Your Investments
The default fund
The current default fund for all new joiners is the Ecclesiastical Flexible Lifestyle Strategy. This approach is designed specifically to provide members with growth during the majority of their working lives and then greater security as they approach retirement.
To find out which fund(s) you are currently invested in, please refer to your latest annual benefit statement produced by Scottish Widows or access your Scottish Widows plan details on the Scottish Widows Ecclesiastical infosite , as you may not be invested in the current default fund.
How does the default work?
The scheme default fund uses a ‘lifestyle’ mechanism that works by initially investing in the main growth fund - the Scottish Widows Eden Tree Higher Income Fund. Then ten years from your selected retirement age (this is set to 65 as default, but you can change this at any time) your pension pot is automatically switched into different funds to prepare your plan for flexible access at your chosen retirement age.
However, this approach adopts a flexible approach by keeping your pension pot invested for taking income as it is needed in retirement and may not be suitable for everybody. We would therefore encourage you to consider if this strategy is appropriate for you.
You can find out more about the default fund, the underlying funds it invests in, as well as alternatives that might better suit your retirement planning here.
Performance
Investment performance is one of the key factors in building a worthwhile retirement fund. If you log into your Scottish Widows account here you can find out the performance of the fund(s) you are invested in, the fund factsheets and a whole lot more!
Default fund survey
Thank you to those who participated in our default fund review survey. We had 45% of colleagues respond and whilst not an overall majority, this provided us with good insight to the aspects of the default fund and investing that are important to you.
From the survey we learned that there was overwhelming support (79%) for a flexible retirement approach, which also concurs with the trends being seen nationally. Given the significance of the ESG and Ethical debate, further questions were asked on members preferences regarding this topic. 58% of respondents said that they would support a responsible investment approach on the default fund strategy, as long as they could reasonably expect to receive an equivalent, competitive investment return compared to a strategy that did not. We are considering all responses alongside the advice we receive from our pension consultants as we continue explore our options and conclude the review. More information will follow once a final decision has been reached.
Responsible Investing
EdenTree have provided further information on the different approaches and terminology of responsibly investing which you can find here. You can also find out more about Scottish Widows responsible investing framework here.
Change to investment policy for Higher Income Fund
To reflect EdenTree’s commitment to responsible and sustainable investment, EdenTree want to bring the investment policy of Higher Income Fund into line with EdenTree's other funds. This means that with effect from 15 November 2021, EdenTree propose to amend how funds are invested so that EdenTree fully screen the investments that are held within the Fund. EdenTree will assess each investment not only as to whether it might do harm but also whether the investment actively benefits environmental, social or governance issues. More specifically EdenTree will look to exclude companies that have a material involvement (10% or more) in alcohol and tobacco production, weapon production, gambling, publication of violent or explicit materials, oppressive regimes, companies using animals to test cosmetic or household products, intensive farming, fossil fuel exploration and production and high interest lending.
The investment policy of the fund is to continue investing in a mix of equities, fixed-interest securities and cash equivalents, plus maintain a bias towards equities of 60 – 85%. The Fund will seek to avoid investment in the companies as described above, and will favour companies that follow good business ethics, corporate governance, employment & labour practices, environment and climate change management, human rights, and community relations and is particularly positive on companies that contribute to education, health & wellbeing, social infrastructure and sustainable solutions.
As a result of these changes, EdenTree have calculated that approximately 11% of the existing holdings will need to be substituted and EdenTree expect these changes will be phased over a three month period. Furthermore the fund has been renamed to the EdenTree Responsible and Sustainable Managed Income Fund. Further details of EdenTree’s Responsible and Sustainable Investment Policy are available on request by telephoning 0800 358 3010 or can be downloaded from EdenTree's website at www.edentreeim.com.
One year on from the outbreak of Covid-19
Despite the considerable impact on the global economy by Covid-19 in the first quarter of 2020, some equity markets have recovered strongly and have performed very well since the initial 25-30% falls seen in early 2020. In fact, after the initial downward movement, some have set record highs. US equities are one such example, with the S&P 500 benefiting from the appreciation in its mega cap tech stocks – which prospered under lockdown restrictions.
It should be noted, however, that the considerable support provided by central banks and governments to tackle the impact of the pandemic has muddied the waters when it comes to valuations and there are differing views on whether some markets may now be overvalued.
Pension default funds are long-term investments that typically invest in a spread of asset classes such as equities, property, bonds and other types of investment. As a result, values can go down as well as up, in response to market movements.
When members are many years away from retirement they will typically be invested more heavily in equity markets and when they draw closer to retirement will typically be invested in a higher proportion of more defensive assets, such as government and investment grade bonds.
Developments in Bond Markets
Given the progress being made with the roll out of vaccines, 2021 has begun with greater economic optimism and inflation is expected to rise. Whilst this may be a temporary increase, and central banks have been playing down the need for increases to interest rates, markets have started to price-in future rate rises.
We have therefore witnessed a notable uptick in bond yields over the first quarter of this year and this has resulted in negative returns for some bond funds. For members invested in annuity-targeted strategies, which typically invest heavily into UK
government bonds, fund values may be more adversely affected than for other retirement strategies. Whilst this may be less of an issue for those wanting to purchase an annuity, it may have a greater impact on those wanting to access their savings differently.
Should any short-term losses materialise, if you’re still some years from retirement, your pension investments should have time to recover.
What if I’m close to my selected retirement age?
Depending on how close to retirement you are, your retirement income needs and your other savings, you might need to take some action. Each individual’s circumstances are different and therefore we would always suggest obtaining regulated financial advice. If you do not have a regulated financial adviser, then you can find one on the Financial Conduct Authority website here.