Guidance on your fund choices

Transcription

1 October 2016 Guidance on your fund choices WPP Pension and Savings Plan Start

2 Introduction Your investment choices The WPP Mercer Target Drawdown Retirement (the default Mercer Smartpath) The other Mercer Smartpaths Mercer Smartpaths and your selected retirement age The core range of funds The full range of funds Information to help you with investment decisions The types of investment The risks of investing Other investment information How to find out more Data protection 2

3 Introduction This guide provides information on the fund choices Zurich has made available. The investment solution for your scheme has been designed by Mercer, your employers adviser, to provide you with an appropriate selection of options to help you manage investment risks. For some, choosing how to invest their retirement savings can be daunting, whilst for others it is a familiar decision. Whatever your knowledge, expertise or desire to learn, there is an approach for you. Once you are a member of the plan, you can log in and see how and where your payments are invested at any time. The triangle below reflects the different levels of day to day involvement by you, less at the top through to more hands-on at the bottom. If you re not comfortable with making investment decisions you should seek help from a financial adviser. You may be charged for any financial advice you receive. Your investment choices The Mercer Smartpath The Mercer Smartpath consists of a range of target retirement funds, designed by Mercer, for you to choose based on your circumstances. Within each target retirement fund, your investments will gradually change to prepare for the benefits you intend to take as well as gradually reducing the risk as you approach retirement. You can invest in more than one Mercer Smartpath at one time and move between them as your personal circumstances change. There are three Mercer Smartpaths available for you to choose: WPP Mercer Target Annuity Retirement WPP Mercer Target Drawdown Retirement WPP Mercer Target Cash Retirement More details on the Mercer Smartpaths can be found in The default Mercer Smartpath and The other Mercer Smartpaths sections of this guide. Please note: you may see Mercer Smartpath referred to as Lifestyle Strategy in other communications. The default Mercer Smartpath This approach is for people who are less confident about making investment decisions and who want to use a Mercer Smartpath which has been pre-designed to achieve long-term growth and change investments, as you approach your selected retirement age, to assets which align to how you intend to take your benefits. The default Mercer Smartpath The other Mercer Smartpaths The core range of funds The full range of funds The triangle is only a way of illustrating the investment options available to you it is not an indication of the advantages of one investment option over another or the suitability of any of the available options and you should not base any investment decision on this. 3

4 The other Mercer Smartpaths This approach has been designed for members who want to have a choice in where they invest and how they access their retirement savings, but are not confident with researching fund managers or choosing different types of investment funds to meet their needs. Mercer has built a core range of Mercer Smartpaths that match a range of target retirement destinations for you to use. There are two alternative Mercer Smartpaths available for you to choose: WPP Mercer Target Annuity Retirement WPP Mercer Target Cash Retirement The core range of funds This range of Mercer funds are self-select funds, which are designed for members who are confident in making investment choices and wish to tailor investments to suit their individual needs. They consist of a range of four risk profiles funds which target certain risk and return characteristics. The full range of funds In addition to the Mercer range, you have the choice of other self-select funds to help meet your investment needs. Your payments will automatically be invested in the WPP Mercer Target Drawdown Retirement. For more information about the WPP Mercer Target Drawdown Retirement, please see the Default Mercer Smartpath section. Once you are a member you can choose from the following investment options: stay in the WPP Mercer Target Drawdown Retirement, (the default Mercer Smartpath) one of the other Mercer Smartpaths, a core range of funds, or the full range of funds. You can also choose a combination of the above options. Depending on the investments you choose, the levels of risk and potential investment performance differ. The value is not guaranteed and can go down, which will affect the retirement income you get in the future. How do the Mercer Smartpaths work? A Mercer Smartpath gradually moves your money automatically, as you approach your selected retirement age, to assets which align to how you intend to take your benefits. If you are eight years or more from your selected retirement age, your money will be invested in the Zurich Mercer Growth Fund. The aim is to reduce your exposure to risk over time and to match how you intend to take your benefits, starting eight years before your selected retirement age, for example, Zurich Mercer Target Annuity 2023 Retirement Fund. This can be useful to help defend against unexpected falls in fund prices as you reach retirement, but could also mean you miss out on future investment growth as you approach retirement. The value of your Retirement Saver and any payments you make will be moved on the first working day in January, 8 years before the year you plan to retire. If you join the plan in January in the 8th year before your selected retirement age, your payments will be invested in the target retirement fund appropriate for the year you plan to retire. You will be sent more information about the specific fund your payments will be invested in and the charges that apply, when you join the plan. You can also invest in the Zurich Mercer Growth Fund on its own as part of the core range of funds. If you choose to invest in it outside of the Mercer Smartpath, your payments will not be moved to assets which align to how you intend to take your benefits as you approach your selected retirement age. While this could be a good way to invest for many people, you need to bear in mind that it may not be right for you, as it does not take your individual circumstances into account. You should think carefully about how closely a Mercer Smartpath meets your investment needs. There is no guarantee Mercer Smartpaths will prove beneficial to your plan and the retirement income you get in the future. You can move your money in or out of a Mercer Smartpath at any time. There are currently no fees or penalties for doing this. 4

5 The WPP Mercer Target Drawdown Retirement (the default Mercer Smartpath) The default Mercer Smartpath available is the WPP Mercer Target Drawdown Retirement. The default Mercer Smartpath includes a range of funds and your plan value and regular payments will be moved between them at different phases as you approach your selected retirement age. The WPP Mercer Target Drawdown Retirement contains the following funds: Zurich Mercer Growth Fund Zurich Mercer Target Drawdown Retirement Fund Zurich Mercer Drawdown Retirement Fund The Zurich Mercer Target Drawdown Retirement Fund that your payments will be switched to in the 8th year before your selected retirement age will depend on the year you plan to retire. You will get more information about the specific fund closer to the time, but an example of how the fund could be invested in the nine years to retirement is illustrated below. The WPP Mercer Target Drawdown Retirement This Mercer Smartpath is designed for investors intending to take a tax-free cash sum and planning a flexible income solution by using a drawdown plan to continue to invest their savings after retirement. Example asset allocation of the WPP Mercer Target Drawdown Retirement (the default Mercer Smartpath) 100% 90% 80% 70% 60% 40% 30% 20% 10% 0% 100% 100% 12.5% 8% 16% 62.5% 67% 71.5% 87.5% 75% 62.5% 12.5% 75% Growth Mix: Equities, Bonds and other assets such as Property Retirement Income Mix: Bonds, Equities and other assets such as Property Cash and Money: Money Market Securities Years to selected retirement age Objective This Mercer Smartpath is designed by Mercer Limited for investors planning to retire and then intending to enter drawdown and continue to invest their portfolio after retirement. It seeks to achieve medium to high capital growth over the long-term, with medium to high risk, by investing in a diversified mix of assets. The emphasis of the Mercer Smartpath gradually changes over its lifetime to reduce the risk of capital loss, ultimately investing in one or more underlying funds to produce a portfolio with around a quarter invested in UK and overseas shares, a substantial holding in government and corporate bonds and the remainder spread across other asset types - giving exposure to other asset classes such as commodities, property, infrastructure and money market instruments. These assets aim to provide moderate long-term capital growth. The fund factsheet shows the underlying fund(s) and weightings. These are selected and reviewed by the investment adviser, Mercer Limited, and may change. 5

6 The other Mercer Smartpaths The other Mercer Smartpaths you can choose to invest in are the WPP Mercer Target Annuity Retirement and the WPP Mercer Target Cash Retirement. The WPP Mercer Target Annuity Retirement The WPP Mercer Target Annuity Retirement contains the following funds: Zurich Mercer Growth Fund Zurich Mercer Target Annuity Retirement Fund Zurich Mercer Annuity Retirement Fund The other Mercer Smartpaths The Zurich Mercer Target Annuity Retirement Fund that your payments will be switched to in the 8th year before your selected retirement age will depend on the year that you plan to retire. You will get more information about the specific fund closer to the time, but an example of how the fund could be invested in the nine years to retirement is illustrated below. This Mercer Smartpath is designed for investors intending to take a tax-free lump sum and seek a secure income by buying a fixed annuity in the year of their retirement. Example asset allocation of the WPP Mercer Target Annuity Retirement 100% 90% 80% 70% 60% 40% 30% 20% 10% 0% 100% 100% 12.5% 8% 16% 62.5% 67% 71.5% 87.5% 75% 62.5% 12.5% 75% Growth Mix: Equities, Bonds and other assets such as Property Annuity Matching Mix: Government and Corporate Bonds Cash and Money: Money Market Securities Years to selected retirement age Objective This Mercer Smartpath is designed by Mercer Limited for investors intending to retire and buy a fixed annuity within 12 months. It seeks to achieve medium to high capital growth over the long-term, with medium to high risk, by investing in a diversified mix of assets. The emphasis of the Mercer Smartpath gradually changes over its lifetime to reduce the risk of capital loss, ultimately investing in one or more underlying funds, which invests around three quarters in government and corporate bonds and around a quarter in money market securities. The fund factsheet shows the underlying fund(s) and weightings. These are selected and reviewed by the investment adviser, Mercer Limited, and may change. 6

7 The WPP Mercer Target Cash Retirement The WPP Mercer Target Cash Retirement contains the following funds: Zurich Mercer Growth Fund Zurich Mercer Target Cash Retirement Fund Zurich Mercer Cash Retirement Fund The Zurich Mercer Target Cash Retirement Fund your payments will be switched to in the 8th year before your selected retirement age will depend on the year that you plan to retire. You will get more information about the specific fund closer to the time, but an example of how the fund could be invested in the nine years to retirement is illustrated below. This Mercer Smartpath is designed for investors planning to retire and transfer their assets into cash at their selected retirement date. Example asset allocation of the WPP Mercer Target Cash Retirement 100% 90% 80% 70% 60% 40% 30% 20% 10% 0% 100% 100% 12.5% 87.5% 75% 62.5% 75% 12.5% 12.5% 100% Growth Mix: Equities, Bonds and other assets such as Property Corporate Bonds Cash and Money: Money Market Securities Years to selected retirement age Objective This Mercer Smartpath is designed by Mercer Limited for investors planning to retire and take their benefits in cash at their selected retirement age. It seeks to achieve medium to high capital growth over the long-term, with medium to high risk, by investing in a diversified mix of assets. The emphasis of the Mercer Smartpath gradually changes over its lifetime to reduce the risk of capital loss, ultimately investing in one or more actively-managed funds which invests in money markets. These assets aim to maintain a cash-based level of income with preservation of capital and easy access. The fund factsheet shows the underlying fund(s) and weightings. These are selected and reviewed by the investment adviser, Mercer Limited, and may change. You should think carefully about how closely a Mercer Smartpath meets your investment needs. 7

8 Mercer Smartpaths and your selected retirement age If you change your selected retirement age, your Mercer Smartpath will automatically be altered to end in the same year as your new selected retirement age. If you reach your selected retirement age but decide not to take your benefits your payments will remain invested in the final phase of your chosen Mercer Smartpath. Please bear in mind these funds may be low risk with lower growth potential and their value may not keep up with inflation. This will reduce the income you get in the future. The core range of funds There are additional investment choices which may be a better fit with your attitude to risk and investment goals. These do not have any automation built in the mix of investments does not change as you approach your selected retirement age. Therefore, it is important if you select from the core fund range, you keep your choices under review. The core range of funds Investing in a range of assets could help you spread your investment risk. It is not guaranteed these funds will or should outperform any of the other available funds or investment strategies. The following table contains the names of these funds, their objectives, the asset class and the total charge that applies to each of them. For information on the level of risk associated with each asset class, please read the Introduction to investing guide. Fund name Asset class Objectives Total charge* Zurich Mercer Defensive Mixed** The Fund aims to achieve stable growth over the long-term. It invests in a diversified range of asset classes with a higher allocation to bonds and money market instruments % Zurich Mercer Moderate Growth Mixed The Fund aims to achieve low to medium capital growth over the long-term. It invests in a diversified range of asset classes with a moderate allocation to shares % Zurich Mercer Growth Mixed The Fund aims to achieve medium to high capital growth over the long-term. It invests in a diversified range of asset classes with a higher allocation to shares % Zurich Mercer High Growth Mixed The Fund aims to achieve high levels of capital growth over the long-term, but with high levels of risk. It invests in a range of asset classes but predominantly in shares % * For more details on the fund charges, please refer to the Other investment information section. ** In some circumstances, where the interest rates are low, the returns on money market funds may be less than the charges, which will reduce the value of the fund and the income you receive in the future. Please remember, depending on the investments you choose, the levels of risk and potential investment performance differ. The value can go down as it s not guaranteed, which will affect the retirement income you get in the future. 8

9 The full range of funds You also have the option to choose from the full range of funds. You can find out about these on the Investment choices page. Please remember, depending on the investments you choose, the levels of risk and potential investment performance differ. The value can go down as it s not guaranteed, which will affect the retirement income you get in the future. The full range of funds Information to help you with investment decisions The types of investment It s important to understand a little more about the types of investment you can make. There are four main types of investment, which are often called asset classes. Each one works in a different way and carries its own particular investment risks. You need to understand how each one works and the risks involved before making any investment decisions. Money market investments: money on deposit (e.g. cash in a bank or building society) and short term loans to raise cash. Gilts and bonds: loans to the UK government or companies. Property: physical buildings, usually commercial properties. Shares: stakes in a company (also called equities). Fund managers buy and sell these assets on your behalf, with the aim of increasing their value over a period of time. The following diagram shows how different assets have higher or lower risks attached to them, and could potentially give you higher or lower returns on your initial investment. While the diagram shows the general long term (over ten years) relative performance of the asset classes, it s important to note the way an asset class has performed in the past isn t necessarily how it will perform in the future. Low Potential returns High Money Market Gilts and Bonds Property Shares Low Risks of value falling High 9

10 The risks of investing The Introduction to investing guide describes the different asset classes such as shares, property and money markets in more detail. It is designed to help you understand the relationship between risk and reward. It s very important to understand the risks associated with investing, and also how you feel about risk before you decide where to invest your payments. Depending on the funds you choose, the levels of risk and potential investment performance differ. There s always the risk that your money could be worth less than when it was originally invested which would result in reduced retirement income in the future. The higher the risk, the more likely it is to fluctuate in value over time. Choosing a lower risk investment usually means that your money is likely to fluctuate by smaller amounts, but you are less likely to see higher growth. The general rule is the greater potential for growth, the more risks you take. A volatile fund tends to see frequent and/or sharp rises and falls in value while a less volatile fund is likely to both rise and fall in value less quickly. If your plan grows less than the rate of inflation, this could reduce the retirement income you get in the future. The actions and decisions of the underlying fund management are the responsibility of the fund managers or fund management companies. However, Zurich does monitor the fund managers offered through the plan through its fund governance process. 10

11 Other investment information Fund charges and expenses are not fixed and can change on a daily basis depending on what the fund has bought or sold on a particular day. We recommend you read the Introduction to investing for more information about the different charges that make up the total charge. There is also a fund fact sheet for each individual fund available on the Investment choices page. The underlying funds the Mercer Smartpaths and the core range of funds invest in may change in the future. The design of the Mercer Smartpaths may also change. Decisions about future changes to the underlying funds and the Mercer Smartpaths will be made by Zurich, following consultation with your employer WPP and it s specialist adviser Mercer, and in line with Zurich s fund governance process and the terms and conditions. If these changes don t change the name, investment risk, objective or increase the cost, you won t be told about them. However, the changes will be updated in this guide and in the fund fact sheets. If in the future there are any changes to any of the funds, such as a change in the name, level of investment risk, objective or increase in the cost, then Zurich will let you know what the changes are as soon as possible. There is also a small risk that a fund manager or company responsible for the funds your payments are invested in become unable to meet their financial obligations. In the unlikely situation this occurs you would not be covered by the Financial Services Compensation Scheme (FSCS). In this event, Zurich Assurance Ltd* would make a claim against the fund manager or company in an attempt to recover the money. However, you could still lose all or some of your retirement fund. * Sterling ISA Managers Limited has made a range of pension funds (Zurich pension funds) available for you to invest in through Zurich Assurance Ltd. (Both companies are part of Zurich s UK Life business). For more information please read the Important information about Zurich pension funds attached to the Terms and conditions which also tells you more about Zurich pension funds and Zurich Assurance Ltd s responsibilities. Mercer Limited and Mercer Global Investments (Europe) Limited have been appointed by Zurich to provide certain investment management services to the funds which are included in the Mercer Smartpaths and the core range of funds. The adviser to WPP, Mercer Consulting, is part of the same Group as Mercer Limited and Mercer Global Investments (Europe) Limited and the Group will therefore benefit from investments in these funds. 11

12 How to find out more If you d like to know more about the fund choices available to you, please contact Zurich on Zurich may record or monitor calls to improve its service. Zurich cannot give you advice but can give you more information to help you. If you re unsure about making an investment decision, you should take financial advice. For details on how to find a financial adviser near you, go to unbiased.co.uk or vouchedfor.co.uk. You will usually have to pay for any financial advice you receive. Data protection Your employer has chosen Sterling ISA Managers Limited as its pension scheme provider. Sterling ISA Managers Limited is part of the Zurich Group and will be your data controller as provider and for administration purposes. Sterling ISA Managers Limited will only act after receiving instructions from your employer to enrol you into or join your employer s workplace pension scheme. Sterling ISA Managers Limited takes your privacy very seriously and is committed to ensuring the way we collect, hold, use and share information about you complies fully with the Data Protection Act Full details of how your data will be used can be found in Appendix 1 of your product Terms and Conditions. 12

13 Please let Zurich know if you would like a copy of this in large print or Braille, or on audiotape or CD Zurich is a trading name of Sterling ISA Managers Limited. Sterling ISA Managers Limited is registered in England and Wales under company number Registered Office: The Grange, Bishops Cleeve, Cheltenham, GL52 8. NP (11/16) RRD