One year on webinar

Transcript for the IBM One Year On recording February 2024

Slide 1 - Intro

Hello. This recording is for members with Defined Contribution (DC) benefits of the IBM Pension Plan and IT Solutions Pension Scheme. The information contained in the presentation is designed to provide a helpful reminder of the importance of reviewing where your money is invested, and to check that it is appropriate for your needs.

Slide 2 - Important Information

Risk warnings:

• This is a general education presentation and does not represent financial advice
• It’s based on the 2023/2024 tax year
• The law, tax rates and any allowances may change in the future
• The value of your investment will go up and down. It isn’t guaranteed, so you may get back less than you put in.

Slide 3 -Your investments: One year on

A year ago, some changes were made to the investment options. This included enhancing the default Lifecycle strategies, closing some legacy investment strategies, and adding new freestyle funds to the range.

It is your responsibility to ensure you know how your pension savings are invested to ensure this remains appropriate for you and to make any changes you wish to make.  However, the Trustee would like to support you to do this and so this recording that is being provided by L&G will cover the following information;

• How to check where your money is invested
• The importance of regularly reviewing your investment options so they remain appropriate for your needs
• Explaining that financial advice may be needed if you’re looking for a personal recommendation about which investment options may be right for you.
• How to take action regarding your investments (where required and if appropriate)

It is important that you monitor the progress of your retirement savings and that you make decisions that are suitable for your own plans for retirement. We recommend that you consider seeking independent financial advice if you need help in choosing a suitable investment for your retirement savings.  

We’re going to take a little time to look at some of the things you ought to be thinking about when it comes to your retirement savings.

If you want help choosing your own investments, we recommend you speak to a financial adviser. You can find a list of advisers in your local area at unbiased.co.uk or by going to www.moneyhelper.org.uk. Financial advisers usually charge for their services.

Slide 4 - Three tier responsibility

We all play a part in supporting you with your pension savings starting with the Trustee who, with its investment advisers, are responsible for choosing a range of investment options for you to invest in.

This includes a default investment option for members who do not wish to choose an investment option as well as a range of other funds and strategies if you to wish to select your investments.

The Trustee is also responsible for monitoring and reviewing the suitability of these investment options.

At Legal & General, we manage the day-to-day administration of your pension savings. We execute on your instructions, taking into account legislation and the Plan’s rules and we are your first port of contact if you have any questions about your pension savings. Our microsite contains lots of information and tools to help you manage your pension savings.

Finally, it is your responsibility to regularly review your investment choices and selected retirement date to ensure they remain relevant. We will be covering this in more detail later in this webinar.

Slide 5 - Investing your money

When it comes to investing your money, there is a relationship between investment performance and investment risk.

If you want the potential for better returns, you’ll normally have to accept more risk.

In return for the possibility that the value of your savings might go up by more over the long term, there will usually be a greater chance that your savings will go down and up by more, and more often, over the same period.

This means that, if you chose a high-risk fund, you could lose a large part – and in some cases all – of the money you have invested.

By investing in a low-risk fund, you’re unlikely to lose your savings but they’re unlikely to go up in value by as much.

You can reduce risk by putting your money in different types of investment with varying levels of risk.

It’s important to be aware that, in periods of extreme market shock, certain asset classes can be more volatile and therefore more risky.

There are four main asset types that funds invest in.  These are cash, bonds, property and shares.   Your pension fund could invest in one of these asset classes or a mixture.

Please refer to your investment guide for further information and guidance on the different types of risk and funds available. A copy of this document is available from your Plan website.

Slide 6 - How are your savings invested?

Let’s take a brief look at where your savings could be invested.

You have a number of investment options for your pension savings – you can either select a Lifecycle Strategy, a Freestyle Strategy, or a combination of both if you choose to invest additional contributions. Anyone not making an active selection will be placed into the default Lifecycle Strategy with a default Target Retirement Age which is the normal retirement age for the Plan section in which you are in.

A Lifecycle Strategy is an investment strategy that offers the potential to grow your pension savings over the long term. It steadily switches where your pension savings are invested, as you approach your Target Retirement Age, into funds which match the retirement objective for that strategy such as:

• buying a guaranteed income (an annuity)
• taking flexible income (drawdown)
• take it all as cash
• or a 'balanced' approach which targets a combination of annuity, cash and drawdown.

Automatic 

 The Lifecycle Balanced 2020 strategy is the default strategy for the M Plan and DSL Plan and is where most members are invested. There are other default Lifecycle strategies for members of the I Plan.

The Lifecycle Balanced 2020 strategy is designed for a variety of retirement outcomes. It targets a combination of taking your pension pot as a cash lump sum, purchasing an annuity (a guaranteed income), and transferring to a flexi-access income drawdown product.

This Lifecycle strategy’s investment aims have been agreed by the Trustee and its investment adviser. Please note this does not necessarily mean that this strategy is suitable for you and your individual circumstances and there are other investment options available.

The Lifecycle strategy has three stages, Growth phase with the aim of increasing the value of your savings, switching phase when we will start to gradually move your savings into funds that target the retirement objective. The final phase is the At Retirement phase when automatic switching will stop.

Warnings

The Lifecycle strategy may not be suitable if you don’t take your pension benefits as intended from your retirement date. You should review your retirement date on a regular basis, as it will determine where your pension pot is invested as you approach retirement. If you don’t take your pension benefits when you reach your Target Retirement Age, your investment allocations will then drift in line with market movements and will not be rebalanced. It is therefore important to review your investment strategy on a regular basis, after your retirement date, to ensure that the funds in which your pension pot is invested remain suitable for your needs and consider taking financial advice (if appropriate).

I know how I want to take my Plan savings

If you know how you want to take your plan savings, there are other Lifecycle 2020 investment strategies available.

Warnings

Depending how you take your pension savings, the outcome that the Lifecycle strategy is targeting may not match the way you intend to use your pension savings or reflect your attitude to investment risk. It may also be unsuitable if you don’t use your pension savings as intended at your retirement date. It is important, therefore, to regularly review how your pension savings are invested and whether this remains suitable for your needs, seeking independent financial advice (if required).

Do it for yourself 

If you would like to take an active role in the investment of your Retirement Account, you can choose the Freestyle Strategy and invest your pension savings in any percentage combination of the Freestyle funds available.

Your investments will not automatically switch as you approach your Target Retirement Age like in the Lifecycle strategies. Your investment instructions will remain in place until you change them. So, it’s important you check how your investments are performing on a regular basis and that you make sure that the choices remain appropriate to you.

You can find more detailed information about all of these options on your Plan website and in the Investment guide.

Slide 7 - Investing in Lifecycle strategies

To recap, a Lifecycle strategy will automatically begin to move your retirement savings into different funds as you get nearer to your retirement date, and will target a particular outcome, for example purchasing an annuity or taking cash.

The outcome that the Lifecycle strategy is targeting may not match the way you intend to use your pension savings or reflect your attitude to investment risk. It may also be unsuitable if you don’t use your pension savings as intended at your retirement date.

It is important, therefore, to regularly review how your pension savings are invested and whether this remains suitable for your needs.

You will find more details of the advantages and disadvantages of investing in a Lifecycle strategy in the Investing section on your Plan website.

Remember that a pension is a tax-efficient, long-term savings plan but the value of your pension can go down as well as up.

Slide 8 - Do your investments match your plans?

We have heard today a little about the importance of understanding your investments and the choices available. Let’s now consider some of the things you may want to consider

Slide 9 - Things you should be thinking about

It’s important, particularly as you approach retirement, to ensure that your pension savings are invested in a way that reflects the way you want to take your money and when.

If you haven’t done so already, you should ask yourself a couple of key questions.

1. When do you intend to access your savings?

Is your Target Retirement Date correct? Unless you’ve changed it yourself, this will automatically be set to the default for most Plan members which is the normal retirement age for the Plan/section in which you are in.

It’s important that you review it on an annual basis, or if your circumstances change, to consider whether you still intend or can afford - to take your money at the date which has been set.

If your Target Retirement Age no longer reflects your circumstances or your plans, you may want to consider changing it. This is particularly relevant if you’re invested in a lifecycle strategy that moves your savings into different funds or asset classes, as you get closer to your Target Retirement Age.

You can do this in your online account.

2. How do you plan to take your money?

You have a range of options when it comes to taking money from your pension pot.

Knowing how you intend to take your money can help you to choose investments that not only reflect your intentions but also the level of investment risk that you’re willing to accept.

All investments carry a degree of risk and it’s important that you understand, and are comfortable with, the risks you're taking before making any investment choices.

You can find out more about investment risk on your Plan website or by going to your online account

Slide 10 - Retirement income options

When it comes to taking money from your pension you have different options available to choose from. Including;

To use your pension to buy an annuity.

To take your pension as cash all in one go.

To take cash from your pension in smaller cash sums.

Or to take a flexible income; this is often referred to as flexi access drawdown.

When thinking about the choices you have, it’s important to consider how each one would fit in with your personal circumstances and income goals. And remember, you don’t have to choose just one, you can combine them.

Please note that not all of these options will be accessible directly through your IBM pension plan. You may need to leave the Plan and access some of the options through an alternative arrangement/provider. Under your scheme rules you must stop working for IBM before taking your pension. If you want to know more about the options for taking your money please see the plan website.

We’ve talked today about investing your savings in a way that reflects your plans and how you intend to take your money.

If you aren’t sure, then you ought to start by asking yourself the following three questions …

1. Are your savings invested in a way that matches how you plan to take your money?
2. Are there other investment options that may be better suited to the way you’re planning to take your money?
3. If your current investments target a particular date, does this match when you plan to take your money?

Slide 11 - legalandgeneral.com/ibmpensionstrust

 If you haven’t already, you might want to look at the investment guides and factsheets, which are available on your Plan website, and could support your understanding.

Slide 12 - Helping you understand your options

If you want help understanding all your investment options, take a look at the guide to investing.

This guide has been designed to help you understand:

• how contributions are invested
• what you should be aware of if you want to make your own investment decisions
• the choices you will need to consider when it comes to investing your pension savings as you approach retirement.

Slide 13 - Managing your pension

You can view your investments in Manage Your Account. If you want to change the way your savings are invested this can also be done in Manage Your Account

In Manage Your Account you can also:

• See the value of your pension pot
• View information on your current investment, view other options and change where you are invested at any time
• View and request benefit statements
• Change your Target Retirement Age

This is also where you can provide details of who you would like to receive your pension in the event of your death.

It is worth registering for your online account.

Slide 14 - Guidance and advice

It’s important to get the support you need to help you make the right decisions.

Slide 15 -Make an appointment with Pension Wise

Regardless of the size of your pension pot, if you have a Defined Contribution (DC) pension and you’re aged 50 or over, you’re entitled to free specialist guidance from Pension Wise, part of the government’s MoneyHelper service. Legal & General will recommend that you take this guidance before accessing your pension.This guidance can help you to understand how each of the options we mentioned with reference to your investment works. It will explain how each option is taxed and help you to identify your next steps. It will also provide information on how to avoid pension scams.

Your 60-minute appointment can be carried out over the phone or face to face. You can book your free appointment by calling 0800 138 3944 or by completing the online booking form, which you can access on the Pension Wise website by scanning the QR code.

Slide 16 - The importance of seeking guidance and advice

There is lots of support available.

MoneyHelper is the new name for the government body that brings together Pension Wise, The Money Advice Service and the Pensions Advisory Service.

The MoneyHelper website has information about the costs and what you should expect if you decide to pay for financial advice. It’s a good place to start.

Pension Wise is a free and impartial service that can help you to understand the ways you can take your retirement savings and the potential tax implications of each one.

The government also has a mid-life MOT website that provides guidance to help people carry out a financial stock-take some years before their retirement.

If you need personalised financial advice, visit unbiased.co.uk to find financial adviser in your local area. Please note that advisers normally charge for their services.

Slide 17 - LV= At retirement advice

If you don’t wish to find your own adviser, Legal & General has teamed up with LV= who provide a telephone retirement advice service. You can find more information on the Advice at retirement website which can be accessed from legalandgeneral.com/workplace/ara or by scanning the QR code on the slide

LV= offer two options for advice.

1. Workplace advice is a restricted advice service that relates only to your DC pension pot(s) in you IBM Pension Plan.
2. Full retirement advice considers your total financial position including all your pension and investment savings as well as, other assets and income sources.

Once you’ve received your initial financial advice from an LV= adviser, you’ll have the opportunity to continue to receive their support via an ongoing service.

Legal & General do not earn any fees from the introduction to LV=.   [Please note that the Trustee is not endorsing the use of this advice service over any others – you are free to use any other advice or guidance service or regulated financial adviser.]

 Slide 18 - Other important considerations

We have covered quite a bit of ground today however this won’t be an exhaustive list

Slide 19 - Managing your money in uncertain times

The rising cost of living means that many people are naturally concerned about their finances. Over the last few years, we've seen uncertainty in financial markets caused by the COVID-19 pandemic, invasion of Ukraine and the rising costs of goods and services. This has led to volatile market conditions. However, history shows that markets do recover from all sorts of circumstances. It’s important to not make rash financial decisions in the heat of the moment about long-term investments To find out more visit our ‘managing your pension in uncertain times’ which you can access via your Plan website

We cover a range of topics such as Investing during times of uncertainty, Managing and protecting your pension & Inflation and the cost of living.

I have pulled out some example questions that specifically relates to the topic of managing investments in uncertain times.

1. The value of my investments has fallen-should I take action?
2. You may have seen a reduction in the value of your pension pot. We should be prepared to see volatility in the financial markets for some time to come. However, while this can be worrying, it’s important to remember that pensions are long-term investments and history suggests that markets which go down, will typically go back up again at some point.
3. Should I switch my investments to avoid further loss?
4. If you’re thinking about switching your investment, it’s something that needs to be considered very carefully.

If you switch out of a current investment into one that’s less volatile, it may reduce your level of risk but would also crystallise any current losses so you might lose the opportunity to recoup those losses in the future. Less volatile funds may also have less scope for growth, however different individuals will have different attitudes to risk and volatility, so may feel more comfortable with a reduced growth potential in future if it means the potential for less risk now. You may wish to consider taking financial advice before switching your investments.

Slide 20 - Tools to help you plan

At Legal & General we want to help you take control of your money and so we will provide you with a range of resources to help you to plan.

Slide 21 - How much income will you need in retirement?

L&G have a Retirement living standards tool that can help you to work out how much you might need in retirement, either as an individual or as a couple.

It works with the PLSA’s Retirement Living Standards, allowing you to amend each category so that it’s relevant to your needs, and can help you to identify an annual income that would provide you with the lifestyle you’re hoping for.

Legal & General’s Retirement planning tool gives you the opportunity to see if your retirement savings are on track to achieve the Retirement living standard you’re hoping for.

It also lets you see what difference it might make to the value of your pension pot at retirement if you saved different amounts over different periods of time and enables you to look at the different ways in which you might want to take your retirement savings.

You can access the Legal & General Retirement Living Standards tool via your Plan website or by going to your online account (MYA).

In addition to Legal & General’s tools , there are other independent tools available that help you with budget planning such as the budget planner from Money Helper:

Slide 22 - Our retirement planning tool

The Legal & General retirement planning tool can help you to see if your retirement savings are on track.

You can access this by going to your online account.

The tool will do some of the work for you by automatically populating some of the fields, including the value of your savings, the amount you contribute, and where your savings are invested.

You can select from a choice of different ‘Retirement living standards’ to help you identify how much money you might need to support a particular lifestyle in retirement. You can also use the tool to see how saving different amounts over different periods of time might impact the size of your pension pot.

You can also add the value of your savings in any other Defined Contribution (DC) plans.

This will help you to consider further which retirement income option might be right for you.

We recommend you use the tool at least once a year to monitor if your savings are on track to meet your needs.

The tool has a number of risk warnings and assumptions and it’s important that read and understand them. It’s also important to be aware that, using the tool does not replace the need for you to seek guidance and financial advice.

Slide 23 - Thank you

We hope you enjoyed the recording today. To summarise, we recommend you take the following action: 

• Check where you are invested
• Review if your investments are still appropriate for your needs
• Consider taking financial advice
• Where required (and appropriate) to take action

If you do have any questions, you can call our helpline team and remember please visit your Plan website for further guidance on the topics covered today. To see your own details please visit Manage Your Account.

Thanks for listening.