Having taken advice from its advisers, the Trustee offers the Drawdown Lifestyle as the Plan’s default arrangement.

The asset allocation in the Drawdown Lifestyle strategy aims to grow your savings ahead of the rate of inflation, while gradually reducing investment risk as you move towards retirement (when your ability to tolerate an investment loss reduces). The Drawdown Lifestyle strategy gradually switches from the Global Equity Fund into the Diversified Fund and Cash starting 20 years before the member’s selected retirement age.

The last investment review was completed on 12 September 2019 which included a review of the Plan’s default arrangement and the wider DC investment options. As part of the review, the Trustee has analysed the Plan’s membership to formulate a view of the investment needs of the members. The Trustee has also considered current market context, member behaviours in exercising their retirement options, risk tolerance and overall Plan design. As a result, the Trustee has introduced changes to the default strategy and fund range. The three new Lifestyle strategies are:

  • Drawdown Lifestyle (the new default arrangement) – for members who plan to keep their fund invested past retirement and withdraw their savings flexibly throughout their retirement, as required.
  • Annuity Lifestyle – for members who plan to take 25% of their fund as tax-free cash and use the remainder to buy an annuity.
  • Cash Lifestyle – for members who intend to withdraw their fund as a one-off cash sum or a series of cash sums over a relatively short period of time.

A ‘phased’ approach was also agreed for the growth phase of the new Lifestyle strategies by exposing members to more investment risk earlier in their careers and de-risking into a more diversified portfolio to reduce volatility and protect against downside events as members approach retirement.

As part of the investment review the Trustee has taken into account the performance of the investment funds (which are predominately passively managed) and also how these are aligned with the Trustee’s investment beliefs. The review also ensured that any changes to the funds are consistent with the aims and objectives of the Statement of Investment Principles.

The Trustee is required to review the performance and strategy of the default arrangement at least every three years (or if there has been a significant change in the membership or investment policy). The next review is scheduled to take place and be completed by 11 September 2022.

There is no requirement for a default investment arrangement for members who are invested in the legacy AVC policies with Utmost and Prudential. These policies are closed to ongoing contributions.

Investment monitoring

The Trustee reviews the performance of both the default arrangement and the underlying funds at each of its quarterly meetings. The Trustee monitors the performance of the investment managers LGIM, BlackRock and TEAMS in conjunction with its advisers, against the agreed performance objectives. The LGIM funds are predominately passively managed and the performance of the funds over the different periods to 31 March 2020 have been within an acceptable tolerance of the respective index. The Trustee is satisfied that the investment performance remains consistent with the aims and objectives stated in the SIP.

In between meetings, the Trustee’s advisers provide updates on and ratings of the Plan’s investment managers and the Plan’s funds as and when required.

The Plan’s main investment manager (and manager of the default arrangement) LGIM presents to the Trustee at least once a year and is questioned by the Trustee on their investment processes with the help of the Trustee’s advisers. The purpose of this is to help satisfy the Trustee that LGIM remains a suitable manager for the Plan. The Trustee may decide to replace an investment manager and/or the funds if it feels it is appropriate. On a quarterly basis, the performance of funds in the Intermec Section of the Plan (invested with BlackRock and TEAMS) are presented to the Trustee. A review of these funds is carried out by the Trustee’s advisers once a year.

Is the default option right for you?

As it invests in funds based on a typical member’s intentions, you need to make sure it suits you. It doesn’t take account of market conditions or your personal preferences for growth or protection, for example.

Freestyle option

Following the last investment review, the Trustee has closed the Global Equity 30:70 Fund to new members (it remains open for existing investors as at October 2020) and introduced a new fund, the LGIM All World Equity Fund.

The Plan offers a range of 11 funds for members who prefer to take up the Freestyle option and actively choose how to invest their Pension Account.

PLEASE NOTE members will need to choose either the Lifestyle investment strategy or the Freestyle investment strategy – you cannot invest in both.

Find out more

Find out more about the Plan’s default investment options by reading the investment guide or logging into ePA.

Click on the ‘Plan Library’ tab and select ‘Investment guide’. You’ll also find quarterly FundWatch reports on ePA so you can keep up to date with how your funds have performed.