Investment options guide

Transcription

1 Making tomorrow a better place Carillion Pension Plan Investment options guide Make your pension savings work harder

2 Your investment options When you and your Employer pay contributions into the Carillion Pension Plan, the money in your Account is invested. By investing your Account, you re trying to make your pension savings work harder so that you have a decent standard of living when you stop working. This guide explains the options available to you and also tells you how your Account will be invested if you do not make a decision. Please read this guide carefully before you tell us your investment choices. You should also read the introduction to investment section in your Plan guide. INSIDE THIS GUIDE Overview 3 GETTING ADVICE By law neither your Employer nor the Plan Trustee can advise you on your investment choices. If you re not sure how to invest your Account, or if you want any advice about choosing investments, you should consider talking to an independent financial adviser (IFA). You can find an IFA local to you at Please note that an IFA may charge for their service. Freestyle 4 Lifestyle 6 Telling us your choices 11 Changing your choices 11 Getting more information 11 Getting advice 12 A final word 12 2 Investment options guide

3 Overview When it comes to investing the contributions that are paid into your Account, you can either make your own investment decisions ( freestyle ), or you can use one of our automatic investment strategies ( lifestyle ). Freestyle is designed for the more confident investor. With freestyle you choose how your account is invested from a range of different funds. There is more about freestyle on pages 4-5. Lifestyle invests your contributions for you and is designed for people who would prefer to have their investment choices made for them. There are three lifestyle options. They each work in a slightly different way, depending on how you think you will want to take the money in your Account. You can find out more about your lifestyle options on pages You can invest in any combination of freestyle funds or you can invest in one of the lifestyle options. You cannot do both. You can, however, change between freestyle and lifestyle whenever you want. We allow up to six switches (each Plan year) free of charge. Whether you choose freestyle or lifestyle, it s important you understand how your investment choices might affect your pension savings and ultimately your options in later life. More information about your options can be found in your Plan guide. Investment options guide 3

4 freestyle If you want to be more involved Everyone has a different idea of what they want in their later years. For many people, stopping work altogether may not be an option, but they would still like to gradually move away from full-time work. It makes sense that you are able to choose the investments you think will best help you achieve your long-term plans. In freestyle, you decide how to invest the contributions that are paid to your Account. A full list of the available investment funds appears on the next page. The investment funds have been chosen by the Plan s Trustee, with help from its specialist advisers. The Trustee keeps the fund choices under review and can remove funds or introduce new ones if it s believed that this will help members get a better result from their investments. It is important that you review your investment choices from time to time and make changes to your investments to suit your objectives at that time. For example, if you plan to buy an annuity with your Account, but you later decide that drawdown would be more suitable for you, you need to consider whether your Account is invested in the right funds to support that. You can change your investments whenever you want, by filling in a changing investment choices form, which you will find in your forms booklet. You can print off further copies of this form from the Carillion pension website at You can check on your investments at: Please note that the value of your investment may fall in value as well as rise. There are no guarantees under any of the funds including the Cash Fund. FUND FACTSHEETS Detailed factsheets, giving information about each fund s charges, make-up, historical performance and benchmark, will be made available through the Carillion pension website: 4 Investment options guide

5 YOUR FREESTYLE OPTIONS GLOBAL EQUITY FUND This passively managed fund invests in the shares of UK and overseas companies. The fund maintains a 30% allocation to the UK and 70% allocation to overseas markets and aims to deliver returns in line with the benchmark of 70% overseas indices and 30% FTSE All Share Index before management expenses. Annual management charge: 0.075% UK EQUITY FUND This passively managed fund invests in the shares of UK companies and aims to deliver returns in line with the FTSE All Share Index before management expenses. Annual management charge: % EMERGING MARKETS EQUITY FUND This actively managed fund invests in the shares of companies located in and/or deriving a significant portion of earnings from emerging markets countries. The fund aims to outperform the MSCI Emerging Markets Index. Annual management charge: 0.75% ETHICAL FUND This passively managed fund adopts an ethical approach to investing in the shares of companies across the globe. The fund aims to deliver returns in line with the FTSE4Good Global Equity Index. Annual management charge: 0.30% DIVERSIFIED GROWTH FUND This actively managed fund aims to deliver long-term capital growth though investment in a diversified range of asset classes including equities, bonds, cash and alternative assets. The fund aims to deliver returns of LIBOR + 3.5% over the market cycle. Annual management charge: 0.275% PROPERTY FUND This actively managed fund invests in UK commercial properties across the spectrum of major property sectors, including offices, industrial and retail assets. The fund aims to outperform the IPD UK PPFI All Balanced Property Funds Index-weighted Average by 1% p.a. over rolling three-year periods before charges. Annual management charge: 0.75% ANNUITY FUND This passively managed fund aims to provide some protection against changes in annuity rates through diversified exposure to assets that reflect the investments underlying a typical traditional level annuity product. The fund does not guarantee your principal capital amount. Annual management charge: 0.07% GILTS FUND This passively managed fund aims to provide exposure to the UK gilt market. The fund seeks to deliver returns in line with the FTSE UK Index-Linked Gilts (Over 5 Year) Index before management fees. Annual management charge: 0.04% CASH FUND The primary aim of the fund is to maintain liquidity and preserve capital through holding sterling term deposits with a range of high quality financial institutions. The fund seeks to match the median return of similar funds as measured by the CAPS Pooled Pension Fund Update without incurring excessive risk. The fund does not guarantee your principal capital amount. Annual management charge: 0.05% Investment options guide 5

6 lifestyle If you want us to manage your investments Many people are happy to pay into a pension, but they don t like the idea of having to make decisions about where to invest their contributions. The Trustee and its advisers have set up three lifestyle options to make it easy for you. These are investment strategies that automatically change the way your contributions are invested as you approach Normal Pension Date (currently defined as age 65 under the Plan s Rules). All we need is for you to tell us: How you think you might want to take the money in your Account. Your options are: lump sum, drawdown or annuity. (You should read the Plan guide to help you understand these options.) AND At what age you think you ll want to take your benefits. If you change your mind later, you can always switch into another lifestyle option or even choose your own investments (freestyle). If you still can t decide, then we will automatically invest your Account using Lifestyle to Annuity (which assumes you will use your Account to buy an annuity when you take your benefits from the Plan). If you change your mind later, you can always switch into another lifestyle option or even choose your own investments (freestyle). 6 Investment options guide

7 HOW LIFESTYLE WORKS Lifestyle to Lump Sum, for people who are more risk averse or who might be planning to take their Account as a one-off cash lump sum. People considering this option should think about the risk of running out of money in retirement. Remember, on average, people aged 55 today will live to their mid-to-late 80s. Lifestyle to Annuity, for people who are prepared to take some risk or want to buy an annuity at retirement. (This will be the default position so, if you do not make an investment decision, your Account will be invested in this lifestyle strategy.) Lifestyle to Drawdown, for people who are prepared to accept more risk or who want to enter a drawdown arrangement and transfer their savings out of the Plan. People considering this option should think about how long their money needs to last. THINGS TO CONSIDER Each lifestyle option aims to use different kinds of investments in the most appropriate way at different stages of your working life. Lifestyle is intended to be a sensible choice for most members. However, different people have different investment needs, and investment performance is not guaranteed. A lifestyle option may not therefore be suitable for everyone. Lifestyle to Annuity and Lifestyle to Drawdown both invest in the Global Equity Fund. Over the long term (more than 20 years) equities are expected to provide a high real rate of return, but equities can be extremely volatile, going up and down in value with little notice, and therefore may not be suitable for all investors. If you invest in lifestyle, you should regularly review whether your lifestyle option remains suitable for your circumstances. A change in plans for when you want to take your benefits from the Plan, for example, is one reason why your original choice may no longer be suitable. Investment options guide 7

8 Lifestyle to Lump Sum for people who think they will want to take their pension savings as cash For the early to middle part of your working life, your Account will be invested in the Diversified Growth Fund. In the three years before your Normal Pension Date, threequarters of your Account will be moved into the Cash Fund. Lifestyle to Lump Sum has the lowest risk profile of the three options, because your Account is invested throughout your working life in the Diversified Growth Fund. The Diversified Growth Fund invests in lots of different things, such as property, infrastructure, equities, commodities and other assets or financial instruments. The aim is that it will not be as volatile as a fund that invests purely in equities in other words, it should not go up and down in value as much and as frequently as an equity fund might. However, this cannot be guaranteed. It also probably won t grow by as much as equities over the long term (more than 20 years). 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Years to retirement Diversified Growth Fund Cash Fund In the three years before your Normal Pension Date, three-quarters of your Account will switch into the Cash Fund. Cash investments shouldn t go down in value (although this is not guaranteed) but they won t grow by much either. You will normally be able to take up to 25% of your Account as a tax-free cash lump sum. The balance of your lump sum will be taxed at your marginal income tax rate in that financial year. If you have a large amount in your Account then you probably want to consider whether this lifestyle approach is the right one for you, because the larger the lump sum, the larger the amount of tax you will have to pay. You also need to consider the risk of running out of money in later life. 8 Investment options guide

9 Lifestyle to Annuity for people who think they will want to use their pension savings to buy an annuity For the early to middle part of your working life, your Account will be invested in the Diversified Growth Fund and the Global Equity Fund. Ten years before your Normal Pension Date, your Account will gradually start to switch into the Annuity Fund and, in the final three years, a quarter of it will also move into the Cash Fund. Lifestyle to Annuity is designed to be a relatively medium risk option. It invests in the Diversified Growth Fund and the Global Equity Fund throughout your working life, and then starts to switch into the Annuity Fund and Cash Fund in the 10 years before your Normal Pension Date. The Annuity Fund aims to track the cost of buying an annuity. When you retire, 25% will be invested in the Cash Fund (as we expect that you will want to take your tax-free lump sum). The balance will be in the Annuity Fund (56.25%) and the Diversified Growth Fund (18.75%). 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Global Equity Index Fund Diversified Growth Fund Years to retirement Annuity Fund Cash Fund Lifestyle to Annuity assumes that you will take up to the first 25% of your Account as a tax-free cash lump sum and use the remaining balance to buy an annuity from an insurance company. The insurance company would normally pay you a guaranteed income for the rest of your life, which would be taxed as income. Lifestyle to Annuity is designed to be a medium risk option. Investment options guide 9

10 Lifestyle to Drawdown for people who think they will want drawdown (ie, to keep their savings invested, after transferring their Account out of the Plan) For most of your working life, your Account will be invested in the Global Equity Fund. Ten years before your Normal Pension Date, some of your equity investments will gradually be switched into the Diversified Growth Fund and, in the final three years, a quarter of your Account will be moved into the Cash Fund. Lifestyle to Drawdown is potentially the highest risk lifestyle option, because your Account is invested in equities right up until your Normal Pension Date. Ten years before your Normal Pension Date, some of your Account will gradually switch into the Diversified Growth Fund. By the time you retire, 37.5% will be in the Diversified Growth Fund, 25% will be in the Cash Fund and 37.5% will still be invested in the Global Equity Fund. This means that your Account may not be protected against sudden stock market falls. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Years to retirement Global Equity Fund Cash Fund Diversified Growth Fund However, if you are planning to use drawdown and transfer your Account out of the Plan, you would keep your savings invested and gradually drawn an income from those monies. Over the long term (more than 20 years) equities are expected to increase in value more than the cost of living, although there is no guarantee that this will happen. Lifestyle to Drawdown is potentially the highest risk lifestyle option. 10 Investment options guide

11 What you need to know TELLING US YOUR CHOICES If you are applying to join the Plan, you need to confirm your investment choices on your application form. (You will find this in your forms booklet.) You can either tick the box to choose a lifestyle option, or fill in the investment funds you have chosen in the boxes provided. Please show the percentage of your Plan Account you want to invest in each one. Your choices must add up to 100%. If they do not add up to 100%, then the default investment strategy will be applied to your Account (ie, Lifestyle to Annuity). CHANGING YOUR CHOICES If you want to change your investment choices in future, you will need to fill in a changing investment choices form, which you will find in your forms booklet. You can print off further copies of this form from the Carillion pension website at GETTING MORE INFORMATION You can find more information about your investment options through the Carillion pension website: The Carillion pension website has links to the latest fund factsheets, so that you can find out more about each investment fund s charges, historical performance and benchmark. There are links to the pension website from the Carillion intranet on the HR pages and under Group information. You can also check your Account investments online, at: The Plan administrator, JLT Employee Benefits, sends each new member a secure login to access the site. If you have lost your login details, please contact JLT s web support team by sending an to: websupport_pal@jltgroup.com You use part 1 of the form to change between the three lifestyle options, and part 2 of the form if you want to freestyle your contributions. Decisions to change can be made at any time by completing the form and sending it to the Plan administrators. Changes will be made on a monthly basis, as soon as practicable after your form has been received. Investment options guide 11

12 GETTING GUIDANCE & ADVICE If you are not sure whether a lifestyle option or freestyle approach would be the best choice for you, or if you want any advice about choosing investments, you should consider talking to an independent financial adviser. You can find details of advisers in your area online at By law neither your Employer nor the Plan Trustee can advise you on your investment choices. Pension Wise is a free and impartial guidance service set up by the Government that aims to help you understand how you can use the savings in your Account. When you get close to taking your pension savings, you will be able to get help on the Pension Wise website ( over the phone, or face to face with guidance specialists from the Pensions Advisory Service and Citizens Advice about: what you can do with your pension savings A final word The Trustee will keep the investment managers and the funds (including the lifestyle options) under review. The Trustee may in the future decide to change investment managers, or introduce a new manager alongside existing ones. The Trustee may also decide to change the funds on offer. Also, from time to time, the investment managers may decide to change the funds they offer. They may introduce new funds, or stop offering existing funds. The Trustee will also keep under review the way the lifestyle options operate and may make changes to their constitution from time to time. If any of this happens, the Trustee will let you know. Please note that the value of your investment may fall in value as well as rise. There are no guarantees under any of the funds including the Cash Fund. the different pension types and how they work what s tax free and what s not. The guidance provided by Pension Wise will be generic and not specific to your individual circumstances, so we recommend that you seek independent financial advice before taking any decisions on your pension. 12 Investment options guide