The Samworth Brothers Retirement Savings Plan

Transcription

1 The Samworth Brothers Retirement Savings Plan Your Investment Options August 2018

2 The Samworth Brothers Retirement Savings Plan Your Investment Options 2016 Contents 1. What s this booklet about? 3 2. Why do I need to think about investing? 3 3. What are investment funds? 4 4. What is investment risk? 6 5. What are my investment fund options? 7 6. The self-select option 8 7. The lifestyle options The default option The Samworth Brothers Lifestyle Programme The alternative option The Samworth Brothers Alternative Lifestyle Programme Your retirement date How do I make my decision? Where can I get more information? Where can I get advice? Other frequently asked questions Understanding pensions language Appendix: Descriptions of funds 18 2

3 1. What s this booklet about? This booklet explains the investment options currently available in the Samworth Brothers Retirement Savings Plan ( the Plan ). It highlights some things to think about when you make your investment decisions. Throughout this booklet some words are written in orange these are explained in more detail in the Understanding pensions language section starting on page Why do I need to think about investing? Whatever your plans are for your retirement, the more money you have, the easier things will probably be. Investing the money you and the Company pay into your retirement savings pot can help it grow. The size of your retirement savings pot at retirement depends, to a large extent, on how the contributions to your pot have been invested over the years. Therefore it is important that you invest your retirement savings pot in a way that suits your circumstances and attitude to investment risk. The Trustee of the Plan, with the help of its investment advisers, has selected 11 different investment funds for you to choose from. Generally, different investment funds offer different levels of financial reward and carry different levels of investment risk. They also have different levels of charges. The Trustee monitors the funds on a regular basis to assess whether they are performing at satisfactory levels. You can find full details of these on page 8. Some people aren t comfortable with choosing investment funds and if this applies to you, you can choose to invest in one of two lifestyle options instead. In these funds, your retirement savings pot is automatically invested in different funds as you get closer to your retirement date. You can find out more about the lifestyle options and how they work on page 9. 3

4 You will be asked to indicate your investment choices on your Application Form when you first join the Plan and you can change these at any time. If you don t make any investment decision at all, the contributions that you and the Company pay will be invested in the default programme (called the Samworth Brothers Lifestyle Programme). You can find more information about this option on page 10. If you feel this option is not for you, we d encourage you to look at all of the options available in this guide and choose the option that you are most comfortable with. This booklet is designed to help answer some of the questions you may have but neither the Trustee nor the Company can give you advice. However, a Financial Adviser can help you with your decisions. You can find an adviser in your local area at Please note that advisers will normally charge for their services. If, after reading this booklet, you still have questions, you can find out more by: Visiting: Calling: The Retirement Savings Plan helpline at Talking to your Personnel Team. 3. What are investment funds? The first thing to know about investment funds is that there are lots of different types. One of the differences is the way a fund is managed. There are two main types of fund management Active and Passive. Active funds are actively managed by a fund manager who buys or sells the investments to try and get a better result than (or outperform ) the market average. Passive funds try to track or follow the performance of the market as closely as possible by buying or selling investments in line with the market. The charges for active funds are generally higher than passive funds because active funds generally require more resources to try to consistently beat the 4

5 market average. However, there is no guarantee that an active fund will perform better than the market average. Another important difference is what the fund invests in. Here are the main types of investment: Cash As the name suggests, cash funds invest in various cash-based investments including simple deposits but also including cash-like investments such as bank credit notes. Bonds These are loans issued by companies, banks and large organisations (including governments in some cases). They work like a kind of IOU offering a fixed or variable rate of interest over a fixed period of time, with the debt repayable at the end. So, if you invested 1,000 in a 10 year bond paying a 2.5% interest you d get 25 each year and your 1,000 back after ten years from a successful investment. Bonds are also traded on markets. Gilts Gilts are bonds issued by the UK Government. Property Property funds usually invest in commercial property such as shops and offices. Property investors receive a share of rental payments and a share of any profit if the property is sold for a higher price than when it was bought. Shares (or equities) These are shares in companies. Shareholders are rewarded for investing their money by receiving payments based on the company s profits (called dividends). Shares are traded on markets like the London Stock Exchange. The value of shares can change dramatically (up and down) in a very short space of time. Many funds include just one type of investment but some include a range of types of investment like shares and bonds (multi-asset funds). 5

6 Whatever a particular fund invests in, its aim is to increase or protect the value of your retirement savings pot. But each type of investment comes with some level of risk and just as there are different types of investments, there are different types of risk. The next section looks at types of investment risk. 4. What is investment risk? Almost all investment involves some degree of risk. For example, if you put your money into your retirement savings pot in cash, there s very little risk you will lose your money, but the interest you get will probably be quite low. If you re young, and are a long way from retirement, your money probably won t increase very much in value and you might not have enough to do the things you want in retirement. This means cash might not be the right thing for you to invest in. On the other hand, if you invested your money in shares you might expect your retirement savings pot to go up in value over the longer term. But the value of shares can change dramatically in the short term and you wouldn t want your retirement savings pot to go down in value just before you retire. It s important you understand the different types of risk. There are two types of investment risk you need to know about: Capital risk this is the risk that your investments drop in value. It s usually the risk being highlighted when you hear the value of your investments can go down as well as up. This can happen with all shares, bonds, property and even some cash funds. Inflation risk this is the risk that your investments don t keep up with the cost of living (inflation). Even if they do go up in value, if they don t go up by as much as inflation then their real value goes down. This can happen with all funds, notably including cash funds. 6

7 The Member booklet explains what options you have at retirement to use the money in your retirement savings pot. (If you re thinking of buying an annuity, you also need to know about conversion risk. This is the risk that your investments aren t linked to the price of annuities as you get closer to retirement.) Why your age matters The importance of the different types of risk changes as you get closer to retirement. For people who are a long way from retirement, then they may choose to invest a larger amount of their retirement savings pot in funds that can grow your money over the long term, like shares. This is because capital risk is less important, as the retirement savings pot has plenty of time to recover from any falls. Inflation risk could be more important because if the retirement savings pot doesn t grow faster than inflation, then in real terms the retirement savings pot will be worth less money than was expected. As people get closer to retirement, capital risk becomes much more important and people will normally consider investing a larger amount of their retirement savings pot in funds that don t move up and down so much to help protect the accumulated value of their retirement savings pot. These investments might include bonds and cash. 5. What are my investment fund options? You have two overall choices, you can either: Create your own investment strategy by choosing from a range of the selfselect funds available; or Choose the Lifestyle Option. 7

8 6. The self-select option The 11 self-select funds provide you with a broad selection of ways to invest your retirement savings pot. In the table below, we ve listed each of the funds that you can choose to invest in and included the management style and the current investment charge. More details on each on the funds can be found in the Appendix. Fund type Fund name Active/ Passive Charge (total expense ratio) Global equity L&G Global Equity Market Weights (30:70) Index Fund 75% GBP Currency Hedged Fund Passive 0.51% UK equity L&G UK Equity Index Fund Passive 0.47% Multi-asset L&G Multi-Asset Fund (MAF) Passive 0.50% Cash L&G Cash Active 0.47% Emerging markets equity L&G World Emerging Markets Equity Index Fund Passive 0.62% Annuity purchase L&G Pre-Retirement Fund Passive 0.49% Corporate bond L&G AAA-AA-A Corporate Bond All Stocks Index Fund Passive 0.49% Ethical equity L&G Ethical Global Equity Index Passive 0.67% Sharia law compliant L&G Pension (PMC) HSBC Life Islamic Fund 3 Passive 0.72% Commercial property L&G Pension Property Fund 3 Active 1.46% Index linked gilts L&G All Stocks Index-Linked Gilt Index Fund Passive 0.45% Investment charges Different investment funds have different charges. The investment charge for each of the funds available is shown alongside the fund description in the table above. 8

9 The charges are accounted for in the price of the unit, so are reflected in the value of your retirement savings pot. Charges are reviewed regularly and may go up and down. About the fund manager The Trustee, with the help of its advisers, has chosen Legal & General Investment Management ( Legal & General ) to manage the Plan s assets. This company was chosen because they offer a range of funds, the key criteria of which match the objectives set out by the Trustee and its advisers. Legal & General is one of the largest managers of UK pension funds. Whatever option you choose, you should still keep your investment choices under regular review to ensure they continue to meet your needs. If you wish to change your investment choices, you should complete a Changing Your Investment Form. These are available from your Personnel team. 7. The lifestyle options What if I don t want to choose my own investment funds? All the different types of risk and different types of investments can make saving for your retirement sound very complicated and many people are not comfortable making investment choices. If this applies to you, the Plan offers two lifestyle options. The aim of a lifestyle option is to invest your retirement savings pot in capital growth assets when you are far away from retirement and then protect it from falling in value when you get closer to retirement. With a lifestyle option your retirement savings pot is automatically moved into lower risk investments over the 20 years before you retire so you don t have to worry about remembering to switch your investments yourself. If you choose a lifestyle option it must apply to the whole of your retirement savings pot. It is not possible to divide your investments between a lifestyle option and individual funds. 9

10 The Member booklet explains the different ways you can use the money in your retirement savings pot at retirement. There are two lifestyle options available: For members who intend to take a large part of their retirement savings pot as cash at retirement and drawdown the rest in smaller cash sums over time, the default lifestyle is designed to suit this option and has been selected by the Trustee on this basis. This option is called the Samworth Brothers Lifestyle Programme. For members who intend to take a smaller part of their retirement savings pot as cash at retirement but leave the rest invested over a longer period of time, the Samworth Brothers Alternative Lifestyle Programme is designed to suit this option and has been selected by the Trustee on this basis The default option The Samworth Brothers Lifestyle Programme The Samworth Brothers Lifestyle Programme targets members who intend to take a large proportion of their retirement savings pot as cash at retirement followed by a simplified form of income drawdown. If you choose this fund, at your retirement date, 50% of your retirement savings pot will be in the L&G Cash Fund and 50% in the L&G Retirement Income Multi-Asset Fund L&G Global Equity Market Weights 30:70 Index Fund 75% GBP Currency Hedged L&G Multi Asset Fund Years to retirement L&G Retirement Income Multi Asset Fund L&G Cash Fund

11 Important If you don t make any investment fund choice at all, the money you and the company pay into your retirement savings pot will automatically be invested in the Samworth Brothers Lifestyle Programme by default. This option won t be right for everyone, and you should look at all of the options available in this guide and choose the option that you are most comfortable The alternative option The Samworth Brothers Alternative Lifestyle Programme The Samworth Brothers Alternative Lifestyle Programme targets members who intend to choose the drawdown option at retirement and take a smaller proportion of their retirement savings pot as cash when they retire. If you choose this option, at retirement, 30-40% of your retirement savings pot will be in the L&G Multi-Asset Fund, 30-40% in the L&G Retirement Income Multi-Asset Fund and 20-30% invested in L&G Cash Fund Years to retirement L&G Global Equity Market Weights 30:70 Index Fund 75% GBP Currency Hedged L&G Multi Asset Fund L&G Retirement Income Multi Asset Fund L&G Cash Fund 11

12 Lifestyle option charges Different investment funds have different charges. The investment charge for each of the funds used within the two lifestyle options is shown alongside the fund description in the table below. If you invest in one of the lifestyle options, the charges that you ll pay will vary over time depending on how far away you are from your retirement date. The charges are accounted for in the price of the unit, so are reflected in the value of your retirement savings pot. Charges are reviewed regularly and may go up and down. If you invest in one of the lifestyle options, the charges that you ll pay will vary over time depending on how far away you are from retirement. Fund type Fund name Charge (total expense ratio) Global Equity L&G Global Equity Market Weights (30:70) Index Fund 75% GBP Currency Hedged Fund 0.51% Multi-Asset L&G Multi-Asset Fund (MAF) 0.50% Multi-Asset L&G Retirement Income Multi-Asset Fund (RIMAF) 0.68% Cash L&G Cash Fund 0.47% 8. Your retirement date If you haven t told us when you plan to retire, we ll assume this will be your State Pension Age by default. The date you plan to retire is especially important if you are in a lifestyle option (including the default option) because it affects how your retirement savings pot is invested and so you should choose a date which is as realistic as possible and update this if your plans change. If you retire earlier or later than expected, your retirement savings pot may not be invested in the best way and you could lose money as a result. The Member Booklet explains more about when you can retire on page

13 9. How do I make my decision? If you are comfortable for your contributions and those the company makes for you to be invested in the Samworth Brothers Lifestyle Programme, you don t have to do anything. This will happen automatically by default. If you want your contributions and those the company makes for to be invested in a different fund or selection of funds, you can do this by: Visiting: Calling: The Retirement Savings Plan helpline at Talking to your Personnel Team. You can change the funds your retirement savings pot is invested in as well as your future contributions at any time. 10. Where can I get more information? You can find out more about the Plan by: Visiting: Calling: The Retirement Savings Plan helpline at Talking to your Personnel Team. 11. Where can I get advice? Neither the Trustee nor the company are allowed to give you advice. If you would like financial advice before deciding which funds to choose, you should speak to a financial adviser. You can find an adviser in your local area at Please note that advisers will usually charge for their services. Alternatively, the Money Advice Service is a free independent service set up by the Government, which provides unbiased money advice and can be contacted by visiting or by calling

14 Important note: Neither the Trustee nor the company can guarantee the performance of any investment fund. Please remember that the value of your retirement savings pot can go down as well as up. 12. Other frequently asked questions Who chooses which funds are available? The Trustee, based on advice from its advisers, decides which funds to make available for you to choose from. The Trustee reviews the selection from time to time and monitors the performance of the funds on a regular basis. In the future, this could mean that certain funds will be removed or new ones added. Who manages the funds? All the funds are managed by professional fund managers. All of the funds are currently offered through Legal & General but some of the underlying funds may managed by other fund management groups. The Trustee monitors all the funds that it offers to you on a regular basis. How many funds can I invest in? You can invest in either: one of the lifestyle options; or the individual investment funds. You can t invest in more than one lifestyle option or invest in a mixture of both lifestyle options and individual investment funds. If you choose to invest in the individual investment funds, you can invest in as few or as many as you wish and in whatever proportions you want. Can I change my choices later? You can change the funds your retirement savings pot is invested in at any time by: Visiting: Calling: The Retirement Savings Plan helpline at Talking to your Personnel Team. 14

15 13. Understanding pensions language This section explains some of the words and phrases that crop up in pension information. Annuity An insurance policy that provides you with an income, usually for the rest of your life. The amount you receive will depend on a number of things including the value of your retirement savings pot, your age, your health and the price of annuities when you retire. Assets Assets are the building blocks of investment funds they are the types of things that funds invest in. There are four main types of asset: equities, bonds, property and cash. Bonds These are loans issued by companies, banks and large organisations (including governments). They work like a kind of IOU offering a fixed or variable rate of interest over a fixed period of time, with the debt repayable at the end. So, if you invested 1,000 in a 10 year bond paying a 2.5% interest you d get 25 each year and your 1,000 back after ten years from a successful investment. Bonds are also traded on markets. Cash fund As the name suggests, cash funds invest in various cash-based investments including simple deposits but also including cash-like investments such as bank credit notes. Contributions These are the payments that are made into The Samworth Brothers Retirement Savings Plan by both you and the Company. Default option If you don t make any investment decision at all, the option chosen by the Trustee to invest your retirement savings pot. The contributions that you and the Company pay will be invested in the Samworth Brothers Lifestyle Programme (which is one of the lifestyle options). Although the Trustee s intention is that this 15

16 option should be suitable for many members of the Plan, we d encourage you to look at all of the options available in this guide and choose the option that you are most comfortable with. Equities See shares. Fixed interest See bonds. Gilts These are bonds issued by the UK Government. For more information please see bonds. Investment fund When contributions are made into your retirement savings pot, the contributions are invested in one or more funds of your choice. The aim of any investment fund is to help protect or increase the value of the money in your retirement savings pot (although there is no guarantee that this will happen). Lifestyle option A lifestyle option is a strategy that invests in a combination of funds which depends on how close you are to your retirement date. The aim of a lifestyle option is to increase the value of your retirement savings pot when you are far away from retirement and then protect it from falling in value when you get closer to retirement. The investments are moved automatically over the 20 years before you retire so you don t have to worry about remembering to switch your investments yourself. Retirement savings pot The value of the contributions from you and the Company, as adjusted for any investment return. 16

17 Property fund Property funds usually invest in commercial property such as shops and offices. Property investors receive a share of rental payments and a share of any profit if the property is sold for a higher price than when it was bought. Shares (or equities) These are shares in companies. Owning a share means you own part of that company. Shareholders are rewarded for investing their money by receiving payments based on the company s profits (called dividends). Shares are traded on markets like the London Stock Exchange. The value of shares can sometimes change dramatically (up and down) in a very short space of time. Trustee The Samworth Brothers Retirement Fund Trustees Limited is the name of the limited company set up to manage the Plan. The Trustee company is responsible for the management and administration of the Plan in accordance with the formal governing documents and relevant UK legislation and regulation. It is responsible for the safekeeping of the money and investments belonging to the Plan. Units All funds are divided into units. When you make contributions to your retirement savings pot these are used to buy new units in your chosen fund or funds. The price of these units rises and falls in line with the underlying investments, and when you wish to take your benefits your units in your chosen fund(s) will be sold at the price at that time. 17

18 14. Appendix: Description of funds This is a summary. Please go to for further information before making an investment decision. Self-select funds Fund name L&G Global Equity Market Weights (30:70) Index Fund 75% GBP Currency Hedged Fund L&G UK Equity Index Fund L&G Multi-Asset Fund L&G Cash L&G World Emerging Markets Equity Index Fund L&G Pre-Retirement Fund L&G AAA-AA-A Corporate Bond All Stocks Index Fund L&G Ethical Global Equity Index Fund description Invests in the global stock market (30% UK shares and 70% non-uk shares) and aims to achieve the same returns as the market. A total of 75% of the overseas assets (excluding emerging markets) will be currency hedged to sterling, exposure to emerging market currencies, will be left unhedged. Invests in UK shares and aims to achieve the same returns as the UK stock market. Aims to provide long-term investment growth through exposure to a range of asset classes. The diversified nature of the fund means that it is expected to have less exposure than an equity-only fund to adverse equity market conditions. Aims to provide capital protection with growth at short term interest rates. The fund invests in the short term money markets such as bank deposits and Treasury Bills. Invests in shares of companies based in emerging market countries and aims to achieve the same returns as the emerging markets stock market. Provides exposure to assets that reflect the broad characteristics of investments underlying the pricing of a typical non-inflation linked annuity product (typically gilts and corporate bonds). This protect against conversion risk, ie the risk that investments aren t linked to the price of annuities as you get closer to retirement. Invests in corporate bonds and aims to achieve the same returns as the UK corporate bond market. Invests in shares of global environmentally and socially responsible companies and aims to achieve the same returns as the ethical market i.e. the market consisting of environmentally and socially responsible companies. 18

19 Fund name L&G Pension (PMC) HSBC Life Islamic Fund 3 L&G Pension Property Fund 3 L&G All Stocks Index-Linked Gilt Index Fund Fund description Aims to create long term appreciation of capital through investment in a diversified portfolio of securities as defined by a relevant world index, which meets Islamic investment principles as interpreted and laid down by the Shariah Committee and provided to the Board of Directors. Aims to get the best return from a portfolio of first class freehold and leasehold interests in commercial and industrial property. This includes industrial warehouse buildings, shopping units and office blocks. It is also permitted to invest up to 15% in other external property funds in order to take advantage of investment opportunities in niche or specialist sections. Invests in index-linked gilts and aims to achieve the same returns as the UK index-linked gilt market. Index-linked gilts are gilts whose payments are linked to inflation, helping to protect against inflation risk. Funds underlying lifestyle options Fund name L&G Global Equity Market Weights (30:70) Index Fund 75% GBP Currency Hedged Fund L&G Multi-Asset Fund (MAF) L&G Retirement Income Multi-Asset Fund (RIMAF) L&G Cash Fund description Invests in the global stock market (30% UK shares and 70% non- UK shares) and aims to achieve the same returns as the market. A total of 75% of the overseas assets (excluding emerging markets) will be currency hedged to sterling, exposure to emerging market currencies, will be left unhedged. Aims to provide long-term investment growth through exposure to a range of asset classes. The diversified nature of the fund means that it is expected to have less exposure than an equity-only fund to adverse equity market conditions. Aims to provide long-term investment growth up to and during retirement, and to facilitate the drawdown of retirement income. The fund invests globally in a range of different asset classes, and in both passive and active funds. Aims to provide capital protection with growth at short term interest rates. The fund invests in the short term money markets such as bank deposits and Treasury Bills. 19

20