Fund objective update for Distribution and Cautious Lifestyle funds

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From 30 September 2022, we’re updating the fund objective for the Distribution fund and Cautious Lifestyle (including any year variants) fund on our Pension and Aegon Retirement Choices (ARC) fund ranges.

Nothing else about the funds will change because of this update. For example, the fund manager, benchmark, charges and Aegon risk ratings will all remain the same.

We’ve written to all those affected to let them know about the changes.

The changes in more detail

The underlying fund manager of the Distribution fund, Aegon Asset Management, is increasing the Distribution fund’s limits to overseas equities and overseas fixed interest to provide greater flexibility and bring the fund in line with the increased overseas exposure in the Association of British Insurers (ABI) sector (ABI Mixed Investment 20-60% Shares). Additionally, property will be removed as an allowable investment.

This update will also affect the Cautious Lifestyle fund (along with any year variants). This is because there are two main stages to the Cautious Lifestyle fund. When savers are still some way off from retirement (known as the Growth stage), this fund aims to grow savings by investing 100% of its allocation in the Distribution fund. Then, six years before retirement, it progressively moves into investments that are designed to preserve the size of annuity (a fixed sum of money paid to someone each year, typically for the rest of their life) you will be able to buy on retirement (known as the Lifestyle stage).

To ensure consistency, we’re updating our version of the funds. Details can be found in the tables below:

Distribution pension fund
Old fund objective New fund objective
This fund aims to outperform the ABI Mixed Investment 20-60% Shares sector median, net of fees, by investing in a mix of UK equities (shares) that offer a dividend yield higher than the average for companies in the FTSE All Share Index and sterling denominated fixed interest securities (bonds). It may also, on occasion, invest in overseas, property and derivatives. This fund aims to outperform the ABI Mixed Investment 20-60% Shares sector median, net of fees, by investing in a portfolio of global equities (shares) which typically deliver a yield higher than that generally available from investment in global equities. The fund also invests in global fixed interest securities (bonds) and in derivatives.

Source: Aegon UK

Cautious Lifestyle fund
Old fund objective New fund objective
The Cautious lifestyle fund uses a two-stage investment process called lifestyling. It aims to perform better than its benchmark in the early years (the growth stage) and give you more certainty about the amount of pension you can buy via an annuity when you retire (the lifestyle stage). Growth stage: During the early years of your investment, the Cautious Lifestyle fund aims to provide long-term capital growth by investing in UK equities (shares) and UK fixed interest securities (bonds). It may also, on occasion, invest overseas. Lifestyle stage: The lifestyle stage starts six years before the start of your target retirement year and recognises that your priorities may change as retirement approaches. It assumes you’ll buy an annuity, to provide yourself with an
income for life (or a specified number of years), when you retire. We’ll progressively start switching your investment into our Long Gilt fund, with the aim of giving you more certainty about the level of annuity you’ll be able to buy when you retire. We’ll also move some of your pension pot into our Cash fund two years before your target retirement year to cater for your tax-free cash entitlement. You can choose how much of your cash entitlement you want to take, but our process assumes you’ll take the maximum which, based on current legislation, is 25% of your pension pot.
The Cautious lifestyle fund uses a two-stage investment process called lifestyling. It aims to perform better than its benchmark in the early years (the growth stage) and give you more certainty about the amount of pension you can buy via an annuity when you retire (the lifestyle stage). Growth stage: During the early years of your investment, the Cautious Lifestyle fund aims to provide long-term capital growth by investing in a portfolio of global equities (shares) which typically deliver a yield higher than that generally available from investment in global equities. The fund also invests in global fixed interest securities (bonds) and in derivatives. Lifestyle stage: The lifestyle stage starts six years before the start of your target retirement year and recognises that your priorities may change as retirement approaches. It assumes you’ll buy an annuity, to provide yourself with an income for life (or a specified number of years), when you retire. We’ll progressively start switching your investment into our Long Gilt fund, with the aim of giving you more certainty about the level of annuity you’ll be able to buy when you retire. We’ll also move some of your pension pot into our Cash fund two years before your target retirement year to cater for your tax-free cash entitlement. You can choose how much of your cash entitlement you want to take, but our process assumes you’ll take the maximum which, based on current legislation, is 25% of your pension pot.

Source: Aegon UK

There’s no guarantee the funds will meet their objectives. The value of an investment can fall as well as rise and is not guaranteed. Investors could get back less than they pay in.

Investors will start to notice the changes in our literature and on our website from 30 September 2022. The changes will be implemented gradually across our material, so they may notice both the old and new fund objectives in use for a time.

For more information on these funds, you can view the fund factsheets via the ‘Fund prices and performance’ page on our website and selecting ‘Other fund ranges’ or ‘Aegon Retirement Choices (ARC)’.

What current investors need to do

Investors don’t need to do anything. If you would like more information, please speak to a financial adviser. If you don’t have a financial adviser, you can visit moneyhelper.org.uk/choosing-a-financial-adviser to find the right one for you.