Blackrock meanwhile, has re-badged its target date fund (TDF) range to reflect the three basic choices members will face at retirement: a ‘retirement’ option for those planning to buy an annuity; a ‘capital strategy’ for members planning to take their DC fund as a cash lump sum; and what it terms ‘flexi’, for those planning to leave their fund invested. Up until 10 years from the target retirement date all three funds will be invested in the same growth assets, but at 10 years out the asset mix will begin to differ as they progressively switch towards a range of retirement options using three different glide paths.
Members are also able to switch funds at no cost if, for example, they decided to buy an annuity at a later date. Blackrock head of UK DC Paul Bucksey says: “At retirement the flexi will comprise 40% UK and global equities and 60% fixed income which will be predominantly corporate bonds. We think 40/60 is a sensible long-term holding to support income withdrawals.”
Blackrock has also teamed up with consultant Aon Hewitt to create a product which gives scheme members access to financial aggregation tools to build their retirement savings, along with access to financial education and information on all their personal finances.
Debbie Falvey, head of DC proposition at Aon, says: “This gives scheme members tools to enable them to track their personal finances in parallel with their retirement savings, putting them in a better position to understand if they are on track for the outcome they need.”
Meanwhile, HSBC Global Asset Management (GAM), has launched a retirement range consisting of three riskrated portfolios: cautious, balanced and dynamic, each with a charge of 25bps. The funds are based on an existing series of HSBC GAM funds – the multi-asset World Selection portfolios – which launched in 2009 and use a combination of dynamic asset allocation and alternative indices.
Caroline Hitch, head of wealth portfolio management at HSBC GAM says the World Selection portfolios offer “dynamic asset allocation, cost-effective portfolio construction and a robust investment process, all packaged together at a price that we believe offers great value”.
WATCHING BRIEF
The temptation for many managers following Osborne’s original Budget bombshell would have been to set their product development teams to work on strategies to accommodate the new wave of money set to swerve annuity providers and find itself in cash or alternative investment products. But talk is cheap in pensions and movement of assets is often at a glacial pace so while some managers have been quick to announce new or adapted products, others have seen it as more of a watching brief to gauge how the dust settles before they act.
Similarly, on the asset owner side it is also a waiting game for some. David Adkins, chief investment officer at the £6bn The Pensions Trust (TPT) says: “We are not rushing in feet first and are happy to observe what is going on. There is a trickle of people due to retire [around 6 April] and the average pot size is under £30,000.”
TPT’s default fund uses TDFs managed by Alliance Bernstein which place members in one of a set of three-year vintage funds. The underlying portfolio is altered by the manager and according to Adkins can adapt to the changes thrown up by last year’s Budget meaning no radical change has been necessary.
TPT is however thinking about some changes. “We are researching the addition of a diversified growth fund into that mix,” adds Adkins. “In order to dampen volatility and capture some skill.”
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