Changes to your company pension

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If you didn’t make an investment choice when you joined your company pension, you’re invested in your scheme default fund, the Aegon Mercer Default Strategy A fund. 

This fund is changing the way it invests to smooth your journey towards buying a fixed income in retirement.

These changes are explained in detail below:

  • The mix of investments used in the growth stage will change to include a larger portion of overseas equities (shares).
  • The pre-retirement stage of your current strategy will now begin 8 years before your target retirement date instead of 5 years.
  • This means your exposure to equities is reduced sooner meaning you may miss out on some potential capital growth.
  • If you’re not planning to retire for some time, this may not be a concern for you. However if you have any concerns about how this change may affect you, please speak to a financial adviser.

From the 20 April 2015, the following changes will take place:

  • The name of the fund will change from 'Aegon Mercer Default Strategy (A) fund' to 'Aegon Mercer Target Annuity fund'. The new name better reflects what the fund aims to do.
  • The mix of investments used in the growth stage will change. It now includes a higher exposure to overseas equities (shares) to improve diversification. As a result, the investment charge during the growth stage will increase by 0.01%.
  • The pre-retirement stage will also change to begin 8 years before your target retirement date instead of 5. The point at which we begin to switch your investment away from equities and into (lower risk) UK fixed interest will now begin earlier. Once you are within 8 years of your target retirement date, you’ll begin to move into fixed interest investments with the aim of giving you more certainty about the level of annuity you’ll be able to buy when you retire. If you’re already within 5 years of your target retirement date this will mean your existing mix investments will also change.
  • We’re also moving from using only UK government bonds (loans issued by the UK government) to a wider range of UK fixed interest investments to help target annuity rates as you approach retirement. This change will result in the charges you currently pay increasing slightly throughout the pre-retirement stage. However, the charge will not increase by more than 0.02% at any stage. The new mix of investments, related investment charges and how these apply to you based on your retirement date are outlined below:
Fund type/years to retirement 8 7 6 5 4 3 2 1 Your retirement year
Diversified Growth fund 50.0% 50.0% 50.0% 50.0% 50.0% 37.5% 25.0% 12.5% 0.0%
UK equity 25.0% 18.7% 12.5% 6.3% 0.0% 0.0% 0.0% 0.0% 0.0%
Overseas equity 25.0% 18.8% 12.5% 6.3% 3.1% 0.0% 0.0% 0.0% 0.0%
Pre-retirement fund 0.0% 12.5% 25.0% 37.5% 50.0% 62.5% 67.0% 71.5% 75.0%
Cash 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 8.0% 16.0% 25.0%
Investment charge 0.25 0.25 0.25 0.25 0.25 0.23 0.20 0.17 0.14
  • What changes have been made to the growth fund? The amount the fund invests UK equities (shares) has reduced while the fund's exposure to overseas equities has increased.
  • Why has the change been made? The change has been made to diversify the types of investment held by the fund to manage the fund's overall risk profile and seek higher long term growth potential.
  • How will this change affect me? The fund charge will increase by 0.01%. The changes to the underlying investments mean the fund is more diversified however the aims, objectives and risk profile remain the same.

In response to the March 2014 Budget, Mercer, the pension adviser to your scheme, has developed a range of retirement options. These new options are available from 15 May 2015 and reflect the new world of pension flexibility.

Under Mercer SmartPath, Mercer has set up a range of ‘Target Retirement’ funds for you to choose from based on your own circumstances.  Mercer will gradually change your investments to prepare you for the benefits you intend to take as well as manage risk as you approach retirement.

You’ll be able to invest in more than one Target Retirement fund and move between them as your own individual plans for retirement change.

  • Mercer Target Annuity Retirement fund This option is designed for investors who want to buy a guaranteed income from an annuity when they retire.
  • Mercer Target Drawdown Retirement fund This option is designed for investors who are prepared to take an uncertain income from their pension savings with potential to grow over time and offer capital growth in retirement.  Though it must be stressed that your income and remaining savings are not guaranteed and can fall as well as rise in value.
  • Mercer Target Cash Retirement fund This option caters for investors who plan to withdraw all of their pension savings as cash at retirement. If you choose this option, it’s important to make sure you’ve carefully planned your future retirement income and understand the tax implications of accessing your pension savings in one single cash payment.
  • Please note these options will not be available until 15 May 2015.

If you’re more than 8 years from your target retirement date… Read more If you’re more than 8 years from your target retirement date

  • The mix of investments used in the growth stage will change to include a larger portion of overseas equities (shares).
  • The pre-retirement stage of your current strategy will now begin 8 years before your target retirement date instead of 5 years.
  • This means your exposure to equities is reduced sooner meaning you may miss out on some potential capital growth.
  • If you’re not planning to retire for some time, this may not be a concern for you. However if you have any concerns about how this change may affect you, please speak to a financial adviser.

If you’re 5-8 years from your target retirement date… Read more If you’re 5-8 years from your target retirement date

  • You are ‘in transit’ from the growth stage to the pre-retirement stage.  And your fund will include investments from each stage.
  • Growth stage:-
    • The mix of investments will change to include a higher proportion of overseas equities (shares)
    • This change is designed to create higher potential for longer term growth
  • Pre-retirement stage:-
    • We’ve changed the underlying mix of investments replacing UK government bonds with a wider range of fixed interest investments.
    • We’re making these changes to help ensure you have more certainty about the level of annuity income you can buy when you retire.
    • As a result there will be a slight increase to the investment charge, though it will not increase by more than 0.02% at any stage.

If you’re already within 5 years of your target retirement date … Read more If you’re already within 5 years of your target retirement date

  • You are already in the pre-retirement stage
  • We’ve made changes to the underlying mix of investments, replacing UK government bonds with a wider range of fixed interest investments.
  • We’re making these changes to help ensure you have more certainty about the level of annuity income you can buy when you retire.
  • As a result there will be a slight increase to the investment charge, though it will not increase by more than 0.02% at any stage.

Why has the pre-retirement stage increased to 8 years? Read more Why has the pre-retirement stage increased to 8 years?

In the lead up to retirement, investors cannot afford exposure to sharp market falls. Mercer have recognised this and brought forward the retirement stage of the fund, reducing equity exposure earlier in order to more prudently manage potential risks in the lead up to retirement.

Why has the investment charge increased? Read more  Why has the investment charge increased?

The small increase in charges reflects the cost of increased diversification. This includes increased exposure to overseas equities in the growth stage and broader exposure to UK fixed interest investments in the pre-retirement stage.

How do I opt out of the changes? Read more How do I opt out of the changes?

If you’re happy with the changes to the Aegon Mercer Default Strategy (A) fund, you don’t need to do anything. These changes will happen automatically.  However, if you feel this fund isn’t suitable for you, you can switch your existing investment and redirect any future investment, free of any switch charge, into an alternative fund or funds of your choice.

How do I switch funds? Read more How do I switch funds?

For more information on how to make a fund switch, please see our website

Your pension account has the chance to build up over a number of years, depending on your circumstances.  As you approach retirement, it’s important to consider if your pension investments will give you the income you want.

If you are unsure that the new Aegon Mercer Target Retirement fund is right for you, we strongly recommend you speak to a financial adviser. If you don’t have an adviser, visit www.unbiased.co.uk(Opens new window). You may have to pay for financial advice.