The Scheme’s main default option is the ‘Diversified Lifestyle’ option. The Trustee has chosen this option as the default because it believes it invests in funds suitable for a typical Scheme member and how it thinks a typical Scheme member will use their savings at retirement.

Is the default option right for everyone?

It might be right for some members, but it shouldn't be assumed that because the Trustee has selected a ‘default’ investment option that they recommend it, or that it’s right for everyone. We all have different personal circumstances – the Trustee can’t take these into account when selecting a default. Ultimately, members are responsible for deciding which investment option best suits their circumstances. So it makes sense to find out more.

Find out more

Find out more about the Scheme’s default investment option in the Scheme’s Investment guide.

What is the default investment option?

The Scheme has 3 arrangements which can be classified as 'default arrangements' under the Regulations. These are:

  • Diversified Lifestyle – the main default: Members who do not make an active decision on their investment option on joining the Scheme will be placed into this option. The Trustee believes that this is the most appropriate option for a majority of members who either opt for this Lifestyle or choose not to make an active decision on their investments.

    During the growth phase (up to 15 years before their target retirement age) the Diversified Lifestyle option members are invested in a combination of equity funds and a property fund (including a currency hedged World ex UK equity fund from January 2018). Over a 5 year period between 15 and 10 years before their target retirement age, their assets gradually switch into a diversified growth fund (the YCB Diversified Assets Fund from January 2018 and prior to that the BlackRock DC Diversified Growth Fund). During the last 3 years before their target retirement age, their assets gradually switch to a cash fund so that at retirement the member is invested 25% in the cash fund and 75% in the diversified growth fund.

  • Annuity Lifestyle: This was the Lifestyle option that (prior to October 2015) was used by members who did not make an active decision on their investment strategy. It was designed at a time when members would have been expected to purchase an annuity at retirement in combination with a tax-free lump sum. This Lifestyle option invests in a mixture of equity funds and a property fund up to the 10 years from a member's retirement (including a currency hedged World ex UK equity fund from January 2018). During the last 10 years, assets are gradually switched to bond funds and a cash fund in order to achieve a 75:25 split (bonds:cash) at the member’s target retirement age.

  • YCB Diversified Assets Fund: This fund forms part of the Lifestyle and Self-Select arrangements but is also a 'default arrangement' for governance purposes, as in the past some Self-Select members' assets were transferred without their express consent.

When does the Trustee review the default arrangements?

The Trustee undertakes a review, each quarter, of the performance of the default arrangements and the funds underlying the default arrangements, and the Self-Select funds available under the wider fund range. In particular the Trustee assesses the extent to which the performance is consistent with each of their aims, benchmarks and objectives.

The Trustee periodically, and on no less than a three yearly cycle, reviews the appropriateness of the default arrangements, taking into account the member characteristics, the members' expected retirement pots and how members may be expected to take their benefits at retirement. It will undertake an earlier review if there are any significant changes in investment policy or member demographics. The last review took place in the Scheme year ending 30 September 2017 and the Trustee also further reviewed member demographics / characteristics in December 2018. The Trustee also reviews and makes changes as it sees fit to the Self-Select fund range also available to members.

What changes has the Trustee made recently?

Following the 2017 review and the further review of member demographics in December 2018, the Trustee decided to make the following changes:

  • Removing the Schroders DGF and BlackRock DGF and replacing them with the YCB Diversified Assets Fund. This change was implemented in January 2018.
  • Updating the existing Lifestyle options to better reflect the options available to members in retirement and the decisions they may make at retirement as well as adding a new Self-Select fund. The Trustee will be communicating with members and implementing this change during 2019.

In addition, in the 2017 Scheme year, partly due to the volatility of Sterling brought about by the Brexit vote result, the Trustee decided to move 50% of the assets allocated to the BlackRock World ex UK Equity Fund used in the Diversified Lifestyle and Annuity Lifestyle to the currency hedged version of the fund. The purpose of the change is to equally balance the currency exposure within the overseas equities with approximately 50% protected from currency movements (relative to Sterling) and 50% remaining subject to currency movements, and so should reduce overall volatility in these funds. This change was implemented during January 2018. This change did not impact members who had self-selected the BlackRock World ex UK Equity Fund.