The Defined Contribution 2010 Plan fund range

It is important to think about how you would like to invest your pension contributions.

BP used specific objectives when choosing the funds that are currently available in the DC2010 Plan fund range.

Depending on how comfortable you are with choosing your investment funds, there are two main approaches to consider:

Self-select - choose your own mix from the fund range

The ‘self-select’ option lets you choose a mix of funds from the range of 8 different funds covering shares (equities), bonds and cash.

If you do choose self-select funds in place of the Lifestyle fund (PDF - 245kb)(Opens new window), you’re taking control of the investment strategy. This means it will be up to you to manage the change from higher-risk, higher-return assets to lower-risk assets in the approach to retirement.

Lifestyle - have your funds chosen and changed for you

The ‘Lifestyle’ option chooses and changes your mix of funds for you automatically, based on how close you are to your retirement age.

If you invest in the Lifestyle fund, please contact us  to let us know at what age you plan to retire so we can begin the process of moving your investments at the right time. We’ll always assume that you plan to retire at age 65, unless you tell us otherwise.

Self-select in combination with Lifestyle

You can also choose to put some of your pension contribution in Self-select and some in the Lifestyle option.

This might be something you’d consider if you like the switching approach of Lifestyle, but aren’t comfortable with the potential volatility from one year to the next of having all of your assets invested (through Lifestyle) in shares up until 10 years before retirement. In this case, a combination of the Lifestyle fund and one of the Self-select bond funds might be worth thinking about.

Before you decide which option suits you best, read on for more information about the Self-select option, followed by the Lifestyle option.

More about self-select funds

The funds available include the building blocks that we use to construct the Lifestyle fund — the Global Equities fund, the GBP Corporate Bonds fund, the UK Gilts fund and the Cash fund.

You can click on the fund names to download a factsheet with more information.

Please note the fund names in any communications from us will show the prefix ‘DCP’ (which stands for Defined Contribution Plan). This will include yearly statements and any online services such as fund switching. So, for example, the UK Gilts fund will be shown as the DCP UK Gilts fund.

The Global Equities fund (PDF - 244kb)(Opens new window) is constructed by investing in three equity funds, which are also available for you to invest in on their own.

These three funds are:

This Global Equities fund aims to match the returns of a broad range of shares of companies from across the world over a large number of industry sectors and thereby achieve long-term growth.

This fund is also one of the current building blocks used for the Lifestyle fund.

Current benchmark

The Global Equities fund’s performance is monitored against the benchmarks of these three funds.

Risk

Above average

The UK Equities fund (PDF - 238kb)(Opens new window) aims to match the returns of shares of companies listed on the London Stock Exchange. By doing so, it allows exposure to a broad range of companies over a number of industry sectors.

This fund is one of the building blocks of the Global Equities fund.

Current benchmark

FTSE All-Share Index.

Risk

Above average.

The Overseas Equities fund (PDF - 238kb)(Opens new window) aims to match the returns of shares of companies listed on the overseas stock exchanges of developed stock markets. By doing so, it allows exposure to a very broad range of companies over a large number of industry sectors.

This fund is one of the building blocks of the Global Equities fund.

Current benchmark

FTSE All-World Developed (excluding UK) Index.

Risk

Above average.

The Emerging Markets Equities fund (PDF - 239kb)(Opens new window) aims to match the returns of shares of companies listed on the stock exchanges of emerging stock markets. By doing so, it allows exposure to a very broad range of companies over a large number of industry sectors.


This fund is one of the building blocks of the Global Equities fund.

Current benchmark

FTSE All-World Emerging Markets GBP Index.

Risk

Higher.

The UK Gilts fund (PDF - 236kb)(Opens new window) aims to match the returns of sterling denominated UK government fixed interest bonds (gilts).

This fund is also one of the current building blocks used for the Lifestyle fund.


Current benchmark

FTSE UK Gilts over 15 Year Index.

Risk

Below average.

The GBP Corporate Bonds fund (PDF - 237kb)(Opens new window) aims to match the returns of a wide range of sterling denominated investment grade bonds with a credit rating between AAA and BBB- or equivalent from Standard & Poors.

This fund is also one of the current building blocks used for the Lifestyle fund.


Current benchmark

Markit iBoxx Sterling Non-Gilts Over 15 Years Index.

Risk

Below average.

The UK Index-Linked Bonds fund (PDF - 236kb)(Opens new window) aims to match the returns of index-linked sterling denominated bonds. The fund may invest in UK government-issued or in non-government index-linked bonds.


Current benchmark

FTSE UK Gilts Index-Linked Over 5 Years Index.

Risk

Below average.

The Cash fund (PDF - 237kb)(Opens new window) invests in a diversified portfolio of high quality money market instruments (those with a minimum credit rating of A1 or equivalent).

This fund is also one of the current building blocks used for the ) Lifestyle fund.

Current benchmark

The fund aims to achieve an investment return that is in line with wholesale money market short-term interest rates (in general, wholesale rates are higher than retail rates). Specifically, the fund seeks to better the return of its benchmark, the Seven Day LIBID (London Interbank Bid Rate).

Risk

Minimal.

More about the Lifestyle fund

The Lifestyle fund (PDF - 244kb)(Opens new window) is aimed at investors who don’t want to manage the exposure to asset volatility as they approach retirement.

Your contributions will be invested in the Global Equities fund, until you are 10 years from your chosen retirement age. From that point the asset mix is automatically and progressively changed to:

 - 75% bonds (for annuity purchase).

 - 25% cash (for a tax-free cash lump sum).

As part of the governance framework, the fund’s performance will be monitored against the underlying funds’ benchmarks.

Risk classification

Above average initially, gradually reducing over the last 10 years to below average in the retirement year.

From time to time we’ll review the structure of the Lifestyle fund to make sure it's suitable for the existing economic conditions. We might make changes if we need to. You’ll find more detail about this in your policy conditions documents.

As retirement approaches, most people will want to protect their retirement savings from undue volatility. You may be comfortable managing this yourself or you can leave it to us by investing in the Lifestyle fund.

The Lifestyle fund works in two life stages:

·         Stage 1 is the earlier part of your career when you’re better able to take volatility risk. In Stage 1, Lifestyle automatically invests your contributions to aim for higher potential returns in by investing in a diversified pool of shares.

·         Stage 2 starts as retirement approaches and you have less time available to make up any falls in value. During Stage 2, Lifestyle switches the asset mix through steady steps into lower-risk asset classes (bonds and cash) which are better suited to preserving the size of pension you can buy with your pension fund.

Stage 1 — building up your savings in your younger years

In the starting phase when you are still building up your savings (the ‘accumulation’ phase), your contributions into the Lifestyle fund are invested in the Global Equities fund. This fund, which is designed to focus on growth with the aim of building your retirement savings, aims to broadly match the returns of a broad range of shares in most of the world’s stock markets.

Please note the fund names in any communications from us will show the prefix 'DCP' (which stands for Defined Contribution Plan).

Target retirement year Investment fund
2027 DCP Lifestyle fund (Accumulation phase) (PDF - 245kb)

Stage 2 — protecting your savings as you near retirement

Ten years from retirement, the amount that you’ve invested in the Lifestyle fund is moved into a Target Dated fund that matches your planned retirement year. Your future contributions will also be paid into that fund. For example, if you’re 55 in 2012 and you’ve chosen 65 as your retirement age, your Target Dated fund will be the 2022 fund.

We will change the asset mix of the Target Dated fund to move in gradual steps from 100% global shares (equities) into UK corporate bonds, UK gilts and cash. This process is designed to help preserve the size of pension you can buy with your fund at retirement. It happens automatically, so you won’t need to do anything to start this change.

During this stage the name of your fund will change to reflect your retirement year. For example, if you intend to retire in 2022, your fund name will change to DCP Lifestyle fund (2022).

There are different factsheets for our Lifestyle fund depending on whether you're invested in the main fund or have started to move into funds that aim to suit your needs as you near retirement. These are the fund factsheets relating to the Lifestyle fund when you're 10 years or less from retirement.

If your target retirement year has passed, but you haven't yet moved your investment, Lifestyle will move your investment into the DCP Retirement fund (PDF - 244kb).

Our Lifestyle fund moves into less and less risky assets during stage two. By the first day of the year in which you reach your retirement age, it reaches its target asset mix of (currently):

  • Cash - 25%
  • UK gilts - 25%
  • GBP corporate bonds  - 50%

The following table shows:

- how the fund’s asset mix changes in the last 10 years before retirement

 - how the risk rating of the fund falls from above average at first, to below average in the retirement year.

fund asset mix changes

Each fund progressively changes its asset mix each month. It makes these changes through 12 equal steps throughout each calendar year until it reaches the target asset mix at the start of the following year.

We use long-dated corporate bonds and long gilts in Stage 2 of the Lifestyle investment process because of their inverse relationship to annuity rates. Broadly, this means that when annuity rates (which tell you how much annuity you will get per year) go down, the value of a pension fund that's invested in long gilts or corporate bonds is likely to go up, and the other way around.

This means that if you invest in long gilts or corporate bonds, the level of income you get at retirement is less likely to change dramatically if annuity rates move up or down just before you retire. But you should be aware that the value of bonds and long gilts can go down as well as up - just like any other asset that can be traded - although the movements won’t normally be as large as those associated with shares (equities).

Please note this relationship is not perfect and there are other factors that can affect the value of bonds, long gilts and annuity rates.

How BP chose the fund range

BP made sure that all of these funds were:

  • Passive funds – these funds aim to follow the returns of an external index (for example the FTSE All-Share Index)*.
  • Transparent - You can see what the underlying fund has invested in and you can see how close the fund is to meeting its benchmark.
  • Low cost - because the cost to the investment manager of running a passive fund is lower, this means that we can bring this fund range to you at a very competitive cost.
  • Highly diversified - each fund invests across a wide range of underlying investments, and the fund range as a whole provides you with access to most types of asset classes.

* Remember that the effects of annual management charges and differences in the timing of pricing between the index and the fund mean their performance will never be exactly the same.

Please note there’s no guarantee that the funds will achieve what they aim to. We don't guarantee benefits and the value of investments can go down as well as up. For advice as to whether a fund is suitable for you, please speak to a financial adviser.

While there’s no guarantee that the investment manager will meet the fund benchmarks, we do monitor these funds through a strict governance process. You can be confident that these funds given the highest scrutiny. But governance is not just about making sure that a fund’s performance is in line with its objectives - it’s also about quality control.  This means there may be changes to the fund range in the future as we keep making sure that the funds we offer continue to meet expectations.

Please note that the links below this line don’t apply to the DC2010 plan – these are links to generic Aegon information.