Scottish Widows has launched a new default fund as part of its mission to evolve its pension investment approaches (PIA).
The new default, Lifetime Investment, will be available immediately for new employers and all customers on a self-select basis, while existing customers invested in the current £60 billion PIA default offering, will also transition to the new default.
Scottish Widows said the new default will offer members a choice of two risk options; the growth path, where 100% of savings will be invested into growth assets initially; and the balanced growth path, where 85% of savings will be invested in growth assets. The remaining 15% will be invested into more defensive assets.
Both options will begin to derisk from 12 years out from a customer’s chosen Selected Retirement Age.
The default derisking path will target drawdown, but members who wish to purchase an annuity or take their savings as cash will be able to access glidepaths that specifically target these outcomes.
Scottish Widows said the new approach has been developed to maximise pension growth potential for customers.
It added that the default has a high exposure to equities in its growth phase and a shorter de-risking phase, leaving customers’ pension savings invested in higher-growth assets for longer to boost potential returns.
In addition, Scottish Widows has also worked with asset manager Robeco to ensure the new default delivers on its responsible investing commitments.
Graeme Bold, managing director, workplace and intermediary wealth, at Scottish Widows, said: “The introduction of Lifetime Investment comes at a time where more and more savers are at risk of a poor standard of living in retirement or having to work longer to supplement their income.
“Our research shows that nearly half (47%) of over 55s fear that they will run out of money during retirement. The new default has been developed as a direct response to these issues, as we aim to give savers the best chance of maximising the growth of their retirement pots.”
Bold added: “PIA has constantly evolved over the nearly two decades since launch and has performed for members over this time. We are excited to evolve this into Lifetime Investment to take account of changes, such as longer life expectancies and phasing of retirement. Whilst this is an exciting milestone for us, there’s more to come as Lifetime Investment evolves and we continue to work towards better retirement outcomes for our customers.”
Main image: hector-j-rivas-1FxMET2U5dU-unsplash
