February 2017 Changes to your Defined Contribution Pension Plan We will be making changes to New Ireland s lifestyling funds, IRIS and Passive IRIS, commencing at the end of March 2017. In addition, we will be changing the funds within our standard suite of funds available to our defined contribution pension plans. The assumptions used in Statements of Reasonable Projection (SORPs) are also changing. We have included information on the changes below and recommend that you read this leaflet carefully. IRIS and Passive IRIS - What is changing? Matching the at retirement asset mix to retirement benefits The way people are taking their retirement benefits has changed considerably in the last few years. Over 90% of customers who took retirement benefits from New Ireland in 2016 took either a cash lump sum or a cash lump sum plus the Approved Retirement Fund (ARF) option. Less than of customers used their fund to purchase an annuity and this amount was typically the residual after accessing a retirement lump sum based on 1.5 times earnings. To reflect the significant shift in how customers are now taking retirement benefits, a low interest rate investment environment, and to take advantage of new investment opportunities, we are redesigning the at retirement landing points of IRIS and Passive IRIS. This means a move away from annuity matching bonds to a low to medium risk asset mix which we consider is suitable to match the purchase of an ARF. Current at retirement landing point of IRIS and Passive IRIS New at retirement landing point of IRIS and Passive IRIS n Long Bonds n Low to medium risk De-risking as retirement approaches We will continue to start the gradual de-risking of IRIS and Passive IRIS funds 15 years out from the chosen retirement year. The new glidepaths and asset mix of IRIS and Passive IRIS will remain largely unchanged until approximately 5 years from the fund s associated retirement year. Approximately 5 years from retirement they will start to move towards the new landing point of 2 cash and a 7 low to medium risk asset mix.
IRIS Combining the expertise of State Street Global Advisors (SSGA) and Legal and General Investment Managers (LGIM) Having carried out an extensive review of the investment market we are delighted to add LGIM, winner of Best Investment Manager 2016 at the Irish Pension Awards, as a new investment partner. We are incorporating the LGIM Euro Diversified Fund into IRIS where it will sit alongside the SSGA equity, property and fixed income strategies. The LGIM Euro Diversified Fund is gaining considerable traction as an efficient and well diversified multi-asset fund and will complement the SSGA strategies. IRIS - Indicative new glidepath 15+ Years to Retirement 15 Years to Retirement 14 years 13 years 50% 50% 3% 2% 3% 2% 47% 3% 44% 7% 4% n LGIM Euro Diversified Fund n Equities n Property 12 years 11 years 10 Years to Retirement 41% 38% 3 9% 11% 13% 6% 7% n Corporate Bonds n Government Bonds 9 years 32% 1 8% 8 years 29% 17% 9% 7 years 26% 19% 6 years 21% 11% 5 Years to Retirement 20% 4 years 16% 4% 3 years 3% 2 years 8% 2% 1 1 year 4% 1% 20% At Retirement 2 A closer look at the LGIM Euro Diversified Fund The LGIM Euro Diversified Fund is designed for long-term pension investors seeking pure market exposure. It combines significant equity investment with exposure to a number of other asset classes and provides enhanced risk management characteristics when compared to an equity only strategy. LGIM Euro Diversified Fund Asset Class Equities (40.0%) Investment Grade Credit (19.0%) Government Bonds (11.) Alternative Credit (15.0%) Alternatives (14.) Holdings 0% 20% 30% 50% 60% January 2017. Allocations can change over time.
Passive IRIS Introducing our PRIME 3 Fund for risk reduction We are introducing our PRIME 3 strategy managed by SSGA into Passive IRIS. PRIME 3 will be used for risk reduction in the years leading up to retirement and is intended to be a match for customers choosing the ARF and cash lump sum option at retirement. Passive IRIS - Indicative new glidepath 15+ Years to Retirement 15 Years to Retirement 14 years 13 years 12 years 11 years 10 Years to Retirement 9 years 8 years 7 years 6 years 5 Years to Retirement 4 years 3 years 2 years 1 year At Retirement 70% 17% 8% 70% 68% 66% 64% 62% 60% 17% 18% 19% 21% 22% 8% 9% 11% 54% 24% 48% 2 42% 2 13% 1 36% 26% 13% 20% 30% 27% 13% 2 24% 4% 21% 11% 3 18% 3% 16% 7% 4 2% 11% 5 1 6% 1% 3% 6 20% 7 2 n Equities n Property n Corporate Bonds n Government Bonds n PRIME 3 A closer look at the SSGA PRIME 3 Fund PRIME 3 is a diversified fund that invests in a range of passively managed funds with exposure to the returns of equities, bonds and a range of alternative assets. The fund has been designed to reduce the potential impact of equity market volatility on investment returns smoothing fluctuations and aiming to enhance the potential return to pension investors. PRIME 3 Asset Class Developed World Equities (risk adjusted - max 32.0%) Diversified Alternatives (15.0%) Euro Corporate Bonds (8.0%) Euro Government Bonds (30.0%) Cash (15.0%) Holdings 0% 20% 30% 50% 60% February 2016. Allocations can change over time. Warning: The value of your investment can go down as well as up. Warning: If you invest in these funds you will not have any access to your money until your retirement date. Warning: These funds may be affected by changes in currency exchange rates. Warning: If you invest in these funds you may lose some or all of the money you invest.
Changes to the Standard Suite of Funds We are making changes to the standard suite of funds which applies to most of our pension plans. The new standard suite of funds is designed to improve and simplify our group defined contribution pensions offering for trustees, employers and members. The new range of funds will come into effect from 1 July 2017, or sooner on request. Some of the funds currently available in the range will be replaced for new members. This change does not affect the funds that members are currently invested in, it only impacts members if they decide to switch funds from 1 July 2017 or later. The choice of funds available to switch into will be as listed below. Risk Category New Standard Suite from 1 July 2017 Lifestyling IRIS Retirement Fund Passive IRIS Pension Indexed Eurozone Long Bond Fund Very Low Risk 1 2 3 4 5 6 7 Pensio Fund Low to Medium Risk 1 2 3 4 5 6 7 ifunds 3 PRIME 3 Medium Risk 1 2 3 4 5 6 7 BNY Mellon Global Real Return Fund ifunds 4 PRIME 4 Medium to High Risk 1 2 3 4 5 6 7 ifunds 5 PRIME 5 High Risk 1 2 3 4 5 6 7 ifund Equities PRIME Equities Please note the management charges on the above funds vary. Full details of the charges are available on request. Changes to Statements of Reasonable Projections (SORPs) We would also like to draw your attention to changes to the assumptions as set out in the Statement of Reasonable Projection (SORP) which is enclosed with members annual statements. Future SORPs will reflect the changes to the IRIS and Passive IRIS strategies and two other changes will also be noted in your annual renewal documentation. 1. The illustrations have changed as a result of revised guidance issued by the Society of Actuaries in 2016. For example a change included reducing the assumed investment rate of return by 1% per annum. 2. For members invested in IRIS or Passive IRIS, the assumed investment rates of return are further reduced to allow for the gradual movement to lower risk assets as members move closer to retirement. This reduced investment rate of return was not reflected in previous SORPs and this has been adjusted for future SORPs. The above changes mean the projected value of retirement benefits in SORPs are likely to be lower than projected values in previous SORPs. Please note the changes are only in relation to the projected value in the illustrations and do not affect the actual value of the pension fund.
Changes to IRIS and Passive IRIS - Key Questions Answered What if a member wants to fund towards the purchase of an annuity? An annuity matching strategy will be available for any IRIS/Passive IRIS investors who plan to purchase an annuity at retirement. They can switch to this strategy free of charge at any time during the five years preceding their chosen retirement age. What if a member s retirement benefits will consist solely of an immediate cash lump sum? We believe the at retirement landing point of 2 cash and 7 low to medium risk assets should also suit most members who plan to take only a cash lump sum at retirement. This mix of assets provides a balance between risk and return for members who use their cash lump sums in different ways but typically including some form of further investment. However, if a member would prefer a more cautious approach, a cash matching strategy will be available to them which they can switch to free of charge. What if a member wants to retire early or late? Individual circumstances can and do change and a planned retirement date can quickly change to an earlier or a later date. The concept of a normal retirement age is not as meaningful in the world of Defined Contribution as it was in the Defined Benefit world. Those funding for retirement will often, at short notice, make a decision to retire sooner than originally intended and take benefits early, or they may decide to defer taking benefits and take them at a later date. It is important not to over engineer a lifestyling system in a Defined Contribution environment. IRIS and Passive IRIS allow members to simply switch the retirement year of their fund free of charge and so can quickly and easily adapt to changing circumstances. This flexibility is a key advantage of a target date lifestyling approach. For example, if a pension investor s original chosen retirement year was 2022 and this moves to 2025, a simple switch to the 2025 fund will put the investment strategy back on course.
If you have any queries or would like further information on the changes, please contact your financial broker or advisor. Terms and conditions apply. The details shown above relating to the funds are as at the date of this document and may change over time. While great care has been taken in its preparation, this leaflet is of a general nature and should not be relied on in relation to a specific issue without taking appropriate financial, insurance or other professional advice. If any conflict arises between this leaflet and the policy conditions, the policy conditions will apply. New Ireland Assurance Company plc is regulated by the Central Bank of Ireland. A member of Bank of Ireland Group. 303534 V1.02.17