TAKING CARE OF TOMORROW TODAY

Transcription

1 TAKING CARE OF TOMORROW TODAY With the William Hill Pension Scheme (Pension Savings Plan 2001 and the Employee Pension Plan) 2013 edition Make the choices that are right for you - Your Investment Options 9901 William Hill investment guide.indd 1 30/05/ :21

2 choosing your investments The benefits you get from your Plan membership will depend on how much has built up in your Account as well as the cost of buying a pension at retirement (an annuity ). The size of your Account will depend on the contributions paid and the growth on your investments. You can choose how your Account is invested. Any choice should reflect your personal circumstances and the degree of risk you wish to take. The information contained in this leaflet, together with the quarterly investment report for members, aims to help you to make informed investment choices. If you pay AVCs you can invest these differently from the selection you choose for your main Account. Similarly, if you have brought a transfer value into the Plan from a previous employment this may also be invested differently from your Account. Choosing investments is important and the Trustee recommends that you speak to an independent financial adviser (IFA) before making any decision regarding your pension. Your options You have two main approaches for investing your Account: or Lifestyle this reflects specially designed investment strategies set by the Trustee. Under this approach, your Account is automatically switched into less volatile investments as you approach your Target Retirement Date. This is designed to help reduce unexpected fluctuations in its value and, as far as possible, to protect the amount of pension you can buy. Self-Select with this approach, you can make your own investment choice from the range of funds available. This guide has been prepared to help you understand some of the basics about investing for your future and factors to consider in deciding where to invest your pension savings. 2

3 The Trustee has chosen Legal & General Investment Management ( one of the world s pre-eminent asset management firms, to provide the funds through their investment platform. To see the full range of funds, visit (if you have previously registered on williamhill, you can continue to use that site or access it via orbit). You should also refer to the quarterly investment report for members, copies of which are displayed on the noticeboard in all shops and offices or are available from the Pensions Department, by: Writing to: Pensions Department William Hill Greenside House 50 Station Road Wood Green London N22 7TP ing: pensions@williamhill.co.uk Phoning: how to choose Given that you will ultimately use some or all of the value of your fund to buy a pension, you should begin with thinking about what you really want from your Account. Are you looking for a certain level of pension in retirement? When do you want to retire? How far away are you from your intended retirement age? Your aim is more than likely to maximise the growth of your Account over the time period until your retirement, to give you as large a pension as possible. To meet this aim you may want to invest in funds that provide a good opportunity for growth. However, generally funds that provide the potential for higher growth also carry a higher level of capital risk. If you are a long way from retirement you may feel you can cope with any short-term falls in the value of your account to benefit from any longer-term increases in the value of your investments. In contrast, as you approach retirement you may want to protect your Account from any short-term fluctuations in value. To do this, you may look to move it into different types of funds that offer the opportunity for less growth but more protection as you approach retirement age. 3

4 a Brief guide to investment Making your decision The approach you take will be based on a number of factors, including your attitude to risk and the length of time until your retirement. You can make your choice by completing the relevant section of the Application Form. You should remember: you can follow a specially selected investment strategy by investing in one of the Lifestyle options; if you do not make an investment selection, your Account will be invested using the William Hill Default Option ; if you do not specify a Target Retirement Date we will assume that your selected retirement age is 65; as an alternative, you can select from a range of self-select funds; you should review your investment strategy regularly; you may change your investment choices at any time, but only once a year. If you wish to make a switch please contact the Pensions Department and request a switch form. Your request will be actioned as soon as possible after the completed form has been returned. You can choose how your Account is invested from a range of fund options. Here are some general notes to help you understand the characteristics of each main investment type. Equities Equities are shares in companies. If the company does well the value of a share should increase, but if the company does less well it may fall in value. In the past equities have generally grown in value more than bonds, gilts or cash over longer periods. However they can go up and down in value, sometimes significantly. Equities are likely to carry the most capital risk. An investor might want to choose a fund that invests mainly in equities if they are aiming for higher long-term returns, but are willing to accept the risks of potential loss of capital and fluctuating value. You may be more willing to invest mainly in equities if, for example, retirement is still some way off or you have other secure investments or your Plan pension is only a small part of your retirement savings. Bonds Bonds are loans to a government, company or other organisation. The level of capital risk for bonds falls somewhere between cash and equities, depending on the nature of the bond. Simplistically, the return on your investment over the lifetime of the bond is the interest you receive on the loan plus any capital gain or loss on the initial investment. The interest can either be fixed (for example 5%) or index- 4

5 linked (which means that it varies in line with inflation). Bonds are traded so their value can go down or up, although usually to a lesser extent than the value of equities. Bond prices usually fall when interest rates rise (and vice versa). Bonds generally have a maturity date (when the loan is repaid) and bond funds usually hold a mix of bonds with different maturity dates. UK Government sterling bonds are called gilts or index linked gilts (the interest on the latter being linked to inflation) and are generally regarded as being the safest type of investment this is because the UK Government is unlikely to default on its sterling bonds as it can, in theory, choose to print more money. Company bonds are known as corporate bonds and are considered to be only as safe as the company that issues them in other words, if a company issues some bonds then goes into administration, investors in the company s bonds are likely to suffer losses. In the past, bonds have generally given lower returns over longer periods than equities, but they are generally less volatile (in other words, they are less prone to significant short-term fluctuations in value). Investing in bonds closer to retirement might help protect the buying power of your Account as the cost of buying a pension depends partly on the price of bonds. Many experts believe that investing in index-linked gilts is a good option if you plan on buying at retirement an annuity that increases in value each year in line with inflation. Conversely, if you expect to take an annuity that stays at the same level rather than increasing, experts consider that investing in fixed interest bonds may be more appropriate. Cash Cash funds can invest in short-term interest bearing investments, short-term bonds and other money market instruments. The value of an investment in cash can occasionally fall in the short-term, although cash investments typically have the lowest capital risk of the main asset classes. Returns on cash funds over the longer term may not keep pace with inflation, so the buying power of your investment may reduce. They can provide good security for your pension savings if you are about to retire and are considering taking a cash lump sum, but may not provide good long-term returns, so your Account may not grow enough to buy you the level of pension you would like. Property Commercial property investments in offices, shops and industrial premises generate investment returns through a combination of rental income and any increase in the value of the property. 5

6 However, property can also fall in value. Although generally not as volatile as equities, there is still capital risk associated with property investments. Furthermore, the cost of buying and selling individual properties is much higher. Property should therefore be viewed as a longer-term investment. As it is not possible to buy or sell properties immediately, from time to time property fund managers may impose restrictions on investments or disinvestments from their funds. Different types of risk All investments carry a level of risk, but there are different types of risk. You need to decide how much of each type of risk you are prepared to take. Capital risk This is probably the best understood type of risk and is the risk that your investments may drop in value. This can happen with almost all investments including equities, property, bonds and even in exceptional circumstances cash funds. The younger you are, the less worried you might be about short-term capital risk as you will have more time until your retirement to make up any shortfall in your Account, either through improved investment returns or increased contributions. Inflation risk This is the risk that your investments will not grow quickly enough to outpace the increase in the cost of living. Even if they do grow in value, if they don t grow quicker than inflation their buying power (the amount of goods and services you can get for your money) goes down. This risk is higher with low capital risk funds, such as a cash fund. 6

7 Annuity conversion risk When you retire, the majority of your Account will probably be used to buy an annuity. This is the promise by an insurance company to pay you a regular income (a pension) for the rest of your life. The cost of buying an annuity varies from time to time and depends in part on the price of bonds. By switching your investments into a fund that invests in bonds when you are closer to retirement, you can help to protect them against this risk. Liquidity risk This arises when one party is interested in trading an asset but cannot do so because few participants in the market want to trade that asset. This can typically apply with property investment where liquidity risk becomes particularly important to parties who are about to sell or currently hold an asset, since it affects their ability to trade. Pooled funds can usually be bought or sold on normal business days, but when there are exceptional liquidity restrictions investments into and / or disinvestments from a pooled fund can be suspended. Understanding some of the terms used: Active management Account Bonds Equities Fixed Interest Gilts This is the process of buying and selling investments with the intention of outperforming a specific investment market index or benchmark. For the purposes of this guide, the term Account refers to your Pension Account and/or AVC Account under the Plan. Bond funds are a loan to a company for a fixed period (or the Government in the case of gilts see below). Interest is paid on the amount borrowed and the capital is repaid at the end of the fixed period. Shares in companies traded on stock markets in the UK or overseas. Securities issued by the Government which pay a fixed rate of interest. Index tracker funds Funds designed to perform broadly in line with a given market index. The process of buying and selling with the intention of matching performance of a market index is also known as passive management. Index-Linked Gilts Plan Securities issued by the Government where the interest paid (and capital when re-paid) is adjusted in line with Retail Price Inflation. For the purposes of this guide, the term Plan refers to your membership of either the Employee Pension Plan or the Pension Savings Plan

8 useful information Copies of the quarterly investment report for members are displayed on the noticeboard in all shops and offices. You can also view up-to-date information on your fund values and the full range of investment options open to you at: You can contact the Pensions Department for further information about the Plan and your investment fund options, or to request copies of the quarterly investment report for members, by: Writing to: Pensions Department William Hill Greenside House 50 Station Road Wood Green London N22 7TP ing: Phoning: If you want help in making your investment decisions, the Trustee recommends that you speak to an independent financial adviser ( IFA ) - for details of one near to you just visit IFA Promotion s website at Important: This leaflet provides a summary of the investment options offered under both the William Hill Pension Savings Plan 2001 and the Employee Pension Plan and does not cover all its detailed provisions. These are set out in the formal Rules if you would like to see a copy of the Rules, please contact us at the address shown. If there is any difference between this guide and the Rules, the Rules will prevail. Please bear in mind that neither the Trustee nor the Pensions Department can make recommendations or provide advice regarding your investment options they can only provide information and guidance of a generic or factual nature. Pricing basis - all the funds detailed in this leaflet are unitised (sometimes referred to as pooled ). Therefore, members can purchase units in each of the funds which will entail ownership of a proportion of the overall fund. Each of the funds in this guide use a pricing basis referred to as swinging single priced. In general this means that if a fund has net sellers on a certain day (i.e. the number of units sold exceed the number of units purchased), the single price is based on the cancellation price (also known as the bid price) for both buyers and sellers. Conversely, in general if the fund has net investors, the single price is based on the creation price (also known as offer price) for both buyers and sellers. The cancellation price will be lower than the creation price, with the difference representing the transaction costs inherent in purchasing and selling the fund s underlying investments. 8