Investment Choices Summary

Transcription

1 Nestlé UK Pension Fund Investment Choices Summary Explaining your investment options August 2017 Nestlé UK Pension Fund 1

2 2 You ll need to choose where your defined contribution (DC) account is invested. The aim is to grow or protect the value of your DC account.

3 Your investment choices a summary In DC Start, your account is automatically invested in the Lifetime Pathway fund. In DC Core, you have a choice about where your account is invested. You can choose the Lifetime Pathway fund if you don t want to actively manage your investments, or you can choose your own investments from the self-select funds available to you. To help you with that choice, the following pages explain the Lifetime Pathway fund and the self-select options. DC Core and DC Start Lifetime Pathway option (default) Pages 4 5 This investment option is made up of three phases - growth, consolidation and pre-retirement. If you choose this option, your DC account will automatically switch to lower-risk investments as you approach retirement. During the pre-retirement phase, this option targets your DC benefits being provided in cash at the point you retire. DC Core Self-select options Page 7 You can choose from nine investment funds and you are responsible for moving your investments to maximise growth, protect your DC Core account or target how you intend to take your benefits, depending on how close you are to retirement. What happens if you don t make an investment choice on your New Member Option Form? If you choose to join DC Core in your first 90 days of employment but don t make an investment choice on your New Member Option Form, your DC Core account will automatically be invested in the Lifetime Pathway fund. Your Target Retirement Age (TRA) will be your State Pension Age (SPA) when you join the Nestle UK Pension Fund (the Fund). If you choose to join DC Start on your 91st day of employment, you don t need to make an investment choice as you will automatically be invested in the Lifetime Pathway fund with a TRA of your SPA when you join the Fund (see page 5). You can choose the Lifetime Pathway fund if you don t want to manage your own investments. 3

4 Lifetime Pathway option (default) The Lifetime Pathway fund will automatically switch your DC Core or DC Start account to protect its value as you get closer to retirement. The switching will take place in three phases: Phase Aim Made up of Funds used* Growth Over 15 years from TRA To grow the value of your investment. Higher-risk investment funds with the potential for higher returns. Equities and Blended Assets Consolidation 5-15 years from TRA To keep a level of growth, and begin to protect the value of the funds you have already built up. Medium-risk investment funds with the potential for higher returns whilst aiming to protect the value of your account. Blended Assets Pre-retirement Less than 5 years from TRA To protect the value of your investment with the expectation that you will take 100% cash at retirement (see Important note below). Lower-risk investment funds to further protect the value of your account. Blended Assets and Pre-retirement to cash *See page 7 for information about the funds. The graph below shows how the automatic switching starts to move your investments once you reach 15 years before retirement: Growth phase Consolidation phase Pre-retirement phase 100% 90% 80% Pre-retirement to cash % of DC account 70% 60% 50% 40% 30% Equities Blended Assets 20% 10% 0% Years to retirement Important note: If you choose the Lifetime Pathway fund but you do not think you will want to take your DC pension as 100% cash, you may wish to consider one of the self-select funds when you reach five years before your TRA. If you are already within five years of your TRA and you don t want to take 100% cash when you retire, you may wish to consider the self-select investment options. See page 7 for details of the self-select options. You may also wish to take financial advice. 4

5 Target Retirement Age (TRA) If you choose the Lifetime Pathway fund, you need to let us know the age you would like to retire. This is known as your Target Retirement Age (TRA). Your TRA helps us to ensure that the switching of your DC account happens at the right time, so if you don t choose a TRA we will assume that you want to retire at your State Pension Age (SPA) when you join. Your TRA doesn t have to be the same as your Normal Pension Age (NPA) in the Fund it can be any age from 55 onwards. Please note, picking a TRA doesn t oblige you to retire at that age, and if you want to change your TRA you can do so quarterly. Do you want to take all your DC account as cash at retirement? When designing the Lifetime Pathway fund we have assumed that most members will choose to take their DC account as cash. For this reason, the pre-retirement phase is designed to suit those of you who are planning to take your DC account entirely as cash at retirement. If this is not what you intend to do, if, for example, you wish to purchase an annuity to provide a regular income in retirement, then you should think carefully. It is important to note that it is during the pre-retirement phase, i.e. the five years before retirement, that your investments should reflect how you are planning to use your DC account at retirement. You may want to consider choosing from the range of self-select investment options, particularly during the last five years. You may also wish to take financial advice. What does it cost? An Annual Management Charge (AMC), which is a percentage of the total value, is automatically deducted from your DC account via an adjustment to the unit prices. This is to cover the cost of managing your investments. In addition, expenses, also known as Other Annual Charges (OAC), may apply to certain funds. The Total Expense Ratio (TER) is the AMC plus the OAC and on a quarterly basis it can vary slightly due to the different performance of the underlying funds and the expenses incurred by them. Always refer to the fund factsheets to access the current TER. During the three phases of the Lifetime Pathway, the charges currently are: Growth phase TER = 0.33% Consolidation phase The TER increases from 0.33% to 0.65% between 15 and 10 years before retirement as your DC account gradually moves into the Blended Assets fund. The TER stays at 0.65% from 10 to 5 years before retirement. Pre-retirement phase The TER decreases from 0.65% to 0.34% from 5 years before retirement as your DC account gradually moves into the Pre-retirement to cash fund. If you choose DC Core and want to invest in the Lifetime Pathway: Select Lifetime Pathway on your New Member Option Form and let us know the age you d like to retire (your TRA). The rest is done for you but let us know if your TRA changes in the future. 5

6 With self-select, you have control over where you re invested. If you choose DC Core and want to choose your own investments make your selection on your New Member Option Form. 6

7 Self-select options You may wish to choose your own investments. There are nine self-select funds to choose from in DC Core. More information is available on the Fund s website. With self-select, you have control over where you re invested and you re responsible for moving your investments to maximise growth, protect the value of your DC account or target a particular way of taking your benefits at retirement. If you choose to self-select, you may wish to take financial advice about your investment choices. Self-select option Aim Risk TER% Equities Property Blended Assets Corporate Bonds This portfolio invests in shares of companies based across the globe. The aim of the portfolio is to provide a high return over the long term. However, global shares often experience times of heightened volatility. The fund is a passive fund which means that the shares are chosen in such a way as to track a broad index of shares in a mechanistic manner rather than relying on a particular investment manager to individually choose shares. This approach aims to reduce the charges on the portfolio as management charges in passive funds are lower than in active funds. This fund aims to provide a diversified exposure to the UK and global property market. The fund is managed by Legal & General Investment Management (LGIM) with 70% invested directly in UK commercial property and 30% invested in global real estate investment trusts (REITs). This fund aims to provide more stable (but slightly lower) long-term returns than equities. The fund will invest in a broad range of assets including, but not limited to: equities, bonds, property, hedge funds and cash. The fund is actively managed by an investment manager who makes asset allocation decisions in order to deliver the targeted investment return. To achieve this, the annual management charge is higher than in passive funds. This fund aims to provide both income and growth based on investment in non-government bonds. It has the freedom to invest in overseas bonds and UK bonds, although investments will be made primarily in UK corporate bonds. Investment should be regarded as a long-term investment as the returns, whilst less volatile than equities, will still have some level of variability. High 0.2 High/Medium 0.5 Medium 0.65 Medium 0.42 Continued overleaf 7

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9 Self-select options (continued) Self-select option Aim Risk TER% Pre-retirement to annuity Pre-retirement to cash Cash Ethical Growth Ethical Consolidation The aim of this fund is to provide exposure to a range of assets with a return that reflects the change in the price of a typical traditional annuity product. The majority of the investment will be in bonds. This fund can be used by members who are likely to buy a regular income in retirement instead of taking cash. The aim of this fund is to provide exposure to a range of assets that have relatively low volatility and are expected to deliver returns in line with, or a small amount above, inflation. The fund is actively managed by an investment manager who makes asset allocation decisions in order to manage the level of volatility. To achieve this, the annual management charge is higher than in passive funds. This fund invests in cash and other money market instruments that are similar to cash with very low volatility. Returns are expected to be low but stable. This portfolio offers investment in a mix of equites and UK government bonds. All funds in this portfolio are ethically screened to ensure that they have a focus on integrating sustainability issues. The expected level of risk is expected to be between that of equities and bonds. This portfolio also offers investment in UK government bonds with a 15% investment in equities. All funds in this portfolio are ethically screened to ensure that they have a focus on integrating sustainability issues. The expected level of risk is relatively low. Medium/low 0.17 Medium/low 0.34 Low 0.18 High 0.24 Medium 0.16 The DC Core funds are bespoke funds that have been put together specifically for the Nestlé UK Pension Fund in accordance with the Trustee s detailed specifications. Each individual DC Core fund is made up of one or more underlying institutional investment funds provided by a number of different investment managers. The Trustee will review the composition of each fund and the performance of each of the underlying funds and fund managers on a regular basis. They may make changes to the underlying funds and/or their percentage allocation within each DC Core fund as required over time. More information about investing is available on the website at 9

10 Changing your investment choices It s important to regularly review your investment choices and if you want to, you can change your investment choices in DC Core quarterly. You can find out more about your investment choices, and how to change them, by visiting the website at nimpensions.co.uk. If you choose to join DC Start and would like to change your investment choices, you will have to move to DC Core. Investment performance As these investment choices were introduced recently, we can t provide you with any historic investment performance information. We ll be able to begin to provide you with performance figures from August Fund factsheets will be available to view on the website at nimpensions.co.uk. Need more help? Please note that Nestlé Pensions and the Trustee are not regulated financial advisers and so cannot give advice or make recommendations about the most appropriate fund choice for you. If you would like advice about your investment choices, you should consider taking financial advice. If you want to speak to a financial adviser The Money Advice Service has a directory of advisers who are authorised by the Financial Conduct Authority at If you are aged 50 or older If you are aged 50 or older, you can get information and guidance about the new flexibilities from Pension Wise, a free and impartial government service. You can access Pension Wise at or phone on ( if calling from outside the UK). For more information about the self-select funds, log into the website at nimpensions.co.uk password: nestlepensions 10

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12 For further information about the Nestlé UK Pension Fund: Write: Nestlé Pensions 1 City Place Gatwick RH6 0PA United Kingdom Tel: pensions@uk.nestle.com Website: (password: nestlepensions) Designed and produced by AHC 2017_