The Retirement Account

Transcription

1 The Retirement Account Fund range and investment proposition For adviser use only - not 1for retail customers

2 The Retirement Account is a revolutionary retirement income product only available via financial advisers. The key to its success is the simplicity of its structure clients can arrange a guaranteed income and select investment funds that meet their needs and adjust these throughout retirement to suit their current circumstances. The investment proposition was designed in conjunction with Square Mile Investment Consulting and Research and has a strict governance process, meaning advisers can be confident in the quality and ongoing management of the funds. Investment assets to suit all income needs The Retirement Account provides a number of different investment assets that can be tailored to a client s individual income needs and attitude to risk. Adventurous funds Active and passive Balanced funds Active and passive Cautious funds Active and passive 80% protected funds Active and passive 100% protection Guaranteed Annuity Guaranteed Riskier How did we select the fund range? The funds were chosen together with Square Mile using a range of selection criteria. INVESTMENT CONSULTING & RESEARCH Square Mile s team of analysts is one of the strongest in the UK and their six executive committee members have more than 160 years of investment experience between them. 2

3 Suitability choice to meet the needs of different clients Simplicity clearly articulated objectives and outcomes Suitability Future proofing considering current and future needs of investors Monitoring Simplicity Marketability brand and performance Risk range of risk profiles Cost Future proofing Cost price and value for money Risk Marketability Monitoring each fund is monitored regularly against a predetermined set of criteria The complete Retirement Account fund range The fund range offers a choice of risk, investment styles and cost dependent on the clients circumstances. Any combination of funds can be selected. There s no charge for switching between funds, and switches can be made as often as required. Cautious Balanced Adventurous Index-tracking funds Peer aware Outcome orientated Income bias Cautious Index Portfolio Balanced Index Portfolio Adventurous Index Portfolio AMC 0.25% OCF 0.25% AMC 0.25% OCF 0.25% AMC 0.25% OCF 0.25% Janus Henderson Cautious Managed AXA Framlington Balanced Managed Threadneedle Managed Equity AMC 0.74% OCF 0.83% AMC 0.75% OCF 0.80% AMC 1.00% OCF 1.16% Threadneedle Dynamic Real Return Jupiter Merlin Balanced Jupiter Merlin Growth AMC 0.85% OCF 1.04% AMC 0.85% OCF 1.73% AMC 0.85% OCF 1.83% Invesco Perpetual Distribution AXA Distribution Janus Henderson Global Equity Income AMC 0.92% OCF 0.92% AMC 0.85% OCF 0.86% AMC 0.85% OCF 0.95% 80% Protected Protected Index Portfolio AMC 0.75% OCF 0.86% Investec MAP AMC 0.80% OCF 1.06% Cash Insight Liquidity AMC 0.10% OCF 0.10% 3

4 The range of funds include both active and passive fund options. The active funds were selected using the following criteria. Peer aware Outcome orientated Income bias Looking to outperform funds which are similar in terms of objectives or asset allocation Looking for a return above zero Less concerned about competitor s performance Looking for good overall total return An emphasis on dividend yield for performance Our passive range consists of three funds, each invested in a basket of index tracker funds managed by Vanguard and ishares exchange traded funds, provided by BlackRock. The risk level of each passive fund is determined by the amount invested in different tracker funds. These funds will be regularly monitored with Square Mile to determine the most pertinent asset allocation based on market conditions. Protected funds The Retirement Account features two protected funds. 1. Retirement Advantage Protected Index Portfolio. A separate brochure and sales material are available for this fund. 2. Investec Multi-Asset Protector (MAP). Both funds use assets that have the potential to grow an investment over the long term. They also have another valuable feature. The funds protect a client s money so that it can never fall below 80% of the highest unit price ever achieved (although this isn t guaranteed). The Investec MAP fund is actively managed. The Protected Index Portfolio is managed passively. The Protected Index Portfolio - this fund is exclusively available through The Retirement Account. It limits investment risk by ensuring that the investment can never fall below 80% of the highest unit price the fund has achieved. This cushioning against major falls in the investment value enables more confidence in managing retirement income. The protection is provided by Morgan Stanley one of the world s largest global financial institutions who manage $2trn of assets. The fund uses two key mechanisms which protect against market volatility: Volatility Control (risk-budgeting) in volatile markets the fund decreases its exposure to the investment portfolio and increases the amount allocated to cash. Derivatives put options aim to ensure that the unit price can never fall below 80% of its highest ever value*. The combination of risk-budgeting and the put option means it cannot cash-lock in the same way as a typical protected fund which uses the constant proportion portfolio insurance (CPPI) method. The fund invests in a passively-managed balanced portfolio, which includes exposure to equities (up to 60%) together with UK corporate bonds, gilts and cash. * The 80% protection is not guaranteed, because Morgan Stanley could fail. 4

5 Monitoring of the fund range The Retirement Account investment proposition follows a strict governance process with ongoing monitoring taking place between Retirement Advantage and Square Mile. Retirement Advantage Board Risk, Capital and Investment Committee (RCIC) The Investment Oversight Committee (IOC) is a subcommittee of the Risk Capital and Investment Committee, which is a board committee. Investment Oversight Committee Square Mile Investment Consulting and Research The IOC consists of representatives of Retirement Advantage and Square Mile Investment Consulting and Research. Retirement Advantage Chief Financial Officer Chief Executive Officer Investment Director Product Director Head of Compliance Square Mile Managing Director Head of Investments Senior Investment Research Analyst Client Relationship Director Retirement Advantage s Investment Oversight Committee meets monthly with Square Mile to review the performance of the funds with an in-depth analysis of each fund taking place quarterly. Should a fund become a cause for concern and remain so it may result in a recommendation to remove the fund from the range. An abstract of the minutes from the monitoring meetings is published on our website quarterly. Retirement Advantage Understanding of customer needs in retirement Understanding of financial advisers requirements Square Mile Investment commentary on funds Up to date information on fund strategy Understanding of fund objectives and how it meets them Consistent review of funds ensuring they continue to meet their stated objectives 5

6 Making use of the investment proposition within a retirement portfolio Retirement is different to all, however the majority of people will look for their income to match their expenses as they did during their working life. How to deal with expenses in retirement The Retirement Account offers different assets to support different expense requirements. Clients invested solely in Pension Drawdown are left open to sequencing risk. Holidays, entertainment, hobbies and interests Variable Optional Important Home repairs, children s weddings Essential Insurance, clothing, car maintenance Food, electricity, gas, water, Council Tax Stable Covering essential expenses The consequences of sequencing risk are potentially strongest in retirement. If there is a run of poor market results whilst taking withdrawals from a pension drawdown portfolio in retirement, it can ruin a client s retirement plans. They could end up with a retirement spending shortfall, or even worse; run out of money altogether. The good news is that you can protect against the effects of sequencing risk by taking income from the Guaranteed Annuity element of the Retirement Account. Think of it as a salary in retirement. By using the annuity to cover essential expenses (together with State Pension and other income sources) clients can limit the risk of a poor sequence of investment returns. A Guaranteed Annuity can be used as an income generating asset within an overall retirement portfolio. This has the following advantages: In volatile markets the product allows you to only take income from the annuity, leaving the rest of the portfolio intact until markets recover Your client can achieve an attractive yield of 5 or 6% or more depending on age and health Unwanted annuity income can be diverted into Pension Drawdown at any time without becoming liable for tax. Using an annuity provides you with a guaranteed growth rate in the meantime. 6

7 Using Pension Drawdown for other income and growth opportunities The Retirement Account range of funds can be used to provide additional income, to invest for the future, or to use as a nest egg. And the beauty of the product is that there is a range of riskprofiled active and passive funds to choose from, all monitored on a regular basis. And for clients who want to take a regular income from Pension Drawdown but are concerned that falling investment markets could reduce their ability to do so there s the Protected Index Portfolio. This fund offers a degree of protection (80%) on a client s investment meaning they are less likely to run out of money. Optional Important Essential The Retirement Account tax wrapper Adventurous drawdown funds Balanced drawdown funds Cautious drawdown funds 80% Protected funds Guaranteed Annuity State Pension Other guaranteed income Flexible, riskier Guaranteed The Retirement Account provides a range of assets that can be tailored to an individual s income requirements. This is coupled with the flexibility to change the mix throughout retirement to help with the typical phases a retiree may encounter active, passive or assisted! You ll find more details about our funds at retirementadvantage.com/adviser. Past performance is not a reliable indicator of future results. The value of investments may go down as well as up. Taking income or withdrawals in excess of fund growth may result in the fund running out quicker than expected. Inflation will reduce how much the Fund is worth in real terms and inflation will reduce how much your income is worth over the years. It is essential to seek advice from a suitably qualified adviser. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. 7

8 DT Ratings TRA Cautious Index Portfolio TRA Investec MAP fund TRA 80% Protected Index Portfolio TRA Janus Henderson Cautious Managed TRA Threadneedle Dynamic Real Return TRA Balanced Index Portfolio TRA Invesco Perpetual Distribution TRA Jupiter Merlin Balanced Portfolio TRA Adventurous Index Portfolio TRA Threadneedle Managed Equity TRA Jupiter Merlin Growth Portfolio Telephone calls may be recorded for training and quality monitoring purposes. Retirement Advantage is a trading name of MGM Advantage Life Limited. Registered no Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Retirement Advantage and the Retirement Advantage logo are trademarks of MGM Advantage Holdings Limited. Registered in England and Wales. Registered office 110 Cannon Street, London EC4N 6EU /18 8