A number of providers have been forced to reshape their default investment options in line with the changes brought about by the pension freedoms, with Standard Life making a U-turn on its previous position.
In March last year a number of providers confirmed to FTAdviser they were reviewing their strategies, following the radical changes announced in last year’s Budget.
At that time, Standard Life said it was not necessary to review its strategy since it had more than one default fund in place, however it has now u-turned on this stance.
Speaking to FTAdviser, Jenny Holt, head of investment solutions at Standard Life, said that the firm has now implemented a change to its workplace solutions, which was already in place for April this year.
She said: “We reshaped the glidepath to move away from targeting annuity structures to multi-asset funds to provide a more broadly diversified asset mix. We’ve moved to something that will provide a good outcome whatever people decide to do.”
The company now has four ‘glidepaths’: a universal glidepath, an annuity purchase glidepath, a lump sum glidepath and an active retirement glidepath.
She added: “Most of the money is in the universal glidepath - we have just over 380,000 people in those.”
Stephen Jackson, pension proposition manager at Aviva. told FTAdviser that the firm had already reviewed the default strategies to take account of the retirement flexibilities.
“It had traditionally been based on buying an annuity. We are replacing elements of default strategies that did track annuity purchase in the derisking phase. We are changing the funds to an option now better aligned with retirement.”
The default fund is called the Diversified Assets fund one.
“We think it is now most appropriate for people approaching retirement broadly for people in drawdown, but also for those who want to stay invested or take their cash.”
The firm is also offering a cash tracking option and an annuity tracking option. From the end of May, new customers have been able to access the new options available, and for existing customers the firm will write to them at the end of the year giving them the chance to change, or they can request to change sooner if they wish.
Scottish Widows also confirmed it had re-evaluated its glidepaths following the pension freedoms.
A spokesperson for Scottish Widows spokesperson said: “We introduced additional glide paths to coincide with the new pension freedoms for 6 April that we regard as suitable for members who wish to remain invested through retirement or who take cash, as well as for those who wish to purchase an annuity.
“These give members investment options that are appropriate to their expected income in retirement.”
The spokesperson added that for the time being, the firm has left its default as one that assumes the member will take cash and purchase an annuity at the selected retirement age.
“We are keeping this under review as member behaviour becomes clearer following the reforms and may decide to adopt one of our alternative glide paths as the default, supported by appropriate member engagement.”
A spokesperson for The People’s Pension confirmed that the organisation is still reviewing its wider investment approach, and that work will be concluded in the next few months, and that its focus to date had been giving people access to the freedoms through small pot claims and uncrystallised fund pension lump sums.
Aegon said that it is moving towards offering a multi-asset investment approach for people the closer they get to retirement, as this offers a better risk/return profile for investors who opt for drawdown or change their retirement date, and as such the firm believes it better serves the needs of a ‘typical’ default investor.
“We’re still working on making these changes and hope to implement them in the coming months.”
A spokesperson for Now: Pensions said: “Now: Pensions offers a single investment strategy – so one fund, no investment choice. We made changes to our lifestyle strategy in July last year.”
Nest has also revised its glidepath. Paul Todd, assistant director of investment, said: “‘We revised the glidepath to reflect our expectation that fewer people will be purchasing an annuity.
“The primary objective of the consolidation phase for our post-2020 target date funds is now to outperform inflation (measured as CPI) after all charges, while aiming to progressively dampen volatility’
ruth.gillbe@ft.com
