01 February 2016

Communication Plan for Default Strategy

Background

In our last newsletter we announced a change to the default investment strategy for our WorkSave Pension Plan to reflect the new era of pension freedom and choice.

Based on our own research and advice from independent investment consultants, we believe most people won't be ready to make decisions about their options until they're close to their plan retirement age. So a 10 year de-risking strategy targeted at annuity purchase no longer seems appropriate for most people.

Our new default strategy therefore leaves members invested in our Multi-Asset Fund until they are ready to make their own decisions. In effect, we've removed the 10 year de-risking from the previous default strategy.

We've supplemented this new open-ended strategy with some alternative strategies for those close to accessing their pension pot, reflecting the main options for members - cash, annuity or drawdown - over a 3 year term. We'll seek to prompt members to review their investment strategy as they approach their selected retirement age (SRA).

We have already written to all affected schemes and are now putting in place a communications programme for members.

Initial Communications

We are writing to new joiners entering the Multi-Asset Fund and existing members invested in the Multi-Asset Lifestyle Profile.

Segment one: New joiners over the transition period

Objectives:

  • confirm they are in the Multi-Asset Fund
  • highlight the options for taking their money
  • encourage them to review their investment strategy in light of the new options for taking their money

Segment two: Existing members aged 50+ or within 10 years of SRA currently invested in the Multi-Asset Lifestyle Profile incorporating 10 year de-risking strategy.

Objectives:

  • remind them their current investment incorporates a 10 year de-risking strategy
  • highlight the options for taking their money
  • urge them to consider if a 10 year de-risking strategy is still appropriate in light of the new options for taking their money

Both mailings are scheduled to commence in Q2 2016.

Ongoing Communications

We will be introducing an ongoing communications programme to reach members at age 50 and again within 4 years of their selected retirement age.

Segment one: Age 50 or 10 years to SRA if earlier

Objectives:

  • remind them of their selected retirement age
  • explain the options for taking their money
  • remind them of their current investment strategy
  • encourage them to review their investment strategy in light of the new options for taking their money

Segment two: 4 years to SRA

Objectives:

  • remind them of their selected retirement age
  • explain the options for taking their money
  • remind them of their current investment strategy
  • encourage them to review their investment strategy in light of the new options for taking their money
  • urge them to contact Pension Wise or speak to a financial adviser

Important note: Our Stakeholder Pension Plans and the Group Personal Pension Plan 2000 range are not currently affected by this change although they remain under review.

In summary

The pension reforms have fundamentally changed the way members take their retirement savings.

Our default investment strategy was designed for people choosing to buy an annuity and is no longer suitable given the range of options available.

We have therefore changed our default investment strategy to the Multi-Asset Fund (without de-risking) and are writing to both new joiners and existing members to prompt them to reconsider their strategy in light of their plans for taking their pension savings. .

For more information contact your usual Legal & General representative.