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LOOKING FOR INVESTMENT
OPTIONS?Our Select Fund Range
CONTENTSYour default investment choice 3
Fund range 5
Governed range 10
Risk category 11
Useful definitions 16
2
3
It’s likely that there will be a default investment option chosen for your plan. This means your pension savings will be automatically invested in this option. Your employer will be able to give you more information about the default.
However the default investment option may not be right for everyone and it’s up to you to decide whether you are happy with it.
If you prefer you can choose your own investment and Royal London offer a carefully selected range of investment options to choose from.
This guide provides more information about the other investment options available.
YOUR DEFAULTINVESTMENT
CHOICE
44
Following a carefully planned investment strategy provides the best opportunity to grow retirement savings. A Retirement Solutions pension can help with this:
Fund RangeYou can create and manage your own investments by selecting from our Fund Range. You’ll have access to the skills and talents of an impressive selection of investment managers including some of the world’s leading investment management companies:
• Baillie Gifford
• BlackRock
• Close TEAMS
• HSBC Investments
• Invesco
• Newton Investment Management
• Royal London Asset Management
• UBS Global Asset Management
Governed RangeAlternatively you might prefer to invest in our Governed Range. This range is made up of specially developed risk graded portfolios and lifestyle strategies. It is designed for those who prefer to select a ready-made investment that is reviewed on an ongoing basis for added peace of mind.
This guide provides information about the fund managers, the extensive range of funds and the different options available within the Governed Range.
To help you understand the terminology contained in this brochure, we have included a Useful Definitions section at the back.
Please be aware that investment returns may fluctuate and are not guaranteed. The price of units may fall as well as rise, and you may not get back the amount you originally invested.
FUNDRANGE
5
The following sections give details and descriptions of the funds available through a Retirement Solutions pension.
To help you decide which funds are most suitable for particular needs and circumstances, we have arranged the funds by asset type. These are summarised below.
DepositsThis term is used to describe investments such as cash. They work in much the same way as a bank or building society account. Investments are put on deposit with a financial institution where they earn interest. Deposits are generally considered safer than other asset classes; however, over the longer term they are likely to provide lower returns.
Corporate bonds and giltsCorporate bonds are loans to companies for a set period. During this period the company pays interest and eventually returns the original amount.
The main risk with a corporate bond is that the company to which the loan has been made might go bankrupt and fail to pay it back. Corporate bonds tend to be less volatile investments than company shares but provide the opportunity for higher growth than deposits.
Gilts are loans to the Government and work in much the same way as corporate bonds. However, gilts are considered very safe investments – since the Government is unlikely to go bankrupt. Like corporate bonds, gilts tend to be less volatile than company shares but provide greater opportunities for growth than deposits.
PropertyMany pension providers let you invest in different types of property. Property funds typically invest in retail outlets, industrial sites and office buildings. One proviso: because the property in a fund might not be readily saleable, it’s possible that you might not be able to cash in your investment in a property fund when you want to. Also the value of property is generally a matter of a valuer’s opinion rather than fact.
FUNDRANGE
6
EquitiesEquities are company shares. Limited companies can sell their shares to raise capital, paying a share of their profit (known as a dividend) to the buyer in return. Shares are bought and sold on the stockmarket, and their prices fluctuate based on a number of factors including the company’s potential profitability. As a result, they tend to be too volatile for short-term investors. However, it is widely accepted that equities have the potential for better returns over medium and longer terms. It’s also worth bearing in mind that equities traded on some overseas stock exchanges can be more volatile than UK equities. They are also affected by fluctuations in currency exchange rates.
Mixed assetsSome funds will invest in a mixture of different asset classes such as company shares, property and deposits. This way, if one particular investment performs poorly, you won’t be as badly affected because your risk is spread more widely.
SpecialistSome funds have an investment universe that is not accommodated by the mainstream sectors. These will be included in the specialist sector. This sector is hugely diverse and will contain funds with various investment objectives and styles.
7
Deposit
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP Deposit Nil Active
Government and Corporate Bonds
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP Annuity Nil Active
RLP Corporate Bond Nil Active
RLP Ethical Bond Nil Active
RLP Fixed Interest Nil Active
RLP Global High Yield Bond Nil Active
RLP Global Index Linked Nil Active
RLP Index Linked Nil Active
RLP International Government Bond Nil Active
RLP Long (15yr) Corporate Bond Nil Active
RLP Long (15yr) Gilt Nil Active
RLP Long (15yr) Index Linked Nil Active
RLP Medium (10yr) Corporate Bond Nil Active
RLP Medium (10yr) Gilt Nil Active
RLP Medium (10yr) Index Linked Nil Active
RLP Short (5yr) Corporate Bond Nil Active
RLP Short (5yr) Gilt Nil Active
RLP Short (5yr) Index Linked Nil Active
RLP Short Duration Global High Yield Nil Active
RLP Sterling Extra Yield Bond Nil Active
RLP Sustainable Managed Income Trust Nil Active
RLP UK Government Bond Nil Active
RLP BlackRock Long Gilt Index Nil Tracker
RLP BlackRock Over 5 years Index linked Gilt Index Nil Tracker
RLP BlackRock UK All Stocks Corporate Bond Index Nil Tracker
Property
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP Property Nil Active
8
Mixed Assets
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP Adventurous Managed Nil Active
RLP Defensive Managed Nil Active
RLP Managed Nil Active
RLP Sustainable Diversified Trust Nil Active
RLP Sustainable Managed Growth Trust Nil Active
RLP Sustainable World Trust Nil Active
RLP BlackRock Consensus 85 Nil Tracker
RLP/Newton Multi-Asset Balanced ‘A’ Nil Active
RLP/Newton Multi-Asset Managed ‘A’ Nil Active
RLP/UBS Global Allocation 'A' Nil Active
UK Equity
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP Equity Income Nil Active
RLP Sustainable Leaders Trust Nil Active
RLP UK Equity Nil Active
RLP UK Mid Cap Nil Active
RLP UK Opportunities Nil Active
RLP UK Smaller Companies Nil Active
RLP/Baillie Gifford UK Equity 'A' Nil Active
RLP BlackRock ACS UK Equity Index Nil Tracker
RLP/BlackRock UK Equity 'A' Nil Active
RLP Close TEAMS UK Equities 1% ‘A’ Nil Active
RLP UK Equity Specialist (Invesco UK Growth) Nil Active
US Equity
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP American Nil Tracker
RLP BlackRock ACS US Equity Index Nil Tracker
European Equity
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP European Nil Active
RLP BlackRock ACS European Equity Index Nil Tracker
9
Asian Equity
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP Far East (Ex Japan) Nil Tracker
RLP Japan Nil Tracker
RLP Pacific Nil Tracker
RLP BlackRock ACS Japanese Equity Index Nil Tracker
RLP BlackRock Pacific Rim Equity Index Nil Tracker
Global Equity
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP Global Equity Nil Active
RLP Global Managed Nil Active
RLP Worldwide Nil Active
RLP Baillie Gifford UK and Worldwide Equity Nil Active
RLP BlackRock ACS Global Blend Nil Tracker
RLP Blackrock ACS Global Equity Index (50:50) Nil Tracker
RLP BlackRock ACS Global Equity Index (60:40) Nil Tracker
RLP BlackRock ACS World (ex UK) Equity Index Nil Tracker
RLP HSBC Islamic Global Equity Index ‘A’ Nil Tracker
RLP/UBS Global Blend (50:50) 'A' Nil Active
Emerging Market Equity
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP Emerging Markets ESG Leaders Equity Tracker Nil Tracker
Specialist
Fund Name Additional Fund Management Charge1 Fund Management Style
RLP Absolute Return Government Bond Nil Active
RLP Cash Plus Nil Active
RLP Commodity Nil Tracker
RLP Enhanced Cash Plus Nil Active
1 These charges are added to the annual management charge for your plan.
10
All of our options in the Governed Range have ongoing governance. This simply means that our investment experts review it regularly. It allows us to maintain an appropriate asset allocation to match the risk attitude – and to make sure it is performing in line with its objectives – aiming to maximise real returns for the level of risk taken. Please note that the investment returns may fluctuate and are not guaranteed and you may not get back the amount you originally invested. If our experts decide that a change to the asset allocation should be made, it will take place automatically on your behalf, you don’t need to do anything. What’s more, this service comes at no extra cost.
This section provides more information about our specially developed risk-graded portfolios and lifestyle strategies.
To help you decide which one might be suitable you need to consider your attitude to risk. This will play a big part in determining the mix of investments that is right for you.
What is your attitude to risk?Everybody’s view of risk is different. Some people are comfortable taking risks while others are naturally more risk averse.
AssetAllocation
Risk Profile
Fund Selection
Review andGovernance
You may already know your risk attitude, but if not, don’t worry. We can help give you an idea of what it is. Simply complete our online risk questionnaire at royallondon.com/riskattitude
All you have to do is answer twelve simple questions about your current situation, feelings and attitude to risk. A report is then produced which confirms your answers and gives you an idea of your attitude to risk.
We have seven possible risk categories and these are described overleaf.
GOVERNEDRANGE
RISKCATEGORY
11
GOVERNEDRANGE
Very CautiousIn general, very cautious investors prefer knowing that their capital is safe rather than seeking high returns. They are not comfortable with the thought of investing in the stockmarket and would rather keep their money in the bank.
CautiousIn general, cautious investors do not like to take risk with their investments. They would prefer to keep their money in the bank, but would be willing to invest in other types of investments if they were likely to be better for the longer term.
Moderately CautiousIn general, moderately cautious investors are uncomfortable taking risk with their investments, but would be willing to do so to a limited extent. They realise that risky investments are likely to be better for longer term returns.
BalancedIn general, balanced investors understand that they have to take investment risk in order to be able to meet their long-term goals. They are likely to be willing to take risk with at least part of their available assets.
Moderately AdventurousIn general, moderately adventurous investors are willing to take on investment risk and understand that this is crucial in terms of generating long-term returns. They are willing to take risk with a substantial proportion of their available assets.
AdventurousIn general, adventurous investors are happy to take on investment risk and understand that this is crucial in terms of generating long-term returns. They are willing to take risk with most of their available assets.
Very AdventurousIn general, very adventurous investors are looking for the highest possible return on their capital and are willing to take considerable amounts of risk to achieve this. They are usually willing to take risk with all of their available assets.
RISKCATEGORY
12
Our aim is to maximise your investment returns in line with your attitude to risk.
We do this by focusing on asset allocation. This means creating a balance of investments from the various asset classes available. So, for example, if you had a ‘Balanced’ attitude to risk, you might invest in a mix of assets such as property, cash deposits and equities, also known as shares. Because these asset classes perform differently, if one type is falling in value, others may be rising.
Getting this balance right can make a huge difference to how your investments perform.
AssetAllocation
Risk Profile
Fund Selection
Review andGovernance
However, it’s not just about getting the asset allocation right at the start. Over time returns between different asset classes will vary which means the percentage invested in each asset class will change over time. So it’s important to review the asset allocation regularly to make sure it still matches your risk attitude.
The Governed Range is designed to automatically deal with these type of issues.
1313
Governed Lifestyle StrategiesYour ability to take risk is likely to change over time. As you approach retirement age, for instance, you’ll probably want to reduce the risk to your savings.
Our Lifestyle Strategies have this covered. We designed them to gradually switch from higher to lower risk portfolios as you approach retirement age. We have a pre-set range of Target Lifestyle Strategies that have been specially created depending on your risk category.
Target Lifestyle Strategy
Risk Category
Your Lifestyle Journey
At 15 yrs + At 10 yrs At 5 yrs Retirement
Cautious
Governed Portfolio 1
Governed Portfolio 2 *
Governed Portfolio 3 *
Target Cash, Target Annuity, Target Drawdown
Moderately Cautious
Governed Portfolio 4
Governed Portfolio 5 *
Governed Portfolio 3 *
Target Cash, Target Annuity, Target Drawdown
Balanced
Governed Portfolio 4
Governed Portfolio 5 *
Governed Portfolio 6 *
Target Cash, Target Annuity, Target Drawdown
Moderately Adventurous
Governed Portfolio 7
Governed Portfolio 5 *
Governed Portfolio 6 *
Target Cash, Target Annuity, Target Drawdown
Adventurous
Governed Portfolio 7
Governed Portfolio 8 *
Governed Portfolio 9 *
Target Cash, Target Annuity, Target Drawdown
* The asset allocation of each Governed Portfolio will depend on what strategy is targeting at retirement. Please refer to the Target Strategy factsheets available on our website at royallondon.com.
Investment returns may fluctuate and are not guaranteed. Prices can go down as well as up and you might not get back the amount you originally invested.
14
Our range of Target Lifestyle Strategies are shown below.
Target Lifestyle Strategies Additional Fund Management Charge
Fund Management Style
Risk Category
Cautious Lifestyle Strategy Nil Active Cautious
Cautious Tracker Lifestyle Strategy Nil Tracker Cautious
Moderately Cautious Lifestyle Strategy Nil Active Moderately Cautious
Moderately Cautious Tracker Lifestyle Strategy Nil Tracker Moderately Cautious
Balanced Lifestyle Strategy Nil Active Balanced
Balanced Tracker Lifestyle Strategy Nil Tracker Balanced
Moderately Adventurous Lifestyle Strategy Nil Active Moderately Adventurous
Moderately Adventurous Tracker Lifestyle Stategy Nil Tracker Moderately Adventurous
Adventurous Lifestyle Strategy Nil Active Adverturous
Adventurous Tracker Lifestyle Strategy Nil Tracker Adventurous
For more information about the Target Lifestyle Strategies please visit royallondon.com/pensioninvestments
Please note that the Target Lifestyle Strategies can target cash, annuity or drawdown at retirement.
If you like the idea of the Target Lifestyle Strategies but want more choice then you might prefer to invest in our Flexible Lifestyle Strategy.
Flexible Lifestyle StrategyThis option allows you to choose which Governed Portfolios to switch into as you get nearer retirement and you can also choose which equity fund to use.
For more information about the Flexible Lifestyle Strategy please visit royallondon.com/pensioninvestments.
Managed Lifestyle Strategy
We also have a traditional lifestyle arrangement that has been designed for a balanced investor. This strategy moves your investment from the Adventurous Managed Fund to the Managed Fund and then the Defensive Managed Fund and comes with ongoing governance.
For more information about the Managed Lifestyle Strategy please visit royallondon.com/pensioninvestments
15
Governed PortfoliosIf you are unsure when you are retiring or are not comfortable investing in a lifestyle strategy, you can invest in any of the nine Governed Portfolios individually. Each comes with ongoing governance and automatic rebalancing to ensure the asset allocation remains aligned to its particular risk attitude and time to retirement.
Governed Portfolios Fund ManagementStyle RiskCategory TimePeriod
Governed Portfolio 1 Active Cautious Long
Governed Portfolio 2 Active Cautious Medium
Governed Portfolio 3 Active Cautious/Moderately Cautious Short
Governed Portfolio 4 Active Moderately Cautious/Balanced Long
Governed Portfolio 5 Active Moderately Cautious/Balanced/Moderately Adventurous Medium
Governed Portfolio 6 Active Balanced/Moderately Adventurous Short
Governed Portfolio 7 Active Moderately Adventurous/Adventurous Long
Governed Portfolio 8 Active Adventurous Medium
Governed Portfolio 9 Active Adventurous Short
Within each Governed Portfolio there is an option to replace the default equity fund.
For more information please visit royallondon.com/pensioninvestments.
Please note that if you choose to invest in either a Governed Portfolio or a Governed Lifestyle this investment choice must apply to all contributions into your plan.
16
The useful definitions are designed to explain more fully the terminology used in the brochure.
Active ManagementActive managers aim to outperform benchmarks by adjusting how much is invested in particular companies and sectors.
BenchmarkA standard against which the performance of a fund can be measured. The benchmark is generally an index or sector average.
Corporate BondsBonds are issued by companies to raise capital to fund their businesses. Bonds are usually tradeable. A bond confers ownership of part of a company’s debt. Returns come from interest payments that bond issuers pay out.
EquitiesAlso known as shares. Individual shareholders own a proportion of a company.
DiversificationThe process of holding a range of investments in order to diversify risk, so that if one investment performs badly, it is compensated by better returns from the remainder of the portfolio.
GiltsThese are bonds issued by the UK Government, to raise money to fund public spending. Also known as Gilt-Edged Stocks.
Index linked giltsGilts where the coupon payments and capital redemption value are linked to the increases in the Retail Price Index. They are designed to give investors protection from inflation.
PortfolioThis can be a mixture of assets of funds. Diversifying your portfolio may help you reduce risk.
Sector averageThe average percentage return for a group of funds with a common theme i.e. European funds, as defined by a regulatory body.
SecuritiesAnother name for shares, equities or bonds.
Trackers (Passive Management)Trackers are funds which aim to follow a benchmark or index. The fund invests in all the companies within the index (or indices) according to their market value weighting.
WeightingsThe proportions in which particular sectors or geographical splits are held within a fund.
USEFULDEFINITIONS
USEFULDEFINITIONS
March 2019 5G2/27
Royal London1 Thistle Street, Edinburgh EH2 1DG
royallondon.com
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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in
England and Wales, company number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL. Royal London Marketing Limited is authorised and regulated by the Financial Conduct Authority and introduces Royal London’s customers to other insurance companies. The firm is on the Financial Services Register, registration
number 302391. Registered in England and Wales company number 4414137. Registered office: 55 Gracechurch Street, London, EC3V 0RL. RL Corporate Pension Services Limited, registered in England and Wales, company number 05817049. Registered office is at 55 Gracechurch Street, London EC3V 0RL.