Self Select Investment Guide move ahead

Transcription

1 Self Select Investment Guide move ahead For members of The Barclays Bank UK Retirement Fund (the UKRF)

2 2 Self Select Investments move ahead Inside this guide Welcome to Self Select 2 Investments Choosing your investment 4 strategy Choosing your Self Select 6 Investment funds Self Select Investment funds 8 Start moving 10 Switching your investments 10 Your Self Select Investments Checklist Back pocket Welcome to Self Select Investments As a member of The Barclays Bank UK Retirement Fund (the UKRF), some or all of your retirement savings will be affected by investment performance. It is therefore important that you understand your investment options and make decisions that are appropriate for you. Making the right choices will depend on your circumstances, the commitment you want to make, and the goals you have for your retirement savings. The UKRF offers you three investment strategies: Lifestyle, Anchor and Self Select Investments, which require different levels of involvement from you. Self Select Investments provides a range of funds to choose from and requires the highest level of involvement. This guide provides more information about these three strategies. It will give you guidance on what you should think about when making your fund choices, particularly if you are interested in Self Select Investments. Further information including details of your benefits can be obtained from: Barclays Pensions Administration Telephone: +44 (0) (Clearway: ) HRSS.pensions@barclays.com Website: In writing: Barclays Pensions Administration Barclays House PO Box 12, 1 Wimborne Road, Poole, Dorset BH15 2BB, UK In the back pocket of this guide you will find factsheets on each of the funds available through Self Select Investments, including the Lifestyle and Anchor funds. You can also get copies from or Barclays Pensions Administration. You should also read your scheme booklet for an explanation about how your retirement savings build up in the UKRF. Your booklet includes an explanation of the terms used in this guide such as Trustee and Pensionable Salary.

3 Self Select Investments move ahead 3 Your defined contribution (DC) fund Your DC fund refers to the parts of your UKRF retirement savings that are linked to investment performance. The table below shows what is regarded as a DC fund based on the different sections of the UKRF. Section Your DC fund Investment Account Afterwork Matched Contributions Additional Voluntary Contributions (AVCs) If you make Matched Contributions of 1%, 2%, or 3% of your Pensionable Salary, Barclays will contribute the same amount to your Investment Account. On top of this you can also pay regular AVCs and lump sum AVCs. The Pension Investment Plan (PIP) Accumulated Fund Barclays contributions AVCs Barclays contributes 10% of your Basic Salary to your Accumulated Fund. On top of this you can also pay regular AVCs and lump sum AVCs. Other sections of the UKRF DC Sections: Retirement Investment Scheme (RIS) CCS AVCs in: 1964 Mercantile AP89 Care If you have RIS or CCS savings or AVCs in one of these sections, you can still choose how they are invested. With effect from 1 April 2010 all sections of the UKRF, other than Afterwork and PIP, were closed to future contributions. You can also get copies of the fund factsheets from www. barclayspensions.co.uk or Barclays Pensions Administration. You can only choose funds from the range made available by the Trustee, which varies from time to time. This guide will help you understand the options available to you at the date of this guide. All references in the guide to managing your investments refer to choosing between the funds made available by the Trustee. The Trustee may withdraw a fund at any time and move your investment to an alternative fund. The Trustee has provided this information as general guidance to support you in making your investment decisions. If, after reading this guide, you are not sure what to do and want investment advice, you should speak to an independent financial adviser (IFA). Information about finding an IFA can be found at

4 4 Self Select Investments move ahead Choosing your investment strategy As you think about your investment strategy you should remember that at retirement you will use your DC fund to provide an income for life (ie. a pension) and you can currently take up to 25% of it as a cash lump sum. Your investment strategy should match the level of involvement you want in managing your investments. It should also reflect the balance you want between growing your retirement benefits and protecting them so you can be more certain about how much your pension will be. Before you decide on your investment strategy you need to think about: How involved you want to be in managing your investments You should consider your experience of investing and the amount of time you can commit to managing your investments. Whether your main priority is to grow or protect the benefits your DC fund will provide in retirement Funds which are expected to grow your retirement benefits over the long term are more likely to go up and down in value in the short term. On the other hand, funds that give you more certainty around the amount of retirement benefits your DC fund will secure, are less likely to grow your benefits. How long you have until you retire Your attitude to growth or protection is likely to change as you get nearer to retirement. If you have a long time before you plan to retire, you may be willing to invest in a way which aims to grow the value of your retirement benefits over the long term, and accept that in the short term your DC fund may go up and down in value. As you approach retirement you are likely to appreciate more certainty over the retirement benefits your DC fund will secure. Use the pension modeller Visit to see how investment returns affect your expected retirement benefits. If you have savings outside of the UKRF (eg. from another pension scheme, an ISA or through Barclays Share schemes), you should consider the investment strategy of your DC fund in combination with these investments.

5 Self Select Investments move ahead 5 Within the UKRF you have three investment options to choose from: Lifestyle Anchor Self Select Investments The following table summarises how the considerations outlined on page 4 might affect your choices between these investment options. Option Grow or protect your retirement benefits Time to retirement Degree of involvement Lifestyle Whilst you are more than 10 years from your target retirement date, Lifestyle follows a higherrisk investment strategy, designed to grow your retirement benefits. Over the last 10 years before your target retirement date, Lifestyle increasingly switches to investments which are expected to protect the value of your retirement benefits, reducing the amount of risk it takes. The investments in Lifestyle follow a pre-set investment strategy. All you have to do is choose the Lifestyle fund which matures in the year you plan to retire. Your investments will automatically be changed over time. Low. Lifestyle aims to ensure that while you remain comfortable with its investment strategy, you will only need to make an investment decision if your expected retirement date changes. If it does, you should consider changing to the Lifestyle fund which matures in the year of your new expected retirement date. Anchor The aim of the Anchor fund over the long term is broadly to keep pace with the cost of buying a pension. Anchor is a lower-risk investment strategy so is less likely to fluctuate in value than higher-risk funds like Lifestyle. However, Anchor is not expected to grow your retirement benefits over the long term. Unlike Lifestyle, Anchor does not change its investment strategy over time. If you are a long way from your retirement date, Anchor is normally considered to be less appropriate. This is because you would normally have to contribute more to get the same level of retirement benefits than if you invested in Lifestyle. However, you are less likely to see large changes in the value of your expected benefits over time. Low. Anchor is managed on your behalf, which allows you to be less involved. Self Select Investments Self Select Investments allows you to build an investment strategy which is more closely aligned to your goals and your views on investing. You can choose a combination of funds which aim to grow, and/or funds which try to protect, your retirement benefits. There are a number of funds to choose from, suitable for members both close to and far from retirement. You should consider reviewing your investment choices as you get closer to your planned retirement. High. This option requires a higher level of involvement from you. It is more likely to be suited to you if you are a confident and experienced investor who can commit the time to managing your investments. Lifestyle works with Anchor You can choose to combine the Lifestyle and Anchor funds to get the balance between growth and protection that is right for you. The rest of this guide outlines the different types of investment funds available through Self Select Investments and what you should consider before making your fund selection. Keep track of your pension It is important to review your investments on a regular basis. A good time to do this may be when you receive your annual Pension Statement showing your expected retirement benefits. If you would like to review your pension more frequently, you can ask for the current value of your DC fund by contacting Barclays Pensions Administration. Details of how to make changes to your investment choices can be found on page 10 of this guide.

6 6 Self Select Investments move ahead Choosing your Self Select Investments funds You can choose the combination which suits you best. Combining different types of investments is known as asset allocation. When you choose between the funds available through Self Select Investments you will be making crucial asset allocation decisions. Among other things these decisions are about balancing: How much you want to grow your DC fund to buy retirement benefits; and How much you want to protect your DC fund to be more certain about the retirement benefits you can expect. If you invest your DC fund in high growth funds you may be able to pay less in contributions to reach your retirement goals, compared to investing in high protection funds. However, you are likely to need to review and revise your contributions and investment choices more frequently to respond to changes in the value of your DC fund. The table below summarises which types of funds offer the potential for growing your retirement benefits or protecting them. Type of fund available Low growth (high protection) Cash Government bonds (Fixed Interest and Index-linked) Some growth (some protection) Corporate Bonds High growth (low protection) Equities Property Diversified Growth

7 Self Select Investments move ahead 7 There are three principles your asset allocation decision should be based on and you should keep these in mind when you review your decision over time. 1. Long-term growth You may be surprised to learn that an extra return of only 1% a year over 30 years can significantly increase your DC fund size, and therefore your retirement benefits. Example Assuming you have invested 1 a month for thirty years, the bar chart shows the final fund value you would achieve based on receiving three different average rates of return. Your asset allocation decision should balance the need for long-term growth with the need for stability (see below). This balance is likely to change depending on how close you are to retirement. If it is a long time before you plan to retire, you may want to choose investment funds that are expected to increase in value over the long term and grow the retirement benefits your DC fund will be able to secure ,176 5% 6% 7% Investment return 2. Stability Generally, the greater the expected long-term investment return a fund offers, the greater the likelihood that the value of your investments could go down in value (especially in the short term). On the other hand, investment funds which provide greater stability are not expected to provide much growth of the value of your investments in the longer term. By selecting investment funds which offer stability, you are less likely to need to change your level of contributions to respond to changes in the value of your retirement benefits. However, you should expect to have to contribute more to get the same level of retirement benefits compared with investment funds which offer long-term growth. As you approach retirement, you are more likely to want stability as you will have less time to pay extra contributions to make up for any sudden fall in the value of your retirement benefits. 3. Pension purchasing power When you retire you will usually use your DC fund to purchase a pension (an annuity) from an insurance company. The cost of buying an annuity changes depending on various factors including expected future interest rates and inflation. Through Self Select Investments you can invest in funds which broadly track the changes in the cost of purchasing an annuity. This means that any falls in the value of your DC fund will be largely mirrored by falls in the cost of purchasing a pension and vice versa. As you get closer to taking your benefits, these funds may become more attractive because your pension purchasing power is less likely to go down and is more protected. The rules of the UKRF also allow you to take up to 25% of your DC fund as a cash lump sum at retirement (subject to any additional limits imposed by HM Revenue & Customs (HMRC) from time to time). Under current HMRC rules this lump sum can be paid tax free. Therefore, you may also want to make use of the cash fund to provide some protection for the benefits you may want to take as a cash lump sum.

8 8 Self Select Investments move ahead Self Select Investments funds Your circumstances and attitude to risk will determine the suitability of the fund(s) you choose through Self Select Investments. The different types of funds available are described below. More information about the funds available for investment can be found on the factsheets in the back of this guide or on Fund type Invests in Long-term growth/stability pension purchasing power Equity funds invest in the shares of listed companies. Over the long term they offer the potential for a good return to grow your retirement benefits, but they offer less stability and there is a higher risk that the value of your fund will fall in the short term. A number of different types of equity funds are available. Equities UK equities these invest in UK listed companies. Overseas equities these invest in companies listed in markets around the world. Good expected long-term returns. Less stability and poor protection of the pension purchasing power of your DC fund. Good expected long-term returns. Less stability and poor protection of the pension purchasing power of your DC fund. In addition, as they invest in foreign countries, these funds can be exposed to changes in exchange rates. Ethical/sustainable funds invest in the shares of carefully selected companies whose products, services and operations are considered to make a positive contribution to society. Good expected long-term returns. Less stability and poor protection of the pension purchasing power of your DC fund. Diversified Growth The Diversified Growth fund is able to invest in a range of asset classes including equities, bonds and property. The fund has specific objectives and the fund manager decides how much is invested in each asset class to meet these goals. In addition the fund increases its exposure to certain asset classes using derivatives to help it meet its return objective. A balance between expected returns and protection of the pension purchasing power of your DC fund. Property Property funds typically invest in industrial and commercial property. Over the long term, these funds offer the potential for reasonable growth, with some price stability and protection of the pension purchasing power of your DC fund. Due to the difficulties involved, from time to time, in selling large properties these funds invest in, fund managers may have the right to impose a queuing system for selling units during times of market turmoil. Corporate bonds Corporate bond funds invest in bonds issued by large creditworthy companies. They offer more risk than gilts and so are expected to earn a higher rate of return. Over the long term, these funds offer the potential for reasonable growth. In the short term they offer some price stability and protection of the pension purchasing power of your DC fund. UK Government bonds (gilts) There are two types of funds which invest in gilts. Both types offer modest returns, some stability and good short-term protection for the pension purchasing power of your DC fund. Fixed Interest funds invest in gilts which pay interest at a fixed rate on a specified date for a specified amount. Index-linked funds invest in gilts which pay interest which is linked to a specified measure of inflation (ie. the Retail Prices Index). A small level of expected growth. Good short-term protection for purchasing an annuity which pays a level pension or increases at a fixed rate. A small level of expected growth. Good short-term protection for purchasing an annuity which pays a pension with a link to inflation. Cash Cash funds are similar to a bank or building society savings account although the value is not guaranteed. They invest in money market assets to offer a high degree of stability but only provide modest returns. Very little expected growth. They offer stability and short-term protection for any cash lump sum you take from your DC fund at retirement.

9 Self Select Investments move ahead 9 Before making your fund selection, you should study the fund factsheets for each of the available funds. The factsheets provide further information on the investment objectives and features of the individual funds, including: 1. Active or passive Funds can be managed on an active or passive basis. In a passively-managed fund, the investment manager aims to produce a return that matches a specific index, such as the FTSE All Share Index. They do this by investing in assets that are broadly the same as the investments that make up that index. An active manager uses their expertise to select investments which they think will perform better than a particular index over time. Active managers aim for higher returns than passive managers although this means that they also run the risk of underperforming against their chosen index. As active funds require more time and involvement from the investment manager the funds usually carry higher management charges than passive funds (see below). 2. Annual Management Charge (AMC) An AMC is the fee applied by the investment manager to cover the costs of managing the fund. This is usually expressed as a percentage and is deducted from the underlying assets of the fund. Copies of the fund factsheets are available from www. barclayspensions.co.uk or Barclays Pensions Administration. Making changes The Trustee regularly reviews the funds it makes available. It has support from regulated investment advisers and makes changes where they are, in the Trustee s opinion, in the best interests of members. 3. Pricing The Trustee does not charge members for switching between funds. However, you should note that depending on how the funds you have chosen are priced by the investment manager, you may incur a charge when you buy and sell units. There are two common ways managers charge for investing new money in funds or for taking money out. This ensures existing holders of the units are not disadvantaged. If funds are priced on a bid-offer basis, two prices exist for the funds: the higher price is for buying units and the lower price is for selling units. On a swinging single basis, there is only one price but this swings to reflect whether the fund is growing or shrinking on a particular day. Details of the pricing basis for each fund are included on the fund factsheets.

10 10 Self Select Investments move ahead Start moving If you only wish to invest in Lifestyle and/or Anchor you can select these options using the contribution form for your section of the UKRF. If you would like to choose from Self Select Investments you should tick this option on your contribution form, and then use the Self Select Investment form to make your fund choices. A copy of the Self Select Investment form is included with this guide and is also available from or Barclays Pensions Administration. You decide how much to invest in each fund by allocating a percentage of your contributions into your chosen funds. The Trustee does not limit the number of funds you can choose to invest in. The only condition is that the total of the percentages you choose for each fund must add up to 100%. Please send your completed form to: Barclays Pensions Administration Barclays House PO Box 12 1 Wimborne Road Poole Dorset BH15 2BB, UK Use the pension modeller Visit to see how investment returns affect your expected retirement benefits. Switching your investments Your pension is a long-term investment and during the time to your retirement it is likely that you will want to change your investment choices. For example, if you think a particular fund is likely to perform better over the medium term, you might wish to change the way your DC fund is invested. Through Self Select Investments you can change how future contributions will be invested and/or you can switch the money already invested in your DC fund to a different fund or funds. There is no restriction on how often you can switch between funds. You need to complete a Self Select Investment form for each fund you wish to switch and submit it to Barclays Pensions Administration. Your instruction will be implemented on the next available weekly trading date. Fund factsheets The Trustee, together with its Investment Managers, produce a factsheet for each fund annually and a performance factsheet quarterly. You can get the most up-to-date factsheets from or Barclays Pensions Administration.

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12 Further information including details of your benefits can be obtained from: Barclays Pensions Administration Telephone: +44 (0) (Clearway: ) Website: In writing: Barclays Pensions Administration Barclays House PO Box 12, 1 Wimborne Road, Poole Dorset BH15 2BB, UK Issued by Barclays Pension Funds Trustees Limited Registered in England Registered No Churchill Place London E14 5HP, UK This guide is intended to provide general guidance on the investment options within the UKRF, and a short, factual summary of the types of funds available to you. However, it is not intended to be, and should not be seen to be, financial advice by the Trustee or promotion of any financial product. In drafting this document, the Trustee is not providing an opinion as to the suitability of any particular fund. Should you have any questions regarding the investment options or the funds available, or require any advice on the UKRF more generally, you should seek your own financial advice. You should also note that the value of investments, including the funds described within this guide, can go both up and down. Past performance is not necessarily a guide to future performance. Once again, we would recommend that you seek your own independent financial advice when deciding which investment options to choose and which funds are suitable and appropriate for your needs. The investment options have been selected by the Trustee, and may be changed, replaced or withdrawn from time to time. Issued March 2012