Your Investments
The default fund
From the 1st March 2022, the default fund for all new joiners is the Aviva My Future Focus Target Drawdown Lifestage. This approach is designed specifically to provide members with growth (subject to fund performance) 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 Aviva or access your Aviva plan details on MyAviva, 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 Aviva My Future Focus Growth 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 designed to imitate the use of drawdown as a mechanism to provide you with an income in retirement.
Lifestyling is a tried and tested investment technique that should provide most of our employees with a suitable investment platform to support their retirement income goals. However this approach, specifically targets funds that mirror the use of drawdown 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 Aviva account here you can find out the performance of the fund(s) you are invested in, the fund factsheets and a whole lot more!
Why is the default fund changing?
The DWP guidance suggests that the design, performance and continued suitability of the default option and its investment strategy should undergo a full review at least every three years.
Accordingly, we regularly review our default fund and recently asked our advisors Mercer Marsh Benefits to provide a recommendation on its ongoing suitability.
Unfortunately the existing default fund has not consistently hit its performance targets in recent times and therefore, following the review, we have decided to switch to a new default fund, the Aviva My Future Focus Drawdown Lifestage Approach. From 1st March 2022, all new joiners to our pension scheme are automatically invested in this new fund.
What happens next?
If you are currently invested in the existing default fund (Aviva Mixed Investment 40-85% Shares Drawdown Lifestage Approach) or the previous default (the Aviva Mixed Investment 20-60% Shares Drawdown Lifestage Approach), you will be automatically switched into the new default fund unless you choose otherwise. Following the change, it will no longer be possible to select either of the previous default options.
Aviva are writing to all affected members on 28 March to explain the changes.
In order to make the necessary changes there will be a blackout period From 28 April to 13 May during which you will not be able to access MyAviva or make changes to your fund choices.
The bulk investment switch will be effective 10 May.
If you wish to select alternative investments, you can do this via MyAviva prior to 28 April. You will also be able to select different funds following the switch in May.
What are your options?
- Aviva offer a variety of fund choices, if you would like to choose your own.
- There is no charge for switching funds, and you can do so as frequently as you choose (but not during the blackout period from the 28th April to the 13th May).
- Whilst the new default fund carries a 0.4% total charge, other funds may charge more.
- Consider your retirement goals, attitude to risk and retirement income strategy when considering your choice of investment.
- Visit www.myaviva.co.uk for further information and to view and switch your funds
Two years on from the outbreak of Covid-19
Despite the considerable impact thrust upon the global economy by Covid-19 in the first quarter of 2020, some equity markets have performed very well since they fell by around 25-30%. 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 began 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.