Creative Pension Trust. Understanding how your pension is invested. Investment Guide

Transcription

1 Creative Pension Trust Understanding how your pension is invested Investment Guide

2 INTRODUCTION The Creative Pension Trust ( the Scheme ) is an occupational money purchase pension scheme. It operates as a master trust, which means that many different employers can invest in it. The Creative Pension Trust has both a default investment approach (as required by law) and access to some alternative investment options should you decide the default investment strategy is not the most suitable for you. The default investment strategy is the Strategic Pension Approach. On joining the scheme, your contributions are automatically invested into this unless you choose otherwise. All of the scheme s investments are managed by Scottish Widows plc, one of the UK s most trusted and well-known financial brands. Page 2 of 10

3 STRATEGIC PENSION APPROACH As the default investment strategy, the Strategic Pension Approach is intended to meet the needs of the majority of members. Our experience is that most people have a Balanced approach to investment risk. Appendix 1 of this guide lists the descriptions for six risk categories we believe might apply to members. Investors with a Balanced approach are prepared to take an average amount of investment risk in order to achieve potentially higher returns over the long term. The Strategic Pension Approach reduces the amount of risk to which your pension pot is exposed as you get closer to the scheme s normal retirement date, age 65. As this gets closer, your pension pot will gradually adjust into lower risk investments automatically. Although this reduces the growth potential of your pension funds at this point, it also helps to protect the value of your funds as you approach retirement age. This de-risking is called lifestyling and is widely used. Importantly, the whole process is automatic. The table below shows how the Strategic Pension Approach works at key landmarks leading up to the scheme s normal retirement date. YEARS TO RETIREMENT ASSET MIX Shares Bonds Cash % 30% 0% 10 40% 60% 0% 5 40% 60% 0% 0 0% 0% 100% As the table shows, the changes in investments are made over time to reduce the effects of short term changes in the prices of any of the assets. Page 3 of 10

4 The diagram below gives an indication of the general risk and reward for different types of investments (asset classes). Within each asset class, the level of risk can vary depending on the specific investment in which you choose to invest. Please remember that with investments in the Scheme, there are no guarantees, and there is a risk that the value of your pension pot could go down as well as up, depending on investment performance, and may fall below the amount paid in. The table below shows in more detail how the Strategic Pension Approach will be invested at key landmarks leading up to the scheme s normal retirement date. The target split of investment between the different assets classes and actual percentage holdings within the Strategic Pension Approach may be changed over time to better suit market conditions and try to ensure the best possible overall outcome and balance of risk. Highest Risk Lowest Risk Target Split of Investments Used Term to NRA Overseas Shares UK Shares Bonds Cash 15 years + 49% 21% 30% 0% 10 years 28% 12% 60% 0% 5 years 28% 12% 60% 0% NRA 0% 0% 0% 100% Page 4 of 10

5 The Detail The Strategic Pension Approach does not invest directly in the investments shown, e.g. in UK shares and corporate bonds. Instead contributions are invested in underlying funds from the Scottish Widows range that are blended to provide the required investment split above. Currently the Strategic Pension Approach is invested as follows: Pension Portfolio Three and Pension Portfolio Four are funds managed by Scottish Widows, but invest in a number of sub-funds. More detailed information about these funds is included below. Page 5 of 10

6 Scottish Widows Pension Portfolio Three Fund Fund Aim Risk Level Sector The Fund aims for long term growth by investing mainly in a range of UK and overseas equities, but with a significant proportion in fixed interest securities and a small amount of index-linked securities. The exposures are currently gained through holdings in the following funds: SSgA UK Equity Index Fund, SSgA Europe ex UK Equity Index Fund, SSgA North America Equity Index Fund, SSgA Japan Equity Index Fund, SSgA Asia Pacific ex Japan Equity Index Fund, SSgA Emerging Markets Equity Index Fund, Scottish Widows Corporate Bond Fund and Scottish Widows Indexed Stock Fund. The asset mix of the fund will be reviewed periodically, and may be amended if a review indicates that it would be in the investors best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, which would reduce the level of investment in equities and/or bonds. Balanced ABI Pensions Specialist Launch Date 06/02/2006 Scottish Widows Pension Portfolio Four Fund Fund Aim Risk Level Sector The Fund aims for long term growth by investing mainly in fixed interest securities and UK and overseas equities, with a small amount of index-linked securities. The exposures are currently gained through holdings in the following funds: SSgA UK Equity Index Fund, SSgA Europe ex UK Equity Index Fund, SSgA North America Equity Index Fund, SSgA Japan Equity Index Fund, SSgA Asia Pacific ex Japan Equity Index Fund, Scottish Widows Corporate Bond Fund and Scottish Widows Indexed Stock Fund. The asset mix of the fund will be reviewed periodically, and may be amended if a review indicates that it would be in the investors best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, which would reduce the level of investment in equities and/or bonds. Cautious to Balanced ABI Pensions Specialist Launch Date 06/02/2006 Page 6 of 10

7 Scottish Widows Cash Fund Fund Aim Risk Level Sector The fund aims to provide long-term growth consistent with high levels of capital security by investing mainly in shortterm securities. Very Cautious ABI Pensions Money Market Launch Date 01/07/1981 Page 7 of 10

8 SELF-SELECT The Strategic Pension Approach is designed to meet the needs of most members of the Scheme throughout their period of membership up to the scheme s normal retirement date. However, the Strategic Pension Approach may not be right for all members. Some members may prefer to invest their pension funds at a different risk level, or choose to take their benefits before or after the scheme s normal retirement date. Also the way you choose to take your benefits at retirement may also affect the suitability of the Strategic Pension Approach and therefore you should make sure you are comfortable with your pension investment when you join the Scheme and on a regular basis thereafter. If your circumstances change, you can alter your investment choice, helping you to ensure that your pension continues to meet your needs. As a result we have also made available the three individual investment funds detailed above, which members can Self-Select, and in addition we have also made the following fund available. However, you should be absolutely sure before making any changes and we recommend you seek professional financial advice regarding any changes to your pension. Scottish Widows Pension Protector Fund Fund Aim Risk Level Sector The fund may be suitable for investors approaching retirement who intend to purchase a conventional pension annuity. The fund invests mainly in long-dated UK fixed interest securities. The prices of these are one of the key factors affecting the cost of buying a pension annuity and so any investment in the fund should rise and fall broadly in line with changes in the cost of buying such a pension in retirement. The fund does not provide any guarantee of the level of pension in retirement or the cost of buying that pension. It may not be effective for those who intend to buy an inflation-linked pension and does not provide protection against changes in the cost of buying a pension that arise from changes in life expectancy. Cautious ABI Pensions Sterling Long Bonds Launch Date 28/07/2003 You may Self-Select investment in any one or more of the above funds instead of, or in addition to, the Strategic Pension Approach at any time for both your existing pension funds and your ongoing pension contributions. You can Self-Select by calling the Creative Auto Enrolment helpline on There is no charge to switch your investment choice using Self-Select. Page 8 of 10

9 APPENDIX 1 ATTITUDE TO RISK DESCRIPTIONS Very Cautious A very cautious investor is not willing to take any stock market risk. They understand that this will almost certainly erode the purchasing value of their investment after taking account of the effects of inflation. Preservation of the value of their investment is more important to them than investment growth. Examples of this type of investment would be deposit accounts. Cautious A cautious investor is prepared to accept low levels of risk for the prospect of slightly higher returns. They are likely to want limited exposure to stock market investment, property and emerging markets. Examples of this type of investment would be assets predominately exposed to fixed interest securities. Typically, any stock market exposure would be limited to a maximum of 35% of the overall investment. Cautious to Balanced A cautious to balanced investor will accept below average risk to achieve more attractive potential returns and would expect to invest in a more equal weighting of assets of fixed interest securities and stock market assets with some exposure to property and emerging markets. Stock market exposure would typically be between 20-60% of the overall investment. Balanced A balanced investor prefers a balanced approach to investment and is willing to accept average risk in the hope of higher returns. The portfolio will typically be invested with a bias to stock market assets, but balanced with fixed interest, property and emerging market assets. Stock market investment will typically be between 40-85% of the overall investment. Balanced to Adventurous A balanced to adventurous investor will accept above average risk for the prospect of high returns. They are not particularly concerned with short-term volatility. They would expect the majority of their funds to be invested in stock market assets, including emerging markets, but will still typically have some exposure to fixed interest securities and property. Stock market investment will typically be between % of the overall investment. Adventurous An Adventurous investor is prepared to take very high risks in order to obtain the potential for very substantial returns and is fully prepared to accept high volatility as a result. The portfolio will be heavily exposed to stock market investments with large exposures to global stock markets, including emerging markets. However, there may still be limited exposure to fixed interest securities and property. There will be no upper limit for stock market investment. Page 9 of 10

10 Creative Auto Enrolment Limited (company no ) is a subsidiary of Creative Benefit Solutions Limited (company no ), which is authorised and regulated by the Financial Conduct Authority, reference number Creative Wealth Management is a trading style of Creative Benefit Wealth Management Limited (company no ), which is authorised and regulated by the Financial Conduct Authority, reference number All three companies are registered in England and Wales. Their registered office is 125 London Wall, London, EC2Y 5AL. Page 10 of 10