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JANUARY 2016
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RETIREMENT ACCOUNT YOUR GUIDE TO RETIREMENT ACCOUNT INVESTMENT OPTIONS For existing Lloyds Banking Group pension customers aged 55 and over and applying directly with Scottish Widows
BRAND CHECKED (
OPERATOR CHECK Date
PAGE 1
INTRODUCTION PAGE 2
WHAT ARE THE SCOTTISH WIDOWS INVESTMENT OPTIONS? PAGE 3
HOW DO I DECIDE WHAT’S BEST FOR ME? PAGE 4
INVESTMENT OPTIONS FOR RETIREMENT PLANNING WHAT ARE GOVERNED INVESTMENT STRATEGIES? PAGE 5 THE GOVERNED INVESTMENT STRATEGIES RANGE PAGE 6 LIFESTYLE SWITCHING EXPLAINED PAGE 7 PENSION PORTFOLIO FIVE PAGE 8 WHAT’S MY NEXT MOVE? PAGE 9
INVESTMENT OPTIONS FOR RETIREMENT INCOME WHAT DO I NEED TO THINK ABOUT IF I WANT TO TAKE AN INCOME? PAGE 10 HOW DO I CHOOSE A PENSION PORTFOLIO FUND (OR FUNDS)? PAGE 12 WHAT’S MY NEXT MOVE? PAGE 13
APPENDIX SECTION 1 – SCOTTISH WIDOWS INVESTMENT APPROACHES PAGE 14 SECTION 2 – FUNDS INFORMATION, AIMS AND RISKS PAGE 22 SECTION 3 – CHARGES PAGE 23 SECTION 4 – GOVERNED INVESTMENT STRATEGIES INVESTMENT DETAILS
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Retirement Account Investment Options
INTRODUCTION NEW PENSION FREEDOMS MEAN YOU NOW HAVE MUCH MORE FLEXIBILITY IN RETIREMENT. THIS MEANS YOU MAY BE LOOKING TO TAKE SOME OF YOUR PENSION FUND AS A CASH SUM AND LEAVE THE REST INVESTED, OR PERHAPS TAKE A REGULAR INCOME.
The challenge for you is deciding how to invest this remaining money.
These investments are available to you through the Scottish Widows Retirement Account, which offers both pre retirement (Retirement Planning) and post retirement (Retirement Income) benefits. The investment choices you can access depend on whether you will be coming into Retirement Planning or going straight into Retirement Income. You should read ‘Retirement Account: Your Guide to Retirement Account and accessing your benefits’ (ref no 54901) for more details.
To help you meet this challenge, we have put together a package of carefully selected investment solutions for customers who have decided to access some of their pension. These investment options are explained in this guide. They have been created with the help of industry experts, and aim to help you achieve what you want without taking more risk than you’re comfortable with.
Everyone’s circumstances and needs are different. We cannot provide investment advice. This guide is designed to give you relevant information to help you make an informed decision, but does not constitute advice.
As well as the investment options detailed in this guide, you may also select from other funds from the Scottish Widows pension fund range and Fixed Term Cash Deposits: please contact us for more information.
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Retirement Account Investment Options
WHAT ARE THE SCOTTISH WIDOWS INVESTMENT OPTIONS? The options we are offering are built around our Scottish Widows ‘Pension Portfolio’ pension funds. Most of our Pension Portfolio funds are ‘multi-asset funds’, which means they invest in more than one type of investment. They are designed to aim for different investment returns, but this means they also take different amounts of investment risk. Most of these funds invest in stocks and shares (also known as equities) and fixed interest investments (also known as bonds). If a fund invests in equities, it means the fund is buying a small part of a company, usually one that is listed on a stock exchange. Equities rise and fall in value, and those who own them (or funds that invest in them) can also receive a slice of the company’s profits in the form of dividend payments. Bonds are issued by a government or company to borrow money. The bond is bought by investors, who will normally receive annual interest payments and be repaid in full at a set later date. Bonds are generally regarded as less risky than equities, but can still rise and fall in value. Our Pension Portfolio Five pension fund is different, in that it invests mainly in ‘cash’ and ‘near-cash’ investments. It is a low risk option in comparison to the other investment solutions in this guide, but this also means it has significantly less potential for growth. Please see the page 7 for full details.
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Potential Investment Return
The diagram below gives an indication of the general risk and reward for different types of investments. Within each investment type, the level of risk can vary depending on the specific investment you choose to invest in.
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Please remember that with investments like these there are no guarantees, and there is a risk that the value of your plan could go down as well as up, depending on investment performance (and currency exchange rates where a fund invests overseas), and may fall below the amount paid in. In general, the more equities a fund holds, typically the more that fund could go up and down (also known as volatility). So, while such a fund may have more growth potential, equally it has a higher chance of losing money. With bonds it’s likely that any ups and downs will be smaller, and therefore it’s likely that performance should be steadier. Most investors will want to hold investments in both, to potentially benefit from any significant growth through equities but also to have the less volatile performance that bonds generally provide. This is why we believe for customers looking to stay invested and take an income in retirement, multi-asset funds like our Pension Portfolio Funds could be suitable investment choices.
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Retirement Account Investment Options
HOW DO I DECIDE WHAT’S BEST FOR ME?
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After working hard to build up your pension savings, you will be faced with a potentially tricky challenge – how do you provide for your retirement and how long will your money last.
In short, for most people it will be a bit of a balancing act. But our investment options are designed to help you find something that is right for you. The investment choices you can access through your Retirement Account depend on whether you will be coming into Retirement Planning or going straight into Retirement Income. In summary:
There are literally hundreds of investment options available to UK pension investors, so we have put together a package of investment options which we believe provide the sort of solutions that could meet your needs, including taking regular income withdrawals over an extended period or taking cash lump sums over a relatively short timescale.
From age 55: • From Retirement Planning, you can take one or more Partial Pension Encashments and keep the remaining amount invested, or purchase an annuity. Each time you take a Partial Pension Encashment, 25% is tax-free with the remainder being taxable. If you purchase an annuity, there is an option to use 25% of the value used to provide a tax-free lump sum. Annuity payments will be taxable.
Please be aware that, as with most investments, there are no guarantees. Choosing suitable investments and levels of income can be complex, and we recommend that you seek professional financial advice. When thinking about what you want to do with your pension pot, we believe there are some key questions:
• If you want a lump sum that is all tax-free (this will be 25% of your Account value), you will need to go into Retirement Income. The remaining amount can then remain invested and be used to provide a regular income or one-off lump sums, or purchase an annuity, which will all be subject to tax.
1. Do you want to take your money as a one-off cash
payment (or a number of cash payments)? 2. Do you want to take a regular income? If so: a) What level of income do you want to take?
Please read ‘Retirement Account: your guide to Retirement Account and accessing your benefits’ (ref no 54901) for more details.
b) How long do you need this income to last? 3. How much risk are you comfortable with?
Everybody’s different and your circumstances may well change over time, so there are no hard and fast rules. But here are some further questions that you may need to address:
We will now look at the investment options in more detail: 1. Investment options for Retirement Planning. 2. Investment options for Retirement Income.
• Do you have other investments or savings to live on? • What would happen if your pension pot dropped dramatically in value? • Would you be able to maintain your current lifestyle if your money ran out in 5 or 10 years? • How long do you want to hold the investment for? Are you happy to take a long-term view and not worry about short-term dips in your savings, or are you uncomfortable when markets become volatile? • Are you comfortable with taking some risk to potentially increase growth, or would you rather minimise the risk as much as you can?
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Retirement Account Investment Options
INVESTMENT OPTIONS FOR RETIREMENT PLANNING
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If you are taking a Partial Pension Encashment, you will move into Retirement Account at the Retirement Planning stage. This will mean you can access our Governed Investment Strategies, which invest in a selection of our Pension Portfolio Funds and some specialist lower-risk funds.
Once you’ve decided on a risk category that you’re comfortable with and selected a retirement outcome, you can feel reassured we will actively be looking after your investment with the following features: • Ongoing governance –– We have put in place an ongoing governance process, with input from independent investment specialists. We regularly check to ensure that the mix of assets (such as bonds and shares) in each strategy continues to be appropriate for the strategy’s aims and risks.
WHAT ARE GOVERNED INVESTMENT STRATEGIES? Governed Investment Strategies are a blend of funds that offer an investment selection appropriate to different levels of investment risk.
• Automatic Rebalancing –– Before the Lifestyle Switching phase begins (see page 6), each quarter we will automatically rebalance the investments to maintain the selected investment split in each risk category. This means we will automatically adjust any movements that have occurred in the fund holdings and maintain the asset mix appropriate to the risk category chosen.
The Governed Investment Strategies are largely made up of the Pension Portfolio Funds, and are regularly reviewed and adjusted to make sure the investments continue to provide the appropriate balance between risk and reward. The Governed Investment Strategies are designed to make it easier for you to invest in a mix of funds that suits your attitude to risk and the length of time until your selected retirement date, without the need to choose individual funds.
If your circumstances change you can alter your investment choice at any time while you are in Retirement Planning. Please note that you can only invest in one Governed Investment Strategy at a time, and 100% of your investment must be invested in that Strategy.
We understand that our customers have different attitudes to risk. So, we offer three risk categories – Cautious, Balanced and Adventurous – each with a different combination of investment risk and reward, designed to match different customers’ attitudes to risk.
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In addition we gradually move your Account into lower risk investments as you approach your selected retirement date. Although this reduces the growth potential of your Account, it aims to help protect its value as you near your selected retirement date. And then five years from your selected retirement date, we will start to tailor your investment in one of three ways (or ‘retirement outcomes’). These reflect whether you’ll want to purchase an annuity, keep your pension invested (including taking an income), or fully encash your pension pot once you reach your selected retirement date. We realise that some customers may not be sure how they will want to provide for their retirement when they first take out a Retirement Account, so you can change towards a different retirement outcome (or to a different risk category) if your plans and objectives change. It is important to review your situation and investment selections regularly.
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THE GOVERNED INVESTMENT STRATEGIES RANGE Following changes introduced in April 2015, investors in UK pensions now have three ways to use their pension pot at age 55 or above to provide for their retirement. You could choose from the following: 1. Annuity Purchase – buying one or more annuities to provide a regular and secure income for life. 2. Pension Encashment – taking all (or part of) a pension pot as a cash lump sum, 25% of which will be tax-free with the
remainder subject to tax. 3. Flexible Access – adopting a flexible approach by using a suitable product like Retirement Account to keep a pension
pot invested and then taking income as it’s needed. Our Governed Investment Strategies take account of the retirement choices available to you. We offer three different ‘retirement outcomes’, designed to prepare your pension investment in its last five years for whichever retirement choice you expect to make. This means that you have two selections to make when you make your investment choice: • The level of risk you are comfortable with –– Cautious –– Balanced –– Adventurous. • The type of retirement outcome you are likely to want when you retire –– Targeting Annuity –– Targeting Encashment –– Targeting Flexible Access Here are our Governed Investment Strategies:
INCREASING RISK CAUTIOUS RISK CATEGORY
BALANCED RISK CATEGORY
ADVENTUROUS RISK CATEGORY
Cautious (Targeting Annuity)
Balanced (Targeting Annuity)
Adventurous (Targeting Annuity)
Cautious (Targeting Encashment)
Balanced (Targeting Encashment)
Adventurous (Targeting Encashment)
Cautious (Targeting Flexible Access)
Balanced (Targeting Flexible Access)
Adventurous (Targeting Flexible Access)
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Retirement Account Investment Options
LIFESTYLE SWITCHING EXPLAINED Our Governed Investment Strategy risk categories all work in a similar way. The difference between them is how much investment risk they take in trying to help your pension fund grow: Adventurous takes the most risk, Cautious takes the least. In the earlier years, more of your money is invested in equities to increase the potential for growth. We then begin to gradually reduce your exposure to risk once you are 15 years from your selected retirement date, because this aims to help protect what you’ve built up if there are any market downturns. This ‘Lifestyle Switching’ into lower risk investments occurs gradually on a monthly basis until your selected retirement date. We don’t actually invest directly in specific assets, e.g. UK equities and bonds. Instead we invest in Pension Portfolio Funds and other funds from the Scottish Widows range that have the combination of asset classes that deliver the required mix of investment risk. Until five years from retirement the ‘investment glidepath’ for your selected risk category is the same, regardless of which retirement outcome you are targeting. In the final five years leading up to your selected retirement date your investment will gradually move into one of three carefully selected packages of lower-risk investments, tailored to suit whichever retirement outcome you have chosen. The graph below is meant to demonstrate how this works, showing a typical Governed Investment Strategy ‘investment glidepath’.
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If you are less than 15 years from your selected retirement date when you start investing in a Governed Investment Strategy, you will join the ‘investment glidepath’ at the relevant point. This will be based on the length of time until your selected retirement date. So, if you are 55 and you have selected a retirement date of age 65, you would join the investment glidepath at the ‘ten years to go’ point in the graph below.
HOW A GOVERNED INVESTMENT STRATEGY ‘INVESTMENT GLIDEPATH’ WORKS
Level of Risk
5 years from retirement – the glidepath diverges 15 years from retirement – level of risk starts to fall
Up to 5 years from retirement – the glidepath is the same, regardless of which retirement outcome has been chosen 15
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Retirement outcomes Targeting Flexible Access Targeting Annuity Targeting Encashment Please note that this graph indicates how the overall level of risk changes at different stages, not the likely performance of an investment. Our Governed Investment Strategies are well established investment solutions which have been carefully updated to allow our customers to benefit from the greater flexibility now available.
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PENSION PORTFOLIO FIVE If you decide not to select one of our Governed Investment Strategies, we also offer our Pension Portfolio Five. This is a is a low risk option compared to other investment solutions in this guide, but this also means it has significantly less potential for growth. It is designed as a low-risk fund generally for the short term, rather than a longer-term investment solution. Please note that if you remain in Pension Portfolio Five, Scottish Widows will contact you up to four times over the first six months of your Retirement Account to discuss alternative investments. Here is a more detailed description of the fund, but please also read Pension Portfolio Five’s aim and risks on page 15 in the appendix, and details of charges on page 22. PENSION PORTFOLIO 5
Pension Portfolio Five invests in ‘Money Market’ assets, also referred to as ‘cash’ and ‘near-cash’ investments*. It has been designed as a possible investment solution for investors who only want to remain invested over the short term and are looking to take a number of cash payments over two years or so (possibly to optimise tax benefits through using personal allowances or remaining in lower tax bands). This means this fund could suit those who are planning on keeping their pension pot invested for only a couple of years and would prefer not to take a significant level of risk. It’s important to note that keeping all your money in this fund for say five or more years would significantly increase the chances that you will see its real value drop over time. By real value we mean your spending power, as this fund is not designed to keep pace with price rises caused by inflation. For this reason, this fund might not be an appropriate option for customers investing over the longer term, especially those looking to withdraw a regular, sustainable income over the course of their retirement.
Scottish Widows Investment Approach ** CAUTIOUS
* Pension Portfolio Five invests in ‘cash’ and ‘near-cash’ investments. In this case, ‘cash’ is not the same thing as the money in a normal bank account. A ‘cash fund’ may hold different types of ‘cash-like’ investments that have similar characteristics to bank deposits – such as a fixed rate of interest, quick access and low risk of capital loss. Cash funds mainly hold investments that mature (i.e. pay out) in the short term (weeks), but can hold assets with slightly longer periods to maturity. A longer period to maturity often means the fund manager is trying to earn a slightly higher return by taking a little more risk, which leads to the potential for slightly higher returns and risks than a bank deposit account. The fund will fluctuate in value because of, among other things, charges and possible falls in interest payments, so investors can get back less than they invest. There is also the risk that this type of fund will not keep pace with inflation, which would mean prices in shops rise quicker than your investment increases in value, so its spending power is reduced. Please remember that, whichever fund you are investing in, the value of your investment can go down as well as up, and could fall below the amount(s) paid in. This also applies to funds which invest in ‘cash’ and ‘near-cash’ investments, as these can fluctuate more than a customer might expect. Therefore these funds do not guarantee a positive return, nor do they provide complete protection for your investment. ** Please see more on the Scottish Widows Investment Approaches in the appendix on page 13.
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Retirement Account Investment Options
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Please note that if you decide to:
WHAT’S MY NEXT MOVE?
• change your selected retirement date,
We hope this guide helps you to make an investment selection that suits your circumstances and meets your needs. Please see ‘Retirement Account: Your Guide to Retirement Account and accessing your benefits’ (ref no 54901) for more information on the Scottish Widows Retirement Account.
• buy an annuity, • move any amount of your pension to Retirement Income, or • transfer out part of the value of your Account we will switch off the Governed Investment Strategy and your Account will remain invested in the underlying funds it’s invested in at that time. However, you can ask to switch it back on, provided you have not started Retirement Income.
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If you move into Retirement Income and retain any monies in the Retirement Planning side of your plan, any ongoing contributions will be invested proportionately in the funds you were invested in when GIS was switched off.
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For more details of the investments and funds used, please see the ‘Governed Investment Strategies investment details’ section on page 23 in the appendix. Please also see page 14 of the appendix for the funds’ aims and risks, and page 22 for information on charges.
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Retirement Account Investment Options
INVESTMENT OPTIONS FOR RETIREMENT INCOME As mentioned earlier, the investment choices you can access through the Scottish Widows Retirement Account depend on whether you will be coming into Retirement Planning or Retirement Income. If you are accessing all of your tax-free cash but leaving the remainder invested, you should be coming into Retirement Account at the Retirement Income stage.
It’s very important for you to assess your own situation before making any decisions. However, our research with Moody’s indicated the following: 1. Our analysis suggested that holding less than 30%
of your investment in equities could jeopardise the chances of sustaining a set income for ten years or more in retirement. Whilst equities are more risky than some other assets, our research indicated that investing a proportion of a pension pot in equities may be required to help deliver investment returns. This helped us to identify the asset allocations we are offering for customers who want to take a regular income.
WHAT DO I NEED TO THINK ABOUT IF I WANT TO TAKE AN INCOME? If you are looking to take an income and go into Retirement Income, you need to consider a number of factors. It’s a very fine balancing act, and it’s important that you understand the impact of taking income from your investment. Put simply, if you’re taking an income and you take too much too quickly, you may run out of money.
2. Our analysis found that withdrawing a relatively low
level of income (somewhere in the region of 3 to 4% of a total pension pot each year) from an investment in a lower risk fund may be the most reliable way to withdraw a regular and sustainable income up to the age of 85. However, this approach would lower the potential for any significant investment growth.
Please also remember that the funds we offer are investments and they are not guaranteed. If you take too much risk your investment could fall significantly in value, which would reduce its ability to provide an income.
3. If you want to withdraw 5% of your initial pension
pot each year, our analysis with Moody’s suggests it becomes slightly more likely that you might be able to sustain this level of income to age 85 if you invest in one of the funds that takes more risk. But it is important to realise that taking more risk means exactly what it says: if you expose your investment to greater risk, you also increase the potential downside if things go badly.
Everyone’s circumstances and needs are different. We cannot provide investment advice, but we can provide some general information for you, based on analysis of our multi-asset Pension Portfolio funds by us and independent experts Moody’s Analytics. Please note that for our analysis we needed to use a specific term, so we used the 20 year period between 65 and 85. Our analysis used a number of specific scenarios and assumptions, which are summarised in the bullet points on page 10.
You should bear in mind that high levels of income may not be sustainable and in some cases could reduce the value of your pension pot to zero. You should consider the impact this might have on your overall income in retirement. It’s also important to note that if you don’t feel comfortable with the prospect of managing a pension pot that changes in value to provide an income, you may wish to consider other ways to provide a retirement income. We would recommend you discuss your options with an adviser. The information above summarises post-retirement analysis conducted by Moody’s Analytics for Scottish Widows in 2014.
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Retirement Account Investment Options
The assumptions made were:
The analysis and assumptions are included as general information only and does not constitute advice. Customers should be aware that investment markets and conditions can change rapidly and as such the views expressed should not be taken as a statement of fact, nor should customers rely on these views when making investment decisions. Past performance is not a reliable indicator of future results.
• The customer would make a 25% tax-free cash withdrawal at age 65. • The balance of the pension pot would then be invested throughout retirement to age 85. • The customer would make fixed annual withdrawals calculated as a proportion of their pension pot at retirement.
Your own situation and attitude to risk will help you determine what is right for you, but we always recommend that you seek professional financial advice to ensure you fully understand the options and how long you will need your income to last for. It is likely that the sustainability of any income you take will depend on the choices you make, such as the level of income you withdraw and the funds you choose.
• The customer would then arrange a secure income by using their remaining pension pot to purchase an annuity at age 85, at prevailing rates. • The fund’s returns are gross (in other words there were no fund charges or product charges taken into account) and withdrawals are level (so are not rising with inflation).
HOW DO I CHOOSE A PENSION PORTFOLIO FUND (OR FUNDS)? For Retirement Income customers, we offer a range of five Pension Portfolio Funds. Pension Portfolio Funds A,B,C and Four are all blends of equities and bonds in different proportions. Pension Portfolio Five is a lower risk fund investing in ‘Money Market’ assets. These funds are explained in detail in the following pages. Here is our package of Retirement Income funds in ascending order of risk and potential return: PENSION PORTFOLIO A
Potential for Growth
PENSION PORTFOLIO B PENSION PORTFOLIO 4 40%
PENSION PORTFOLIO C PENSION PORTFOLIO 5
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Retirement Account Investment Options
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Pension Portfolio Five invests in ‘Money Market’ assets, also referred to as ‘cash’ and ‘near-cash’ investments*. It has been designed as a possible investment solution for investors who only want to remain invested over the short term and are looking to take a number of cash payments over two years or so (possibly to optimise tax benefits through using personal allowances or remaining in lower tax bands). This means this fund could suit those who are planning on keeping their pension pot invested for only a couple of years and would prefer not to take a significant level of risk. It’s important to note that keeping all your money in this fund for say five or more years would significantly increase the chances that you will see its real value drop over time. By real value we mean your spending power, as this fund is not designed to keep pace with price rises caused by inflation. For this reason, this fund might not be an appropriate option for customers investing over the longer term, especially those looking to withdraw a regular, sustainable income over the course of their retirement.
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Scottish Widows Investment Approach ** CAUTIOUS
* Pension Portfolio Five invests in ‘cash’ and ‘near-cash’ investments. In this case, ‘cash’ is not the same thing as the money in a normal bank account. A ‘cash fund’ may hold different types of ‘cash-like’ investments that have similar characteristics to bank deposits – such as a fixed rate of interest, quick access and low risk of capital loss. Cash funds mainly hold investments that mature (i.e. pay out) in the short term (weeks), but can hold assets with slightly longer periods to maturity. A longer period to maturity often means the fund manager is trying to earn a slightly higher return by taking a little more risk, which leads to the potential for slightly higher returns and risks than a bank deposit account. The fund will fluctuate in value because of, among other things, charges and possible falls in interest payments, so investors can get back less than they invest. There is also the risk that this type of fund will not keep pace with inflation, which would mean prices in shops rise quicker than your investment increases in value, so its spending power is reduced. Please remember that, whichever fund you are investing in, the value of your investment can go down as well as up, and could fall below the amount(s) paid in. This also applies to funds which invest in ‘cash’ and ‘near-cash’ investments, as these can fluctuate more than a customer might expect. Therefore these funds do not guarantee a positive return, nor do they provide complete protection for your investment. ** Please see more on the Scottish Widows Investment Approaches in the appendix on page 13. Please see page 18 in this guide for details of the Fund’s aim and investment risks. Please also see page 22 for details of charges and page 13 for more information about the Scottish Widows Investment Approaches. Here are the multi-asset Pension Portfolio Funds described in turn: PENSION PORTFOLIO C 30% 70%
Pension Portfolio C is a higher risk fund than Pension Portfolio Five, but it is the most cautious of the multi-asset funds, with 70% invested in bonds. It is likely that an investment in this fund will move up and down less than in funds with more equities, but this means that the chances of your investment growing significantly are also a lot less, even when the stockmarket is rising strongly. The overall risk level is relatively low.
Scottish Widows Investment Approach BALANCED
Please see page 19 in this guide for details of the Fund’s aim and investment risks. Please also see page 22 for details of charges and page 13 for more information about the Scottish Widows Investment Approaches.
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Retirement Account Investment Options
PENSION PORTFOLIO 4 40% 60%
Pension Portfolio Four is 40% equities, so it has been designed to be slightly more risky than Pension Portfolio C, and slightly more cautious than Pension Portfolios A or B. This means the performance should be less volatile than A or B, but it is less likely that the fund will deliver significant growth. It is likely that this fund will appeal to customers who are comfortable with some risk, but who will prioritise the potential for less volatile returns above the chances of their investment growing significantly.
Scottish Widows Investment Approach BALANCED
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Please see page 17 in this guide for details of the Fund’s aim and investment risks.
SEC
Please also see page 22 for details of charges and page 13 for more information about the Scottish Widows Investment Approaches. PENSION PORTFOLIO B
50%
Pension Portfolio B has a 50/50 mix of equities and bonds, so we invest more money in equities and less in bonds than Pension Portfolio Four. This means the potential for growth is increased, but that also means anyone investing in this fund 50% should be comfortable with slightly more risk. In comparison to the funds with more invested in bonds, there is more chance that the value will move up and down. But this fund is designed to be less affected by market volatility than Pension Portfolio A.
Scottish Widows Investment Approach BALANCED
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Please see page 20 in this guide for details of the Fund’s aim and investment risks. Please also see page 22 for details of charges and page 13 for more information about the Scottish Widows Investment Approaches. PENSION PORTFOLIO A
60%
Pension Portfolio A is the most risky of these funds: it’s been designed with 60% equity content, so the majority of your money will be invested in equities. This means there 40% is a greater risk of the value moving up and down. There is also a greater potential for growth. Therefore this fund may suit those who are relatively comfortable with risk and volatility, and wish to increase the chances of their pension pot growing. However this also increases the chances that their pot size could reduce, which would lower their potential income and ultimately mean it could run out if their investments underperform or experience significant volatility.
Scottish Widows Investment Approach PROGRESSIVE
Please see page 20 in this guide for details of the Fund’s aim and specific investment risks. Please also see page 22 for details of charges and page 13 for more information about the Scottish Widows Investment Approaches. The value of an investment is not guaranteed and can go up and down depending on investment performance (and currency exchange rates where a fund invests overseas) and could fall below amounts paid in.
WHAT’S MY NEXT MOVE? We hope this guide helps you to make a selection from our Pension Portfolio fund range that suits your circumstances and meets your needs if you are in the Retirement Income stage. Please see ‘Retirement Account: your guide to Retirement Account and accessing your benefits’ (ref no 54901) for more information on the Scottish Widows Retirement Account.
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Retirement Account Investment Options
APPENDIX
h
aches.
h
SECTION 1 – SCOTTISH WIDOWS INVESTMENT APPROACHES While there are a number of ways to evaluate risk, Scottish Widows uses the following definitions to help you decide on an appropriate investment approach when choosing a pension portfolio fund.
SECURE
CAUTIOUS
BALANCED
PROGRESSIVE
ADVENTUROUS
SPECIALIST
These investments provide safety to the amount invested and can be expected to offer relatively low growth over the medium to longterm. They cannot fall in actual value, but can fall in ‘real’ value due to the effects of inflation.
These investments are expected to have a relatively modest risk to the capital value and/ or income. They have the potential to provide income, and/or, over the medium to longterm, relatively modest capital growth. The capital value may fluctuate, although some products may offer an element of capital protection.
These investments carry a risk of loss to capital value but have the potential for capital growth and/or income over the medium to long-term. Typically they do not have any guarantees and will fluctuate in capital value.
These investments are expected to have a relatively significant risk of loss to capital value, but with the potential of relatively more capital growth over the medium to long-term. They do not offer any guarantees and will fluctuate in capital value.
These investments carry a relatively much higher risk of capital loss but with the potential for relatively higher capital growth over the medium to longterm. They may be subject to a considerable level of fluctuation in capital value. They do not offer any guarantees.
These investments carry a very high risk of capital loss, but with the potential for a higher return over the long-term. They are very volatile and are only suitable for clients who can afford to, and are prepared to, risk the entire capital value. They do not offer any guarantees.
SECURE
CAUTIOUS
BALANCED
PROGRESSIVE
ADVENTUROUS
SPECIALIST
aches.
h
INCREASING RISK We categorise investment periods as follows: Short-term: up to 5 years, Medium-term: between 5 and 10 years, Long-term: over 10 years. Please be aware that we review these investment approach definitions and the investment approach for our funds regularly, so these may change. You can find information on current investment approaches and notification of any changes at www.scottishwidows.co.uk/investmentapproaches
aches.
ency
nd
13
Retirement Account Investment Options
SECTION 2 – FUNDS INFORMATION, AIMS AND RISKS
unable to return the fund’s assets and if this happens, the other assets would be sold. If the sale proceeds and any other payments due to the fund were not enough to replace the assets lent, the fund would go down in value.
The Scottish Widows unit-linked funds aim to provide long-term growth in the price of units. This is generated by a combination of capital growth as well as income that is added to the fund.
The individual aims of the Scottish Widows pension funds covered in this guide are shown on the following pages. There are charges associated with investing in the funds. The charges can be different for different funds and can change. For details of the charges, please see page 22 of this guide.
A proportion of each unit-linked fund may be held in cash to provide liquidity or while awaiting suitable investments. The Scottish Widows unit-linked funds can invest in other unit-linked funds or in collective investment schemes (for example open-ended investment companies (OEICs) or unit trusts) to achieve exposure to meet the stated fund aims.
Full terms and conditions are available on request from Scottish Widows. Charges, terms and limits may change. The value of an investment is not guaranteed and can go up and down depending on investment performance (and currency exchange rates where a fund invests overseas), and you may get back less than you invested.
Some funds may use derivatives (contracts which have a value linked to the price of another asset) to help reduce risk or reduce cost, or to help generate extra capital or income. This is normally referred to as Efficient Portfolio Management (EPM). It is not intended that this will cause the risk profile of these funds to change, but using derivatives might not achieve the described outcomes and may result in greater fluctuations in the values of these funds.
There may be restrictions on the amount you can invest in certain funds. Please contact us for details of any restrictions that apply. We may change the selection of funds that we make available. We reserve the right to delay a request to sell your units in certain circumstances. The period of delay will not be more than six months if the units to be cancelled include units which relate to a fund which holds directly or indirectly assets in the form of real or heritable property. It will not be more than one month in all other cases. This may happen in exceptional circumstances where, for example, there is an unusually high demand for units to be cashed in. For more details please see the relevant Policy Provisions for your investment with us.
The funds may engage in ‘securities lending’. This is where a fund lends out some of its assets with an agreement that the borrower will return them after a limited period. The borrower pays a fee which is added to the fund after the costs associated with the lending have been deducted. The fund receives other assets and possibly a cash payment as security during the lending period for the assets lent. There is a risk that the borrower may be
Where any of the following general risks apply to a fund, they will be indicated beside the aims of the fund shown in the following table. Any specific risks associated with a fund will also be shown here. EM
EQ
FI
OS FIG
This fund invests in emerging markets so might invest in stockmarkets which are generally less well regulated than those in the UK. This may result in a greater risk that the value of the units might go down. The investments in these markets might also be bought and sold infrequently therefore resulting in large changes in their prices. This fund invests in company shares (often referred to as ‘equities’). Investing in company shares generally has the potential for higher capital growth over the longer term than investing in say, corporate bonds and other fixed interest securities. However there might be considerable fluctuations in equity prices and there is a greater risk that the value of the investment will fall. Some of the securities in which this fund invests might default or their credit rating might fall. The value of those investments will usually fall should an issuer default or receive a reduced credit rating. Fluctuations in interest rates are likely to affect the value of the securities held by the fund. If long-term interest rates rise, the value of the units is likely to fall and vice versa. Exchange rate changes might cause the value of any overseas investment to go up or down. This fund may invest more than 35% in government or public securities issued by a single issuer. There could be a risk, for example, that they can’t repay the amount borrowed. If they don’t repay, the value of the fund will fall.
14
PENS
Fund
Scott Portf Fund
Retirement Account Investment Options
FUNDS AVAILABLE IN RETIREMENT PLANNING
s, and h to alue.
funds ges.
funds. d can 22 of
from ange.
an go e (and seas),
nvest y n of
units ot be clude
perty. s. re, units evant
PENSION PORTFOLIO FIVE Fund
Aim
Risk
Scottish Widows Pension The Fund aims to provide high levels of capital Portfolio Five Pension security by investing mainly in high quality Fund short to medium term securities. These include fixed or floating rate debt instruments such as deposits, commercial paper, medium term notes, asset backed securities and bonds.
Specific risk – Some of the securities in which this Fund invests might default or their credit rating might fall. The value of those investments will usually fall should an issuer default or receive a reduced credit rating. Fluctuations in interest rates are likely to affect the value of the The exposures may be gained through holdings securities held by the Fund. If interest in the following funds: rates rise, the value of the units is likely Aberdeen Sterling Investment Cash Fund to fall and vice versa. The Fund therefore Aberdeen Global Liquidity Fund – Sterling carries a relatively modest risk to capital. Sub Fund The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, though the Fund will continue to invest mainly in short to medium term securities.
wn in
ed ments ces.
is a
n the
a
15
Retirement Account Investment Options
UNDERLYING FUNDS USED IN GOVERNED INVESTMENT STRATEGIES Our Pension Portfolio and investment funds aim to achieve results that are suited to the Governed Investment Strategy chosen and your selected retirement outcome. Fund
Aim
Scottish Widows Pension Portfolio One Pension Fund
The Fund aims to provide long-term growth by investing in UK and overseas equities.
Fund
Scott Portf
Risks EQ
OS
EM
EQ
OS
EM
The underlying funds will use full replication or sampling techniques to track an index. The exposures are currently gained through holdings in the following funds: SSgA UK Equity Index Fund SSgA Europe ex UK Equity Index Fund SSgA North America Equity Index Fund SSgA Japan Equity Index Fund SSgA Asia Pacific ex Japan Equity Index Fund SSgA Emerging Markets Equity Index Fund The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, though the Fund will continue to invest predominantly in equities. Scottish Widows Pension Portfolio Two Pension Fund
The Fund aims to provide long-term growth by investing predominantly in UK and overseas equities. It also has some exposure to bonds. The underlying funds will use full replication or sampling techniques to track an index. The exposures are currently gained through holdings in the following funds: SSgA UK Equity Index Fund SSgA Europe ex UK Equity Index Fund SSgA North America Equity Index Fund SSgA Japan Equity Index Fund SSgA Asia Pacific ex Japan Equity Index Fund SSgA Emerging Markets Equity Index Fund SWUTM Corporate Bond Tracker Fund The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, though the Fund will continue to invest predominantly in equities.
16
FI
Scott Portf
gy
Retirement Account Investment Options
Fund
Aim
Risks
Scottish Widows Pension Portfolio Three Pension Fund
The Fund aims to provide long-term growth by investing primarily in a range of UK and overseas equities, but with a significant proportion in fixed interest securities and a small amount of index-linked securities.
EQ
OS
FI
EQ
OS
FI
The underlying funds will use full replication or sampling techniques to track an index. The exposures are currently gained through holdings in the following funds: SSgA UK Equity Index Fund SSgA Europe ex UK Equity Index Fund SSgA North America Equity Index Fund SSgA Japan Equity Index Fund SSgA Asia Pacific ex Japan Equity Index Fund SSgA Emerging Markets Equity Index Fund SWUTM Corporate Bond Tracker Fund SWUTM Index Linked Tracker Fund The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, though the Fund will continue to invest generally in equities. Scottish Widows Pension Portfolio Four Pension Fund
The Fund aims to provide long-term growth by investing mainly in UK and overseas equities and fixed interest securities. It also has some exposure to index-linked securities. The underlying funds will use full replication or sampling techniques to track an index. The exposures are currently gained through holdings in the following funds: SSgA UK Equity Index Fund SSgA Europe ex UK Equity Index Fund SSgA North America Equity Index Fund SSgA Japan Equity Index Fund SSgA Asia Pacific ex Japan Equity Index Fund SWUTM Corporate Bond Tracker Fund SWUTM Indexed Linked Tracker Fund The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could at times invest more or less in equities than fixed interest securities. It could also be invested in different funds and additional asset types, which would reduce the level of investment in equities and/or fixed interest securities.
17
Retirement Account Investment Options
Fund
Aim
Risks
Scottish Widows Pension Portfolio Five Pension Fund
The Fund aims to provide high levels of capital security by investing mainly in high quality short to medium term securities. These include fixed or floating rate debt instruments such as deposits, commercial paper, medium term notes, asset backed securities and bonds.
Specific risk Some of the securities in which this Fund invests might default or their credit rating might fall. The value of those investments will usually fall should an issuer default or receive a reduced credit rating. Fluctuations in interest rates are likely to affect the value of the securities held by the Fund. If interest rates rise, the value of the units is likely to fall and vice versa. The Fund therefore carries a relatively modest risk to capital.
The exposures may be gained through holdings in the following funds: Aberdeen Sterling Investment Cash Fund Aberdeen Global Liquidity Fund – Sterling Sub Fund The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, though the Fund will continue to invest mainly in short to medium term securities. Scottish Widows Pension Protector Fund
Scottish Widows Cash Fund
The Fund may be suitable for investors approaching retirement who intend to purchase a conventional pension annuity. The Fund invests mainly in long-dated UK fixed interest securities. The prices of these are one of the key factors affecting the cost of buying a pension and so any investment in the Fund should rise and fall broadly in line with changes in the cost of buying such a pension in retirement. The Fund does not provide any guarantee of the level of pension in retirement or the cost of buying that pension. It may not be effective for those who intend to buy an inflation linked pension and does not provide protection against changes in the cost of buying a pension that arise from changes in life expectancy. The Fund aims to provide long-term growth consistent with high levels of capital security by investing mainly in short-term securities.
18
FI
RETI
Fund
Scott Portf
FIG
Scott Portf
Specific risk The Fund can invest in highquality, mostly short-term debt instruments such as fixed deposits, certificates of deposit, commercial paper and floating rate notes. It carries a relatively modest risk to capital.
n
edit ue l uer ced ns y
Retirement Account Investment Options
RETIREMENT INCOME FUNDS Fund
Aim
Scottish Widows Pension Portfolio C Pension Fund
The Fund aims to provide long term growth by investing primarily in fixed interest securities, but with a significant proportion in UK and overseas equities.
EQ
OS
FI
EQ
OS
FI
The underlying funds will use full replication or sampling techniques to track an index. The exposures are currently gained through holdings in the following funds: SSgA UK Equity Index Fund SSgA Europe ex UK Equity Index Fund SSgA North America Equity Index Fund SSgA Japan Equity Index Fund SSgA Asia Pacific ex Japan Equity Index Fund SWUTM Corporate Bond Tracker Fund
nd.
y to Fund vely
ighm s es of er t est
Risks
The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, though the Fund will continue to invest primarily in fixed interest securities. Scottish Widows Pension Portfolio Four Pension Fund
The Fund aims to provide long-term growth by investing mainly in UK and overseas equities and fixed interest securities. It also has some exposure to index-linked securities. The underlying funds will use full replication or sampling techniques to track an index. The exposures are currently gained through holdings in the following funds: SSgA UK Equity Index Fund SSgA Europe ex UK Equity Index Fund SSgA North America Equity Index Fund SSgA Japan Equity Index Fund SSgA Asia Pacific ex Japan Equity Index Fund SWUTM Corporate Bond Tracker Fund SWUTM Indexed Linked Tracker Fund The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could at times invest more or less in equities than fixed interest securities. It could also be invested in different funds and additional asset types, which would reduce the level of investment in equities and/or fixed interest securities.
19
Retirement Account Investment Options
Fund
Aim
Scottish Widows Pension Portfolio B Pension Fund
The Fund aims to provide long-term growth by investing in a balance of UK and overseas equities and fixed interest securities.
PENS
Risks EQ
OS
FI
Scott Portf Fund
The underlying funds will use full replication or sampling techniques to track an index. The exposures are currently gained through holdings in the following funds: SSgA UK Equity Index Fund SSgA Europe ex UK Equity Index Fund SSgA North America Equity Index Fund SSgA Japan Equity Index Fund SSgA Asia Pacific ex Japan Equity Index Fund SSgA Emerging Markets Equity Index Fund SWUTM Corporate Bond Tracker Fund The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, though the Fund will continue to invest in a balance of equities and fixed interest securities.
Fund
Aim
Scottish Widows Pension Portfolio A Pension Fund
The Fund aims to provide long-term growth by investing generally in a range of UK and overseas equities, as well as a proportion in fixed interest securities.
Risks
The underlying funds will use full replication or sampling techniques to track an index. The exposures are currently gained through holdings in the following funds: SSgA UK Equity Index Fund SSgA Europe ex UK Equity Index Fund SSgA North America Equity Index Fund SSgA Japan Equity Index Fund SSgA Asia Pacific ex Japan Equity Index Fund SSgA Emerging Markets Equity Index Fund SWUTM Corporate Bond Tracker Fund The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, though the Fund will continue to invest generally in equities.
20
Fund
EQ
OS
FI
Retirement Account Investment Options
PENSION PORTFOLIO FIVE Fund
Aim
Risk
Scottish Widows Pension The Fund aims to provide high levels of capital Portfolio Five Pension security by investing mainly in high quality Fund short to medium term securities. These include fixed or floating rate debt instruments such as deposits, commercial paper, medium term notes, asset backed securities and bonds.
Specific risk – Some of the securities in which this Fund invests might default or their credit rating might fall. The value of those investments will usually fall should an issuer default or receive a reduced credit rating. Fluctuations in interest rates are likely to affect the value of the The exposures may be gained through holdings securities held by the Fund. If interest in the following funds: rates rise, the value of the units is likely Aberdeen Sterling Investment Cash Fund to fall and vice versa. The Fund therefore Aberdeen Global Liquidity Fund – Sterling carries a relatively modest risk to capital. Sub Fund The asset mix of the Fund will be reviewed periodically by Scottish Widows, and may be amended if a review indicates that it would be in the investors’ best interests to do so. This means in future the Fund could be invested in different funds and additional asset types, though the Fund will continue to invest mainly in short to medium term securities.
21
Retirement Account Investment Options
SECTION 3 – CHARGES
SECT
The fund charges are as follows:
The ta The ta
Fund name
Annual Management Charges
Other Expenses
Total Annual Fund Charges
Scottish Widows Pension Portfolio A
0.100%
0.000%
0.100%
Scottish Widows Pension Portfolio B
0.100%
0.000%
0.100%
Scottish Widows Pension Portfolio C
0.100%
0.000%
0.100%
Scottish Widows Pension Portfolio One
0.100%
0.000%
0.100%
Scottish Widows Pension Portfolio Two
0.100%
0.000%
0.100%
Scottish Widows Pension Portfolio Three
0.100%
0.000%
0.100%
Scottish Widows Pension Portfolio Four
0.100%
0.000%
0.100%
Scottish Widows Pension Portfolio Five
0.100%
0.000%
0.100%
Scottish Widows Pension Protector Fund (note 4)
0.200%
0.000%
0.200%
Yea Retir
Scottish Widows Cash Fund (note 4)
0.200%
0.000%
0.200%
15
Yea Retir
15
10
5 0
10
5
NOTES ON CHARGES
illustration(s) for details. Please also see ‘Retirement Account: your guide to Retirement Account and accessing your benefits’ (ref no 54901). The Total Annual Fund Charge for each fund is shown in the ‘What are the Charges?’ section of the illustration as ‘Investment Management Charge each year’.
1. The Total Annual Fund Charge of a fund is the sum of: a) the Scottish Widows Annual Management Charge, b) if applicable, an External Fund Management Charge, c) if applicable, a Multi-Manager Fund Management
0
4. A Total Annual Fund Charge (TAFC) of 0.1% will
Charge, and
apply when you are fully invested in the Pension Portfolios within the Governed Investment Strategies. If you are moving towards the ‘Targeting Annuity’ retirement outcome, in the last five years before your selected retirement date you will gradually be moved into the Pension Protector and Cash funds, and a 0.2% TAFC would apply to that proportion of your investment.
d) if applicable, an allowance for any Other Expenses.
The Management Charges of a), b) and c) above cover fund management, administration, marketing and the cost of sales, and also for c) the multi-manager selection service. Other Expenses include, for example, trustees’ fees, auditor’s fees and regulators’ fees. The allowance for Other Expenses can change on a regular basis.
5. This guide should be read together with the relevant
If any of a) to d) above changes for a fund, the Total Annual Fund Charge for that fund will also change.
product literature, including any Key Features illustrations.
2. For Unit-Linked Funds the Total Annual Fund Charge
6. Full terms and conditions are available on request from
is reflected in the prices of each unit.
Scottish Widows. Charges, terms and limits may change.
3. Other product charges in addition to the Total Annual
7. The Total Annual Fund Charges are those current at
Fund Charges will apply. Please see the Retirement Account Key Features and your personalised
the time of going to print.
22
Yea Retir
15
10
5 0
ement
Retirement Account Investment Options
SECTION 4 – GOVERNED INVESTMENT STRATEGIES INVESTMENT DETAILS The tables below show how each Governed Investment Strategy will be invested at key points in the term to retirement. The target splits of investments and actual percentage holdings within each strategy may change.
Cautious (Targeting Annuity) Highest risk Target Split of Investments Used Years to Retirement
Overseas Shares
UK Shares
Bonds
15 yrs+
49%
21%
30%
10 yrs
28%
12%
60%
5 yrs
28%
12%
60%
0 yrs
75%
Highest risk
25%
Lowest risk
Target Split of Investments Used Years to Retirement
Overseas Shares
UK Shares
Bonds
15 yrs+
49%
21%
30%
10 yrs
28%
12%
60%
5 yrs
28%
12%
60%
0 yrs
Cash
% 100 90 80 70 60 50 40 30 20 10 0
100%
Cautious (Targeting Flexible Access) Highest risk
Lowest risk
Target Split of Investments Used
n
and at
Cash
Cautious (Targeting Encashment)
tal he on as
eting ars
Lowest risk
% 100 90 80 70 60 50 40 30 20 10 0
Years to Retirement
Overseas Shares
15 yrs+
49%
21%
30%
10 yrs
28%
12%
60%
5 yrs
28%
12%
60%
0 yrs
21%
9%
45%
UK Shares
Bonds
Cash
25%
evant
from hange.
nt at
23
% 100 90 80 70 60 50 40 30 20 10 0
15 yrs+ 10 yrs Overseas Shares Bonds
5 yrs 0 yrs UK Shares Cash
15 yrs+ 10 yrs Overseas Shares Bonds
5 yrs 0 yrs UK Shares Cash
15 yrs+ 10 yrs Overseas Shares Bonds
5 yrs 0 yrs UK Shares Cash
Retirement Account Investment Options
Balanced (Targeting Annuity) Highest risk
Lowest risk
Target Split of Investments Used Years to Retirement
Overseas Shares
UK Shares
Bonds
15 yrs+
59.5%
25.5%
15%
10 yrs
49%
21%
30%
5 yrs
28%
12%
0 yrs
Cash
60% 75%
25%
Balanced (Targeting Encashment) Highest risk
Lowest risk
Target Split of Investments Used Years to Retirement
Overseas Shares
UK Shares
Bonds
15 yrs+
59.5%
25.5%
15%
10 yrs
49%
21%
30%
5 yrs
28%
12%
60%
0 yrs
% 100 90 80 70 60 50 40 30 20 10 0
Cash
% 100 90 80 70 60 50 40 30 20 10 0
100%
Balanced (Targeting Flexible Access) Highest risk
Lowest risk
Target Split of Investments Used Years to Retirement
Overseas Shares
UK Shares
Bonds
15 yrs+
59.5%
25.5%
15%
10 yrs
49%
21%
30%
5 yrs
28%
12%
60%
0 yrs
21%
9%
45%
Cash
25%
24
% 100 90 80 70 60 50 40 30 20 10 0
Yea Retir
15
10 15 yrs+ 10 yrs Overseas Shares Bonds
5 yrs 0 yrs UK Shares Cash
5 0
Yea Retir
15
10
5 15 yrs+ 10 yrs Overseas Shares Bonds
5 yrs 0 yrs UK Shares Cash
0
Yea Retir
15
10
5 0 15 yrs+ 10 yrs Overseas Shares Bonds
5 yrs 0 yrs UK Shares Cash
Retirement Account Investment Options
Adventurous (Targeting Annuity) Highest risk
Lowest risk
Target Split of Investments Used
yrs
Years to Retirement
Overseas Shares
UK Shares
15 yrs+
70%
30%
10 yrs
59.5%
25.5%
15%
5 yrs
49%
21%
30%
0 yrs
Bonds
Cash
75%
25%
Adventurous (Targeting Encashment) Highest risk
Lowest risk
Target Split of Investments Used Years to Retirement
yrs
Overseas Shares
UK Shares
Bonds
15 yrs+
70%
30%
10 yrs
59.5%
25.5%
15%
5 yrs
49%
21%
30%
% 100 90 80 70 60 50 40 30 20 10 0
Cash
0 yrs
% 100 90 80 70 60 50 40 30 20 10 0
100% Adventurous (Targeting Flexible Access) Highest risk
Lowest risk
Target Split of Investments Used Years to Retirement
Overseas Shares
UK Shares
15 yrs+
70%
30%
10 yrs
59.5%
25.5%
15%
5 yrs
49%
21%
30%
0 yrs
21%
9%
45%
Bonds
Cash
25%
yrs
25
% 100 90 80 70 60 50 40 30 20 10 0
15 yrs+ 10 yrs Overseas Shares Bonds
5 yrs 0 yrs UK Shares Cash
15 yrs+ 10 yrs Overseas Shares Bonds
5 yrs 0 yrs UK Shares Cash
15 yrs+ 10 yrs Overseas Shares Bonds
5 yrs 0 yrs UK Shares Cash
Retirement Account Investment Options
THE GOVERNED INVESTMENT STRATEGY FUNDS
As you autom
Funds Scottish Widows Scottish Widows Scottish Widows Scottish Widows Scottish Widows Pension Pension Pension Pension Pension Portfolio Five Portfolio Three Portfolio Four Portfolio Two Portfolio One Asset classes
Caut (Targ Annu
Overseas Equities
- SSgA Europe ex UK Equity Index Fund - SSgA North America Equity Index Fund - SSgA Japan Equity Index Fund - SSgA Asia Pacific Ex Japan Equity Index Fund - SSgA Emerging Markets Equity Index Fund (Excluding Pension Portfolio Four)
UK Equities
- SSgA UK Equity Index Fund
Corporate Bonds
- SWUTM Corporate Bond Tracker Fund
Index-linked Bonds - SWUTM Index Linked Tracker Fund
CAU CATE
70%
59.5%
49%
Cauti (Targ Enca
28%
Cauti (Targ Acces 30%
25.5%
21%
12%
–
15%
22.5%
47.5%
BALA CATE
–
–
7.5%
12.5%
Balan (Targ Annu
Cash
- Aberdeen Sterling Investment Cash Fund - Aberdeen Global Liquidity Fund – Sterling Sub Fund
100%
In the last 15 years before you retire, we gradually start switching to lower risk investment funds. The funds used during the five years leading up to your selected retirement date will depend on which retirement outcome you have selected, be this Targeting Annuity, Targeting Encashment or Targeting Flexible Access.
Balan (Targ Enca
Balan (Targ Acces
The table on the next page shows you which funds are used for each risk category and the different retirement outcomes.
ADV RISK
Adve (Targ Annu
Adve (Targ Enca
Adve (Targ Acces
When the nu
If you the inv 26
dows
ve
ome
Retirement Account Investment Options
As you can see from the tables below, whichever risk category and retirement outcome you choose, we will have automatically adjusted your Account by your selected retirement date. CAUTIOUS RISK CATEGORY
15 years+
at 10 years
at 5 years
at 0 years
Cautious (Targeting Annuity)
Scottish Widows Pension Portfolio 3 – 100%
Scottish Widows Pension Portfolio 4 – 100%
Scottish Widows Pension Portfolio 4 – 100%
Scottish Widows Pension Protector – 75%
Cautious (Targeting Encashment)
Scottish Widows Pension Portfolio 3 – 100%
Scottish Widows Pension Portfolio 4 – 100%
Scottish Widows Pension Portfolio 4 – 100%
Scottish Widows Pension Portfolio 5 – 100%
Cautious (Targeting Flexible Access)
Scottish Widows Pension Portfolio 3 – 100%
Scottish Widows Pension Portfolio 4 – 100%
Scottish Widows Pension Portfolio 4 – 100%
Scottish Widows Pension Portfolio 4 – 75%
BALANCED RISK CATEGORY
15 years+
at 10 years
at 5 years
at 0 years
Balanced (Targeting Annuity)
Scottish Widows Pension Portfolio 2 – 100%
Scottish Widows Pension Portfolio 3 – 100%
Scottish Widows Pension Portfolio 4 – 100%
Scottish Widows Pension Protector – 75%
Balanced (Targeting Encashment)
Scottish Widows Pension Portfolio 2 – 100%
Scottish Widows Pension Portfolio 3 – 100%
Scottish Widows Pension Portfolio 4 – 100%
Scottish Widows Pension Portfolio 5 – 100%
Balanced (Targeting Flexible Access)
Scottish Widows Pension Portfolio 2 – 100%
Scottish Widows Pension Portfolio 3 – 100%
Scottish Widows Pension Portfolio 4 – 100%
Scottish Widows Pension Portfolio 4 – 75%
ADVENTUROUS RISK CATEGORY
15 years+
at 10 years
at 5 years
at 0 years
Adventurous (Targeting Annuity)
Scottish Widows Pension Portfolio 1 – 100%
Scottish Widows Pension Portfolio 2 – 100%
Scottish Widows Pension Portfolio 3 – 100%
Scottish Widows Pension Protector – 75%
Adventurous (Targeting Encashment)
Scottish Widows Pension Portfolio 1 – 100%
Scottish Widows Pension Portfolio 2 – 100%
Scottish Widows Pension Portfolio 3 – 100%
Scottish Widows Pension Portfolio 5 – 100%
Adventurous (Targeting Flexible Access)
Scottish Widows Pension Portfolio 1 – 100%
Scottish Widows Pension Portfolio 2 – 100%
Scottish Widows Pension Portfolio 3 – 100%
Scottish Widows Pension Portfolio 4 – 75%
Scottish Widows Cash – 25%
Scottish Widows Pension Portfolio 5 – 25%
Scottish Widows Cash – 25%
Scottish Widows Pension Portfolio 5 – 25%
mes.
Scottish Widows Cash – 25%
Scottish Widows Pension Portfolio 5 – 25%
When you start investing in a Governed Investment Strategy the proportion of investment in each fund will be based on the number of months until your selected retirement date. If you were to invest directly in the same range of assets, rather than investing via the Governed Investment Strategy, the investment costs you would pay would be higher. For full details please see your personal illustration. 27
Scottish Widows Limited. Registered in England and Wales No. 3196171. Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 181655. 54866 01/16
