LIFE AFTER WORK. Your guide to The Fidelity Buy Out Plan including Fund Summary Buy Out Plan (Ex Alpha Company Pension Plan)

Transcription

1 LIFE AFTER WORK Your guide to The Fidelity Buy Out Plan including Fund Summary Buy Out Plan (Ex Alpha Company Pension Plan)

2 Other Formats If you find it difficult to read this document, please contact Fidelity and we can provide you with an alternative format including large print, Braille, audiotape and CD. How to contact Fidelity You can either: Call the Pensions service centre on This service is open on business days from 8am to 6pm. Outside these hours, you can leave a message on the confidential answering service and Fidelity will contact you on the next business day. pensions.service@fil.com

3 Buy Out Plan (Ex Alpha Company Pension Plan) This booklet is a guide to your plan. It should be read in conjunction with your Policy Conditions. Contents Outline of the plan 2 Your Investments 3 Your pension benefits explained 46 Transferring out 48 What if you die? 49 How secure is your pension? 50 Member services 51 Useful contacts 53 Important legal information 54 1

4 Outline of the plan Outline of the plan What is the plan? The Fidelity Buy Out Plan ( the plan ) is a pension savings arrangement, made up of an insurance policy in your name and issued to you by FIL Life Insurance Limited ( FIL Life ). It was arranged for you by the trustees of your previous pension scheme who have transferred, without any deduction by Fidelity, the value of that scheme to the plan. Your pension account Fidelity holds a pension account for you under the plan. Your pension account is invested into FIL Life funds that invest into underlying funds managed by other Fidelity companies or third parties. You can control how your pension account is invested by choosing one or more funds from the range of funds available. If you have not made a choice, your pension account will have been, and will remain in, the default investment strategy. JARGON BUSTER For the purposes of this booklet references to the plan mean the Fidelity Buy Out Plan. Help is at hand This booklet has been designed to explain how your plan works in a way that we hope you will find easy to follow. You should read it carefully and keep it safe for future reference. Look out for the jargon buster boxes, which define some of the more technical terms used. We ve tried to keep things straightforward, but if you have any questions or you want any further information, please contact the Fidelity Pensions Service Centre (please see Member Services section). Please note that you cannot contribute in any form to this plan. In the event that you would like to make contributions to another pension arrangement then we recommend that you contact a Financial Adviser. Your plan benefits The aim of the plan is to provide you with an income once you decide to take your benefits. Although there are other options, most people choose an annuity, also known as an income for life, to provide their retirement income. You may also be able to take a tax-free cash lump sum from the plan when you decide to take your benefits. Please note as with all pension products you cannot normally start taking the benefits under the plan until age 55. Further information regarding the benefits offered under this plan can be found later in this booklet in the section entitled Your pension benefits explained. 2

5 Your investments Your investments The amount of pension you receive when you take your benefits from the plan generally depends on how much growth is achieved by your funds, the type of pension you require and annuity rates available at the time. Usually the higher the value of your pension account the greater the benefits you can buy, so you should carefully consider how your pension account is invested. Your pension account is invested into FIL Life funds. Through these funds, FIL Life invests in underlying Fidelity unit trusts and open-ended investment company (OEIC) funds managed by FIL Investment Services (UK) Limited, authorised and regulated by the Financial Services Authority. FIL Life may also invest into funds managed by non-fidelity fund managers or be reinsured by non-fidelity life insurance companies. The name of the non-fidelity insurance company or fund manager will normally be shown in the name of the FIL Life fund. Default investment strategy On transfer from your previous pension arrangement your pension account will have been invested in the plan s default investment strategy, which has been designed by the trustees of the company for those who do not want to play an active role in managing their pension account. With this option Fidelity will, depending on how many years you have left until your take your pension benefits, allocate your pension account to the following fund(s) in the proportions shown in the table: equity fund - Fidelity BlackRock Long Term Fund bond fund - Fidelity Pre-Retirement Bond Pensions Fund cash fund - Fidelity BlackRock Cash Fund Years until you take your benefits 10+ years 5-10 years 1-5 years 0-1 years Equities 100% 50% 10% 0% Bonds 40% 10% 100% The aim of the strategy is to allow you to benefit from the growth potential of equity-based investment when you are younger. As you get closer to taking your benefits, by investing more in bonds and cash, your pension account won t be at such a risk from a sudden drop on the stock markets. Finally, when the time comes to take your benefits, your pension account will generally, if not fully, be invested in bonds and cash. Fidelity may not rebalance your pension account if changes in the values of the funds mean that the actual mix of funds is already very close to the intended target when a change is due. The investment strategy is targeted towards when you plan to take your benefits. Fidelity will assume that you plan to take your benefits at the normal pension age that was applicable under your previous pension arrangement. Therefore if you plan to take your benefits at any other age, you must let Fidelity know. You cannot normally select a pension age of less than 55. If you have previously selected a different age under your previous pension arrangement, other than the normal age, then it will not automatically apply. Unless you tell us of that different age, your pension age under the plan will go back to being the normal pension age that was applicable under your previous pension arrangement. 0% 0% Cash 0% 10% 80% 3

6 Making your own choice of funds As an alternative to leaving your pension account in the default investment strategy, you can choose your own portfolio of funds from the list in the Your Fund Choices section. The latest fund fact sheets are also available on PlanViewer or from the Pensions Service Centre. Creating an investment portfolio involves choosing a selection of funds that match your attitude to the risks and rewards of investing. As you may realise, being a successful investor usually means tolerating a certain amount of risk. This can sound alarming if you are new to investing, so it may help to think of risk as an essential element in everything you do from crossing a road to catching a plane. You are constantly weighing up the risks that an activity involves against the benefits it might bring. What this means for investments is that you can think of risk as an opportunity, it gives you a chance to increase the growth potential of your pension account. We have provided information on risks to assist you with your decisions later in this section. As a member of the plan you can change your investments whenever you want. You can do this in one of two ways by: using Fidelity s secure online pension service PlanViewer at JARGON BUSTER A Financial Adviser is a person authorised to provide financial advice, for which they may charge a fee. Please remember that if you move money between funds or switch from one investment option to another, you may be out of the market for a short time. Before we set out your fund choices, please note the following jargon busters. These explain some of the types of investment that may be held within the underlying funds. After the list of fund choices, we set out important points around fund risk factors and risk ratings for you to consider, together with information on fund charges and fund management styles. You should read all these sections before making your choice. JARGON BUSTER Shares give you part ownership of a listed company. Their prices reflect how well investors feel that companies are doing and are expected to do. Equities is another term used for shares. by calling the Pensions Service Centre on There is no charge for switching your funds. For general information Fidelity s Pensions Service Centre is always willing to answer any questions you may have. Their goal is to help you make a decision you ll feel comfortable with but they cannot give you advice on what investments would be right for someone in your particular circumstances. If you would like that sort of help, you may want to think about seeing a Financial Adviser. JARGON BUSTER Bonds are loans to companies or governments (loans to the UK government are called gilts). Their prices depend on current and future interest rates and the financial strength of the companies or governments to which the loans have been made. 4

7 JARGON BUSTER Cash means investment in a range of short-term financial products offered by banks and financial institutions. As these products produce varying returns cash funds do not offer or set a particular rate of interest. JARGON BUSTER Property involves investing either directly in commercial property (like office blocks and shopping centres) or in the shares of property companies. Investment returns reflect either rental income and the value of the property held or the value of any shares held in property companies. JARGON BUSTER Alternative Investments cover a very broad and varied range of investments, and are so called because they are not traditional investments such as equities, bonds and cash. They could, for example, include investments in commodities (such as oil, gas, raw materials) and infrastructure (such as toll roads). RISKS Fidelity can t guarantee what your plan will be worth or what your pension will be. Reason could include: The value of your investments may go down as well as up and you may not get back the amount invested. Your pension may be lower than the estimated yearly pension amount shown on your annual pension account summary. This may happen if: you take some or all of your benefits before your planned pension date investment performance is lower, or charges are increased above those illustrated the cost of buying a pension increases. Fund charges and expenses may increase. The value of a fund may be affected if any of the institutions with which cash is deposited suffers insolvency or other financial difficulty. You bear the risk that any funds into which our FIL Life Insurance Limited funds are invested or into which our funds are reinsured do not pay Fidelity the full amount. In addition to some of the general risks highlighted above, each fund will have its own specific risks. In the Your fund choices section of this document we show which risks are associated with each fund. Fidelity has also rated each of the available funds to give you an indication of the potential level of risk applicable. These risk ratings are shown in the Risk rating - risk and how Fidelity rates funds section of this document. 5

8 Risk rating - investment risk and how Fidelity rates funds There are various ways to measure risk, but we have chosen to provide an indication of the risks involved in our fund range by considering two factors. The first factor is volatility based on past performance. Volatility is the movement, both up and down, in the fund returns over a fixed period. The second factor is an internal assessment of the underlying asset types within a fund. These ratings provide a guide to help you understand the potential risk involved when investing in our fund range. Each increase in risk level represents an increase in the potential for your fund value to grow but also to fall. Each additional level also increases the likelihood of the value of your fund fluctuating dramatically. These ratings may change in the future and we will not contact you when they do. For the most up to date ratings you should review the latest fund factsheet on PlanViewer or contact the Pensions Service Centre. None of our risk ratings imply or offer any form of guarantee. Remember that each fund has been assigned a risk category based on our internal methodology and this only considers risk in the context of our overall fund range. It is important that you read the appropriate risk category description. You should also consider financial advice regarding the suitability of your investment choices. Risk Band Description L1 Lower risk/return Greater emphasis is placed on capital preservation rather than maximising returns. This means that these types of funds will generally aim to preserve the value of your investments but in return will usually offer a lower rate of growth. Please note that low risk does not mean that the fund s value would not fall. L2 Lowermedium risk/return Less emphasis is placed on capital preservation than in the lower risk/return category introducing a chance of higher potential returns. Compared to the lower risk/return category there is more of a risk of your fund value going down but in return for this there maybe a better chance of your fund value experiencing a higher rate of growth. M1 Medium risk/return The potential for capital growth is generally better than the lower risk/return and lower-medium risk/return categories but the value of the fund may vary considerably either up or down. M2 Mediumhigher risk/return The potential for capital growth is higher than the medium risk/return category, but risk is increased. Funds in this category can often experience large fluctuations in value, either up or down, especially in the shorter term. H Higher risk/return The potential for capital growth could be high, but with a corresponding level of risk. Funds in this category can often experience extreme fluctuations in value, either up or down, especially in the shorter term. 6

9 Graphical Illustration of our risk ratings: 7

10 Fund specific risk factors In addition to general risks highlighted in the Risks section, each fund will have its own specific risks. In the Your fund choices section we show the types of risk associated with each fund. A description of each of these risks can be found in the table below. You should refer back to this table when reviewing your fund choices. Risk Factor Type of Risk Description of Risk 1 Concentrated portfolio The fund may invest in a relatively smaller number of stocks. This stock concentration may carry more risk than funds spread across a larger number of companies 2 Derivative exposure The fund invests in derivatives as part of its investment strategy, over and above their use for Efficient Portfolio Management (EPM). Investors should be aware that the use of these instruments can, under certain circumstances, increase the volatility and risk profile of the fund beyond that expected of a fund that only invests in equities. The fund may also be exposed to the risk that the company issuing the derivative may not honour their obligations which in turn could lead to losses arising. 3 Efficient Portfolio Management The fund may use other investment instruments apart from / or in place of the actual underlying securities. This is done in order to manage the fund in a more efficient fashion. Examples of these other instruments could be options, derivatives or warrants. The process of using these instruments in the fund is referred to as Efficient Portfolio Management (EPM). These instruments can be used to effectively take a position (or reduce an existing position) in a share or index, allowing positions to be altered more quickly and cost effectively than dealing directly in the underlying investment, but are not generally used to try and magnify returns. However, investors should be aware that the use of these instruments can, under certain circumstances, increase volatility and risk beyond that expected of a fund that only invests in conventional equities. 8

11 4 Emerging markets The fund invests in emerging markets. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment could either increase or decrease. These investments therefore carry more risk. 5 Ethical restrictions The fund is unable to invest in certain sectors and companies due to the ethical criteria used to select investments for the fund. 6 Exchange rate The fund invests in securities outside the UK. The value of investments and any income from them may therefore decrease or increase as a result of changes in exchange rates between currencies. 7 Geared Investments The fund focuses on geared investments. Funds which focus on geared investments such as warrants or options carry a higher degree of risk than other equity investments because of the risk of the underlying investments. It is possible that the fund may suffer sudden and large falls in value so that the short fall on cancellation, or the loss of the realisation on the investment could be very high and could even equal the amount invested, in which case you would get nothing back. 8 Highy yield bonds The fund invests in high yield bonds. High yield bonds carry a greater risk of default than investment grade bonds, and economic conditions and interest rate movements will have a greater effect on their price. Income levels may not be achieved and the income provided may vary. 9 Specialist The fund is specifically aimed at sophisticated investors and is particularly high risk, because it concentrates on a region that may be exposed to unusual political or economic risks. You should only invest if you are comfortable with the specific risks pertaining to the fund in question. 10 Income eroding capital growth The fund focuses on income which may reduce the prospect of capital growth. Any income generated cannot generally be withdrawn from a pension account until retirement and will be reinvested in the fund. 9

12 11 Liquidity The fund can suffer from partial or total illiquidity, which may lead to considerable price fluctuations and the inability to redeem your investment. This could affect you, for example when you are close to retirement. 12 Performance charges The fund makes charges that depend on the fund s performance. 13 Property funds The fund invests directly in physical property, there may be delays in completing your instruction to sell. This could affect you, for example when you are close to retirement, as it may be difficult to sell the units you hold in such funds. Any decision to invest in physical property should be carefully considered in line with your planned retirement goals. The value of physical property is generally a matter of a valuer s opinion rather than fact. 14 Sector specific funds The fund invests in specific sectors. Funds which invest in specific sectors may carry more risk than those spread across a number of different sectors. They may assume higher risk, as markets/sectors can be more volatile. In particular, gold, technology funds and other focused funds can suffer as the underlying stocks can be more volatile and less liquid. 15 Smaller companies The fund invests in smaller companies. Smaller companies shares can be more volatile and less liquid than larger company shares, so smaller companies funds can carry more risk. 16 Solvency of depositary The value of the fund may be affected if any of the institutions with which cash is deposited becomes insolvent or experiences other financial difficulties. 17 Solvency of issuers The fund invests in bonds and there is a risk that the issuer may default, resulting in a loss to the portfolio. 18 Volatility Investments in the fund tend to be volatile and investors should expect an above-average price increase or decrease. 10

13 Fund charges There are no initial charges for the funds. So if 100 is transferred from your previous pension arrangement then 100 is invested into your chosen funds. These funds have annual management charges, which currently range from 0.15% to 1.50%. Funds also incur other charges such as auditing and registry fees. The annual management charge and the other charges are deducted from each fund s assets and are reflected in the quoted daily price for the fund they are not taken directly from your pension account. Performance figures for the funds therefore take account of all fund charges. All fund charges are reviewed regularly and Fidelity will notify you if the annual management charges increase. Other charges depend on actual costs incurred and will change from time to time. Details of current annual management charges and other charges are set out in the table of fund choices set out above. So if you contribute 100 to your pension, 100 is invested into your chosen funds. Fund management styles There are two fund management styles you should be aware of before you make your investment choice: active and passive. management the investment manager s aim is to try to beat the market average by making share selection decisions based on research and analysis. Passive management the investment manager tries to follow a particular index,for example the FTSE 100. JARGON BUSTER An index is a device that measures changes in the prices of a basket of shares, and represents the changes using a single figure. The purpose is to give investors an easy way to see the general direction of the market or shares in the index. 11

14 Your Fund Choices Fidelity Investments Life Insurance Limited funds Life Fund Name Risk ratng, risk factors and fund objective Annual Management Charge Other Charges Fund Management Style Fidelity Cash Pensions Fund - Class 5 Risk rating: L1 Fund specific risk factor: 3, 16, 17 by Fidelity. The objective of the underlying fund is: The objective is to maintain capital value whilst producing income. It invests in money market instruments, other short-term investments and transferable securities. The fund may invest in derivatives for the purposes of efficient portfolio management, although is unlikely to do so. 0.25% 0.10% Fidelity L&G Cash Fund - Class 9 Risk rating: L1 Fund specific risk factor: % 0.00% by Legal & General Assurance (Pensions Management) Limited. The objective of the underlying fund is: To match the median return of similar funds as measured by the CAPS Pooled Fund Update without incurring excessive risk. The Fidelity fund invests in the underlying fund through a reinsurance policy with Legal & General Assurance (Pensions Management) Limited. 12

15 Fidelity Index Linked Bond Pensions Fund - Class 5 Risk rating: L2 Fund specific risk factor: 17 by Fidelity. The objective of the underlying fund is: The fund s investment objective is to achieve income and capital growth. The fund will invest primarily in UK and overseas index-linked gilts and other index-linked fixed interest securities. 0.25% 0.10% Fidelity Pension Annuity Fund - Class 5 Risk rating: L2 Fund specific risk factor: 3, 4, 6, 8, 10, 17 This life fund aims to achieve a level of income reflecting long term changes to annuity rates. It will invest into underlying funds managed by Fidelity that primarily invest into UK gilts, UK non-gilt fixed interest securities and other overseas fixed interest securities. 0.25% 0.10% Fidelity Pre- Retirement Bond Pensions Fund - Class 5 Risk rating: L2 Fund specific risk factor: 3, 4, 6, 8, 10, 17 This life fund aims to achieve a level of income reflecting long term changes to annuity rates. It will invest into underlying funds managed by Fidelity that primarily invest into UK gilts, UK non-gilt fixed interest securities and other overseas fixed interest securities. 0.30% 0.10% 13

16 Fidelity UK Aggregate Bond Pensions Fund - Class 5 Risk rating: L2 Fund specific risk factor: 17 by Fidelity. The objective of the underlying fund is: The fund s investment objective is to achieve both capital growth and income. The fund will invest primarily in UK gilts and non-gilt fixed interest securities. 0.30% 0.10% Fidelity UK Long Corporate Bond Pensions Fund - Class 5 Risk rating: L2 Fund specific risk factor: 3, 4, 6, 8, 10, 17 by Fidelity. The objective of the underlying fund is: The fund s investment objective is to achieve both capital growth and income. The fund will invest primarily in non-gilt fixed interest securities, at least half of which will have a remaining maturity of at least 10 years. 0.30% 0.10% Fidelity L&G Over 15 Years Gilts Index Fund - Class 9 Risk rating: L2 Fund specific risk factor: 3, 17 by Legal & General Assurance (Pensions Management) Limited. The fund s objective is to track the total return of the FTSE-A Government (Over 15 year) Index to within ±0.25% pa for two years in three. The Fidelity fund invests in the underlying fund through a reinsurance policy with Legal & General Assurance (Pensions Management) Limited. 0.18% 0.00% Passive 14

17 Fidelity L&G Over 5 Years Index Linked Gilt Fund - Class 9 Risk rating: L2 Fund specific risk factor: 3, 17 by Legal & General Assurance (Pensions Management) Limited. The objective of the underlying fund is: The fund s objective is to track the total return of the FTSE-A Index-Linked (Over 5 year) Index to within ±0.25% pa for two years in three. The Fidelity fund invests in the underlying fund through a reinsurance policy with Legal & General Assurance (Pensions Management) Limited. 0.15% 0.00% Passive Fidelity L&G Pre- Retirement Fund - Class 9 Risk rating: L2 Fund specific risk factor: 3, 17 by Legal & General Assurance (Pensions Management) Limited. The objective of the underlying fund is: The investment objective of the Fund is to provide diversified exposure to assets that reflect the investments underlying a typical traditional non-inflation linked pension annuity product. The Fidelity fund invests in the underlying fund through a reinsurance policy with Legal & General Assurance (Pensions Management) Limited. 0.18% 0.00% Passive 15

18 Fidelity Global Diversified Pensions Fund - Class 5 Risk rating: M1 Fund specific risk factor: 2, 3, 4, 6, 8, 13, 14, 15, 16, 17, 18 by Fidelity. The objective of the underlying fund is: The fund s investment objective is to achieve long term capital growth by investing in asset classes giving diversified underlying exposure. The fund will invest mostly in collective investment schemes and may also invest directly in securities, money market instruments, cash and deposits. 0.75% 0.15% Fidelity UK Corporate Bond Pensions Fund - Class 5 Risk rating: M1 Fund specific risk factor: 17 by Fidelity. The objective of the underlying fund is: The fund s investment objective is to achieve both capital growth and income. The fund will invest primarily in non-gilt fixed interest securities. 0.30% 0.10% Fidelity JPM Life Balanced Fund - Class 5 Risk rating: M1 Fund specific risk factor: 3, 4, 6, 8, 13, 15, 17 by JP Morgan Life Ltd. The objective of the underlying fund is: The JPM Life Balanced Fund (the Fund ) is a pooled life fund for pension schemes investing in UK and overseas equities, bonds and cash, either directly or through other funds. The Fund seeks to achieve excess returns through stock selection. The Fund is well diversified and, under normal circumstances, is fully invested with direct cash holdings kept to a minimum. The Fidelity fund invests in the underlying fund through a reinsurance policy with JP Morgan Life Ltd. 0.65% 0.00% 16

19 Fidelity JPM Life Diversified Growth Fund - Class 5 Risk rating: M1 Fund specific risk factor: 3, 4, 6, 8, 13, 14, 15, 17 by JP Morgan Life Ltd. The objective of the underlying fund is: The JPM Life Diversified Growth Fund is a pooled life fund for pension schemes. The Fund aims to maximise long-term capital growth for clients by investing in a diversified mix of asset classes for growth. Exposure to different asset classes can be accessed by direct or indirect investments or by using exchange traded derivatives. The Fund is well diversified and, under normal circumstances, is fully invested, with cash holdings kept to a minimum. The Fidelity fund invests in the underlying fund through a reinsurance policy with JP Morgan Life Ltd. 0.90% 0.00% Fidelity JPM Life Moderate Fund - Class 5 Risk rating: M1 Fund specific risk factor: 3, 4, 6, 8, 15, 17 by JP Morgan Life Ltd. The objective of the underlying fund is: The JPM Life Moderate Fund (the Fund ) is a pooled life fund for pension schemes investing in UK and overseas equities, bonds and cash, either directly or through other funds. The Fund seeks to achieve excess return through instrument selection, country allocation, asset allocation, and currency exposure. The Fund is well diversified and, under normal circumstances, is fully invested, with cash holdings kept to a minimum. The Fidelity fund invests in the underlying fund through a reinsurance policy with JP Morgan Life Ltd. 0.65% 0.00% 17

20 Fidelity L&G Consensus Fund - Class 9 Risk rating: M1 Fund specific risk factor: 3, 4, 6, 16, 17 by Legal & General Assurance (Pensions Management) Limited. The objective of the underlying fund is: The Fund aims to maintain an asset distribution close to that of the CAPS Pooled Pension Fund Update - Balanced Section, with the aim of delivering long-term performance which is close to that of the median fund, excluding property in the update. The Fidelity fund invests in the underlying fund through a reinsurance policy with Legal & General Assurance (Pensions Management) Limited. 0.18% 0.00% Passive Fidelity L&G Corporate Bond All stocks Fund - Class 9 Risk rating: M1 Fund specific risk factor: 3, 17 by Legal & General Assurance (Pensions Management) Limited. The objective of the underlying fund is: The Fund aims to track the performance of the iboxx Non-Gilts (ex-bbb) Index to within +/- 0.5% p.a. for two in three years. The Fidelity fund invests in the underlying fund through a reinsurance policy with Legal & General Assurance (Pensions Management) Limited. 0.22% 0.00% Passive 18