your future welcome investing in inside to the Summer 2009 newsletter Pearson Group Pension Plan

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1 Pearson Group Pension Plan investing in your future A newsletter for members of the Money Purchase sections welcome to the Summer 2009 newsletter It s been an eventful year since the last investment newsletter was issued in July inside Five investment principles to consider Who s responsible for what? We all know that these are turbulent times. Now, more than ever, it s crucial that you think about your pension and how your investments are doing and whether you may want to change any of them. We can t give you advice, though we can help with some simple principles about investing (see page 2). And, of course, you can talk to a financial adviser. But in the end its up to you these are your funds and it s your future. Your investment options How to take action Getting in touch

2 Five investment principles to consider As a member of one of the Money Purchase sections of the Pearson Group Pension Plan, you make your own investment decisions from a range of options that are selected and monitored by the Trustee of the Plan. You do not need to make any changes to your investment options, but we have set out some principles that might be helpful to you in deciding how to invest your pension savings. We recommend that you consider consulting an independent financial adviser, who can offer you tailored advice that is specific to your personal situation, to help you choose. 1: Consider your timing Even the world s best institutional investors find it difficult to time the market so ideally you should avoid jumping into and out of the market whenever prices rise or fall Many investors tend to hold off buying until an investment has increased in value and then when the markets take a dip they want to put their money in safer investments, before it takes a further hit. However, if you do this, you may be locking in the losses to your Pension Fund caused by the stock market falls. On the other hand, as you get closer to retirement you may be giving your account some degree of protection against further falls in the stock market, which is important at this stage. Always keep in mind where you are on the pensions timeline ie how long you have left until retirement, along with the level of risk you are prepared to take with your pension savings. 2 2: Rebalancing Once you ve chosen your Pension Fund investments, you need to review your decision regularly to make sure that the mix you ve got is still in line with your original objectives and your attitude to risk. Some funds may grow faster than others, which means that after a while you may have slightly more of your Pension Fund invested in one type of asset than you would like. By rebalancing from time to time, you can ensure that your Pension Fund is not over-exposed in one asset class or fund. And, if you find your investment objectives changing over time, this process will enable you to update your asset mix to meet your new requirements. 3: Spread your investments Another important concept to consider is diversification. In simple terms, it means don t put all your eggs in one basket. By aiming for a spread of different types of investments, if any one market or asset class performs poorly, it will (hopefully) be offset by better performance in other areas. When you re younger, you may decide to invest your pension savings entirely in equities (shares in companies quoted on stock markets). Over medium to longer-term periods the return on equities has historically tended to be higher than that from less volatile investments such as bonds or fixed interest. Even so, you may wish to invest in different types of equities (eg, some in the UK, some in the rest of the world, etc) to spread the risk of one market going into meltdown and losing a large proportion of your pension savings. If you are approaching retirement you may like to diversify across asset classes so for example, holding a mix of equities, bonds and fixed interest.

3 4: Review your investment choice properly When individuals select their own funds on joining a pension scheme, there is a 4 tendency to stay invested in these funds until they retire. This is true, even though each individual's investment aims will typically change over time. The concept of staying 'anchored' with your investment choices is very common, particularly when a fund has fallen in value. Decisions on the type of assets you hold, and on when to buy and sell should be based on your personal circumstances and your attitude to investment risk. Please note that Plan members who have chosen the Lifestyle Option will not be anchored in this manner, as their investments will automatically be switched on the approach to retirement to reflect a more acceptable (lower) level of risk at this stage. Risk vs return 5 5: Slowly but surely A better approach to trying to time the markets is to make smaller but more regular investments. The experts call it pound cost averaging. Basically, it means drip-feeding your investment a little at a time, instead of investing it all in one go. By investing at regular intervals, you can buy more units in a fund when prices are low, and fewer units when prices are high. If you are a contributing member, you automatically buy units at different prices through your regular monthly contributions. If you wanted to move the current accumulated value of your Pension Fund into a new fund or combination of funds and you are concerned about doing so in one go because the timing might not be right, you could do it a little at a time. After all, Winterthur Life doesn t currently charge any switch fees, which means you can move your investments around as often as you like. 3

4 Who s responsible for what? We take a look at who is responsible for what when it comes to the investment of your Pension Fund. The Trustee: the Trustee is responsible for providing a range of funds into which you can invest your pension contributions. The Trustee monitors the performance of the funds and will make changes when appropriate, taking into account advice from its appointed investment consultant. The investment consultant: Watson Wyatt provides advice to the Trustee regarding the range of funds provided by the Trustee and helps to monitor the performance of the funds. The fund manager: the fund manager is charged with the task of making informed decisions on which asset in each fund to buy, and when to do so. This determines whether the fund makes a profit or a loss. The investment provider: Winterthur Life was appointed by the Trustee to offer Plan members a choice of investment funds and manage the day-to-day administration of these investments. It is responsible for buying and selling units in your chosen funds in line with your instruction. You: although the Trustee selects and regularly reviews the range of funds available to you, it is your responsibility to decide which to invest in (or whether to go for the Lifestyle Option). If you make your own investment choices, you are not only responsible for choosing your funds but also for deciding when to move from higher risk funds to lower risk funds (eg as retirement approaches). You may wish to seek independent financial advice to help you make your investment choices. 4

5 Your investment options If you decide to change your current investment strategy, what are your options? Well, it depends on whether you have chosen the Lifestyle Option, or if you already choose your own investments from the funds available. Already choosing your own funds? You can switch investments at any time, currently free of charge. You can tell us if you only want future contributions to be redirected to a new investment fund/s (if you are a contributing member), or if you want part or all of the value of your Pension Fund to be transferred into the new fund/s you have selected. You could switch into the Lifestyle Option if you think this is the best option for you. Already in the Lifestyle Option? If you are one of the members who have chosen the Lifestyle Option, and you do not believe the current lifestyling process is working for you, you can choose your own investment funds. If you do this, you will have to opt out of the Lifestyle Option. If you opt out of the Lifestyle Option, you will have to transfer the entire value of your Pension Fund into one or more of the investment funds available. You can invest it in any combination across the funds, as long as the total adds up to 100%. How do I take action? You can access your Pension Fund information 24/7 through Winterthur Life s website, where you can download the latest fund fact-sheets and change your investment choices. You can also access the pension modeller to help your financial planning. Winterthur website: You will need to enter your User ID and PIN. If you have lost this information, call the Winterthur Life helpline: If you are a contributing member of the Plan, you can change your contributions from 1 January each year. You will receive details from the Group Pensions Department later in the year. You can also visit the Plan website to check when the Pensions Department will be at your site. The Plan website address can be found in the box below. Should you wish to consult an independent financial adviser, you can visit for details on where to find one in your area. Getting in touch If you have any queries about the Plan, please contact the Group Pensions Department by: pensions.helpline@pearson.com phone: writing to: Pearson Group Pension Plan, 80 Strand, London WC2R 0RL The Plan website, is also a really good source of information. 5

6 Group Pensions Department Mezzanine Floor 80 Strand London WC2R 0RL Helpline: Website: (tel) (fax)