Investment changes April 2012

Transcription

1 Investment changes April 2012 mited Retir Hewlett-Packard Investment Scheme Make the most of your pension savings The Hewlett-Packard Investment Scheme (the HPIS) is an important part of the benefits you receive from Hewlett- Packard Limited (HP) and the Trustees of the HPIS are committed to making sure you have the information you need to understand and manage your pension savings. Background The HPIS has a new system, known as an investment platform, which makes it easier for the Trustees to update investment funds in the future if better ones become available. Also, the Trustees have reviewed the investment options available to you and carried out some research to understand the key characteristics of the membership, including the benefits an average member may secure. Following this, the Trustees have introduced new fund choices and changed the way the investment options are presented to you so that the decision-making process is as simple and straightforward as possible. This guide will tell you all about the changes and how to make the most of your pensions savings. For and on behalf of the Trustee Directors of the HPIS Jonathan Lord Chairman of the Trustee Directors

2 About the HPIS and the changes The pension you will get from the HPIS when you retire will mainly depend on: how much you and your employer have paid in; where you choose to invest the money paid in and the performance of your investments; your age when you retire; the type of pension you choose to buy; and how much it will cost to buy a pension when you retire. The Trustees acknowledge that some members may find picking their investment choices difficult and they want to make sure that you have the best possible choice of funds. With this in mind the Trustees have carried out a review and, with the help of their advisers, have decided to offer an improved range of funds to members. You should make the most of this opportunity to make sure you are invested in the most suitable funds for you. If you decide to make a new selection, your funds will be moved when you tell us, otherwise your funds will be invested in similar funds to your current selection. In summary the changes are: 1 Default fund: The existing HPIS default investment option, the Schroders Intermediated Diversified Growth (Schroders IDGF), will be renamed the HP Higher Growth & Risk. It will be gradually mixed with the Standard Life Global Absolute Return Strategy (Standard Life GARS), also a type of diversified growth fund (by the end of 2012 the fund will be invested half in the Schroders IGDF and half in the Standard Life GARS). This is to reduce the risk of a single investment manager underperforming. 2 Termination of SEI: The Trustees have decided to terminate the mandates with the investment manager, SEI, due to reduced confidence that they would achieve the expected performance. Any investment held with SEI will be moved into funds held with Legal & General. If you are currently invested with SEI you should carefully review this move. 3 New funds: Five new risk rated funds will be introduced, enabled by the new Zurich investment platform. Two new self select asset class funds will also be introduced the HP Emerging Market Equity and the HP Global Bond. 4 Lifestyle: A new arrangement will be introduced so that you can use lifestyling before retirement, no matter which funds you select in the growth phase of your pension. In addition, the option to target lifestyling towards a rising pension will be added to the existing option to target a level pension. 5 Ex-EDS Plan members: Five year lifestyling will be automatically added for ex-eds Plan members who are currently invested in the old EDS Plan default option (the Passive Base ). From 1 June, all the funds will be named with the prefix HP e.g. the HP UK Equity. This is referred to as white labelling. While these changes are being introduced, between 1 May 2012 and 1 June 2012, you won t be able to make changes to your funds. You should make the most of this opportunity to review your pension savings. Use this guide to help you understand more about the changes and make your choice. See the back page for where to get more help. 2

3 What to do next 1 Think about what type of member you are The section on page 4 describes the characteristics of different members to help you decide which of the new investment choices is right for you. 2 Read all the information about the new choices The Trustees have chosen to implement a new investment structure designed to simplify the choices that you need to make. Read about the new choices on page 6. You should also read the updated Investment Guide and the fund fact sheets on the website 3 Make your choice You need to find out where your funds are invested at the moment. This was shown in the benefit statement you received in November Then, unless you are happy with the new investment choices on pages 9 and 10, you should visit by 30 April 2012 to change your investment choice. It is important to seek advice if you need it, visit to find an independent financial adviser near you. There may be a charge for this service which you will be responsible for paying

4 Step 1: What type of member are you? You need to decide whether you would prefer the default fund, risk rated funds or self select funds. Tick the applicable answer below to help you make this decision: Are you comfortable making investment decisions? Yes No Do you understand how investments work? Yes No Are you comfortable managing your own investments? Yes No If you answered mostly no, the default fund may be suitable for you. If you answered mostly yes, the risk rated or self select funds may be more suitable for you. Read on to find out more. Default fund The default fund is designed for members who are less confident about making an investment decision and require assistance in making their choice. This fund has, with the Trustees input, been designed to offer members a good balance between risk and return that should meet the needs of the majority of members. Lifestyling towards a level pension will be automatically enabled, however members will be reminded of their lifestyle choices six years before retirement. It is important to note that the Trustees will continue to monitor, and if necessary, update the default fund. Risk rated funds The five risk rated funds are designed for members who want to have a choice in where they invest, but need assistance. (One of these is the default fund). This new range of pre-built funds have been designed by the Trustees and their investment advisers to have an efficient mix of assets that offer members funds that target certain risk and return characteristics. It is important to note that the Trustees will continue to monitor and, if necessary, update the new risk rated funds. Warning: While the Trustees will use their best endeavours to monitor and, if necessary, make changes to the asset allocation and underlying managers of the default and risk rated funds, investments can go up or down and there is no guarantee of performance. Self select funds The self select funds are designed for members who are confident in making investment choices and wish to tailor their investment decisions to suit their individual needs. As well as the risk rated funds and the default fund, members can choose from the range of asset class funds. While the Trustees will monitor the range of funds on offer, they will not monitor your individual fund choices (apart from the ongoing monitoring of the investment options). It is important to regularly review your investment options to make sure they are still appropriate for you. 4

5 Step 2: Read all about the new choices You need to choose one of the following three ways of investing your retirement account. The Investment Guide and the fund fact sheets, available on the HPIS website give you more detailed information and you should read these before making your choice. The summary here will help you to get started. The fund names are designed to highlight the risk and return characteristics. There can be a number of underlying funds mixed together within these funds which may change over time if the Trustees feel that changes are necessary. The Trustees will, as always, continue to monitor the performance of all the funds. Default fund For members who do not want to make investment decisions the Trustees offer a default investment option the HP Higher Growth & Risk. This fund is currently made up of the HP DGF which consists of the Schroders Intermediated Diversified Growth (Schroders IDGF). It will be gradually mixed with the Standard Life Global Absolute Return Strategy (Standard Life GARS) during The Standard Life GARS has been introduced to diversify the default fund and to reduce the risk of a single investment manager underperforming. The split between Schroders IDGF and Standard Life GARS will be 50/50 by the end of Lifestyling towards a level pension will be automatically enabled. You will be given the option to change your lifestyle option approximately six years before you retire (see page 8 for more information). Ex-EDS Plan members The Passive Base was the old default option for ex-eds Plan members although lifestyling was not automatically enabled. If you are still invested in the Passive Base, lifestyling will be automatically enabled unless: you decide to opt-out of lifestyling; or you are already within five and a half years of your retirement age. If you are within five and a half years of retirement age you can choose to opt-in to lifestyling by contacting the Scheme Administrator

6 Risk rated funds For members who want to be involved in making decisions about their investments, but who only want a limited choice of funds, the risk rated funds provide a choice of pre-built funds. The five risk rated funds have been named according to their relative potential risk and return characteristics. You can select as many funds as you wish in whatever proportion you choose. The table below shows the key characteristics of each of the risk rated funds, including the objective of the fund and the charge payable. The Total Expense Ratio shown includes all services and expenses incurred in the running of each fund. Name Underlying funds Objective Risk/ return HP Lowest Growth & Risk 50% HP Pre- Retirement 25% HP Index Linked Gilts This fund aims to provide members with easy access to a diversified fund that expects to deliver low long-term growth through exposure to bonds and cash. Low- Medium Total Expense Ratio (% per year)* % HP Cash HP Lower Growth & Risk 60% HP DGF 40% HP Pre- Retirement This fund aims to provide members with easy access to a more balanced fund that expects to deliver low to moderate longterm growth through exposure to bonds, equities and a range of alternatives. Medium 0.55 HP Moderate Growth & Risk 50% HP DGF 15% HP UK Equity 15% HP World ex UK Equity This fund aims to provide members with easy access to a diversified fund that expects to deliver moderate long-term growth through exposure to equities, bonds and a range of alternatives. Medium % HP Pre- Retirement HP Higher Growth & Risk 100% HP DGF This fund aims to provide members with easy access to a diversified portfolio that expects to deliver returns similar to that of equities, but with less volatility than the HP Highest Growth & Risk. The fund can invest in a broad array of asset classes including equities, bonds and a range of alternatives. Medium- High 0.83 This is the default fund. HP Highest Growth & Risk 35% HP DGF 25% HP UK Equity 25% HP World ex UK Equity 15% HP Emerging Market Equity This fund aims to provide members with easy access to a fund that expects to deliver equity-like returns, with slightly less volatility. The fund invests predominantly in equities, including emerging market equities but also has an allocation to a diversifying range of other asset classes. High 0.39 For details of each underlying fund, please see the individual fund descriptions in the self select fund section on the next page. *The charges shown are correct as at 31 December

7 Self select funds For members who are more confident making investment decisions, the Trustees have provided a choice of self select funds. Don t forget, you can also select from the risk rated funds described on page 6. The self select choices available are largely unchanged but there are two additional funds now available HP Emerging Market Equity and HP Global Bond. You will notice that all funds have been renamed with the prefix HP as described on page 2. You can select as many funds as you wish in whatever proportion you choose. name Objective Risk/ return HP Cash HP Pre- Retirement HP Index Linked Gilts HP Global Bond HP Consensus HP Passive Base HP Property HP DGF HP UK Equity HP Global (40:60) Equity HP World ex UK Equity HP Emerging Market Equity This fund aims to deliver low risk returns by investing in cash deposits and other short-term investments. This fund will provide protection from volatility but its real value may be eroded when inflation is high. It aims to match the median return of similar cash funds without incurring excessive risk. This fund aims to invest in assets that reflect the investments underlying a typical non-inflation linked pension annuity product. This fund is a blend of Investment Grade Corporate Bonds (90%) and UK Over 15 Yr Gilts (10%). This fund aims to capture the returns of the UK Index-Linked Gilt market. It tracks the FTSE A Index Linked (Over 5 Year) Index and invests in medium and long-term Index Linked Gilts. This fund invests in investment grade global government bonds and aims to track the JPMorgan Global Government (Ex UK) Traded Bond Index. This fund combines the mid to long-term growth potential of UK and overseas equities with the relative security of gilts, overseas bonds and cash. The fund is likely to be of specific interest to members with mid to long-term investment horizons. This fund is created from two of the passively managed fund options. The growth portion consists of 85% of the Global (40:60) Equity with the remaining 15% invested in the Pre- Retirement. This fund invests in a wide range of commercial property types, for example, shops, offices, retail parks, industrial units. The fund does not invest, to any great extent, in residential property. This fund aims to provide growth similar to, but with reduced volatility, as compared to equities. The fund can invest in a broad array of asset classes including equities, bonds and a range of alternatives. This fund aims to capture the returns of the UK equity market. It tracks the FTSE All-Share Index and invests only in UK equities. This fund provides access to the UK and overseas markets via index funds and aims to capture global equity market returns. It is invested 40% in UK equities and 60% in overseas equities. This fund aims to capture global equity market returns (excluding the UK). It tracks the FTSE World (ex UK) Index and invests in units in pooled equity index funds in North America, Europe (excluding UK), Japan, Asia Pacific and Advanced Emerging Markets. This fund aims to capture the performance of global emerging equity markets. It tracks the FTSE All-World All Emerging Index. Type Low Passive 0.18 Lowmedium Lowmedium Passive 0.14 Passive 0.10 Medium Passive 0.18 Medium Passive 0.14 Medium Passive 0.13 Medium Active 1.12 Medium -high Medium -high Medium -high Medium -high Active 0.83 Passive 0.09 Passive 0.13 Passive 0.15 High Passive 0.31 Total Expense Ratio (% per year)* Investment return and your ultimate pension depends on the asset classes in which your money is invested. Because the funds are in different asset classes (equities, property, bonds, and cash) the mix of funds you choose can make a significant difference to the performance of your investments. You should read the Investment Guide and the fund fact sheets carefully to understand the detail on each of the funds, and regularly review your choices. The fund fact sheets and the Investment Guide are available on the HPIS website *The charges shown are correct as at 31 December

8 Lifestyle glidepaths Lifestyle glidepaths are designed to automatically change the mix of funds you are invested in as you approach your selected retirement date; from the assets you choose for the growth phase, towards assets that better match the type of pension you wish to purchase at retirement. When you come to buy an annuity (which provides you with an income for your retirement) you will have important decisions to make. You have a choice between a level pension or a rising pension which increases over time. When you get closer to retirement it is important to think about what choice you might make. To accommodate both choices, there are now two lifestyle options: 1) Lifestyle glidepath which targets a level pension. This option gradually moves funds to reach 25% HP Cash and 75% HP Pre-Retirement by your selected retirement date. 2) Lifestyle glidepath which targets a rising pension. This option gradually moves funds to reach 25% HP Cash and 75% HP Index Linked Gilts by your selected retirement date. If you are not invested in the default fund where lifestyling is automatically enabled, the Scheme Administrators, Capita, will write to you approximately six years before your selected retirement date to ask you to confirm whether you want to add lifestyling and if so, which type of lifestyling you would prefer. Full details and information will be provided to you at that time to help you decide. Please note that if you are already on an old ten year lifestyle glidepath, you do not have access to the Lifestyle option which targets a rising pension unless you switch to the five year lifestyling glidepath. If you wish to change, you should contact the Scheme Administrator. It is now possible to have lifestyling enabled no matter what fund or funds you are invested in. The diagram below shows how your funds are moved over time. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 5 years 4 years 3 years 2 years 1 year Selected Retirement Age Your chosen s HP Pre-Retirement or HP Index Linked Gilts HP Cash Please read the Investment Guide at for more information about lifestyle. 8

9 Step 3: Make your choice Before you make your choice, it is important to consider any other pension savings you have and how these work together to achieve the retirement income you want, as this may affect how you invest your retirement account. You should think about how long you have to invest before you retire. If you only have a short time until you retire, investing in high risk funds may not be appropriate because if their value falls you may not have time to make up any losses. But if you are a long way from retirement you may consider investing in higher risk funds which have the potential for greater returns over the long term. It is important to seek advice if you need it visit to find an independent financial adviser near you. There may be a charge for this service which you will be responsible for paying. Next, check where your funds are currently invested. This is shown on your benefit statement from last November. You can request a copy of your benefit statement by contacting the Scheme Administrator. Use the charts below to find out where your funds will be automatically invested from 16 May If you would like them to be moved somewhere else visit before 30 April 2012 to change your investment choice. If you are currently invested in the default fund Your funds will be invested in the HP Higher Growth & Risk. Schroders IDGF HP Higher Growth & Risk If you are currently invested in an SEI fund Your funds will be invested in the new investment options as outlined below. Existing SEI options New self select funds SEI UK Equity SEI Global (40:60) Equity SEI Active Base HP UK Equity HP Global (40:60) Equity HP Global (40:60) Equity 85% HP Pre-Retirement 15% SEI World ex UK Equity HP World ex UK Equity 9 9

10 If you are an ex-eds Plan member There are two legacy EDS funds for ex-eds Plan members the Passive Base and Active Base. Your funds will be invested as outlined below. Passive Base Active Base HP Passive Base HP Global (40:60) Equity 85% HP Pre-Retirement 15% If you are currently invested in self select funds If you have chosen your own funds in the past, your funds will be invested in the new options as outlined below. Existing self select options New self select options LGIM Cash LGIM Pre-Retirement LGIM Index Linked Gilts LGIM Consensus LGIM Passive Base Aviva Property LGIM UK Equity LGIM Global (40:60) Equity LGIM World ex UK Equity HP Cash HP Pre-Retirement HP Index Linked Gilts HP Consensus HP Passive Base HP Property HP UK Equity HP Global (40:60) Equity HP World ex UK Equity If you don t want your funds to be invested in the new funds above, please visit before 30 April 2012 to make your choice. No matter what investments you choose now, you should make sure you review your investments regularly to make sure they re helping you reach your savings goals. You can view your current fund choices and make changes using the website. It is also important to consider your overall situation, including any other pension savings you may have, to make sure they are all working together to achieve the retirement income you want. 10

11 Your questions answered What happens if I don t make a choice? If you don t make a choice by 30 April 2012 your funds will be invested in the new funds, according to the charts on pages 9 and 10. What is the new platform for? As explained in the Trustees Report to Members in November 2011, to be able to manage funds more effectively the assets of the HPIS were moved onto an investment platform, provided by Zurich. The transition was completed on 6 December Will there be changes to the investment fees I pay? Yes, the investment fees you pay will change with the introduction of the new funds. What you pay will depend on the funds you choose as shown in the tables on pages 6 and 7. What other costs may be incurred? Transferring assets from one fund/manager to another involves dealing costs which cannot be avoided entirely. The Trustees will work with their advisers and aim for the most efficient way of transferring assets to minimise any dealing costs. As your assets are now held on the investment platform, fund switching costs associated with being out-of-market may still occur, but should be greatly reduced. The Trustees are working to ensure that costs are kept to an absolute minimum. What should I do if I don t have access to the internet but I want to make a choice? You can contact the Scheme Administrator to make your choice. Contact details are given on the back page. What happens with lifestyling if I am close to retirement? If you are currently in lifestyling, your funds will continue to be transferred from higher risk funds to lower risk funds in line with your lifestyling glidepath as you approach your retirement age. If you are close to retirement age and are not in lifestyling, you are strongly encouraged to review your investment funds and consider whether lifestyling might be appropriate for you. An independent financial adviser can help you with this decision. You can find an independent financial adviser by visiting Why are the fund choices changing? As you will recall, the HPIS was established on 1 January 2010 in order to bring together the existing active membership of HP s two historic defined contribution arrangements, the Hewlett-Packard Limited Pension Scheme and the EDS Investment Plan. The first stage of this exercise was to transition the assets of the active members into the HPIS. The Trustees then carried out a review of the HPIS s membership profile to understand potential member requirements and with the help of their advisers, have agreed to simplify the investment options and offer a range of funds which better meets members needs. Why do the funds have new names? In the past, each investment fund was named after its investment manager. The Trustees feel that members should make their investment decisions based on the type of fund (the asset class and risk profile) rather than the individual investment manager. Also, the Trustees will be monitoring the underlying funds and, if necessary, making changes. The new naming convention, known as white labelling, allows for such changes to be made. You can find details of the underlying funds by reading the fund fact sheets on the HPIS website

12 Where can I get more help? You can find more information on the HPIS website If you have any questions about your pension and benefits records, or the changes which are being introduced, you can get in touch with Capita Hartshead, the Scheme Administrator. Their contact details are: HP Investment Scheme Administrator Capita Hartshead Radio House Thanet Way Whitstable Kent CT5 3QP Tel: Fax: hp@capita.co.uk Important dates 30 April 2012 If you want to make your own investment changes which are different to the charts on pages 9 and 10, you should do so by 30 April Otherwise your funds will move according to these charts. 1 May June 2012 While the funds are being moved from SEI to the new investment options there will be a period of time when you will not be able to make changes to your investment choices online. If you are due to retire during this period Capita will contact you. If you haven t heard from them and you think you should have, please contact them on June 2012 Normal service will resume and you will be able to transact on your retirement account. Important points to remember This document is for information only and should be read alongside the Investment Guide, the fund fact sheets and other HPIS information. It does not take into account your personal circumstances and does not constitute financial advice. Neither the Company, the Trustees, nor the Scheme Administrator can provide you with advice. If you are unsure about what to do, we strongly recommend that you seek independent financial advice. You can get help finding an independent financial adviser at Please note the value of investments, and income from them, may fall as well as rise. This includes equities, government or corporate bonds, and property, whether held directly or in a pooled or collective investment vehicle. Investments in developing or emerging markets may be more volatile and less marketable than in mature markets. Exchange rates may also affect the value or an overseas investment. As a result, an investor may not get back the amount originally invested. Past performance is not necessarily a guide to future performance. mited Retir Hewlett-Packard Investment Scheme /Hew/Inv0312