Scottish Widows has revamped its largest default fund to target a higher exposure to growth assets and embed sustainability targets.
The company’s existing workplace pension offering, known as Pension Investment Approaches (PIA), which have more than £60bn in assets collectively, will be replaced by the new Scottish Widows Lifetime Investment.
The new default fund is available for new employers and for individual customers on a self-select basis, while existing customers invested in the PIA default will transition to the new fund.
In a press release, Scottish Widows said Lifetime Investment had a high exposure to equities in its growth phase and a shorter de-risking phase than the previous offering.
Graeme Bold, managing director for workplace and intermediary wealth at Scottish Widows, said the new approach was designed to maximise pension growth potential.
He 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.
“In fact, our research shows that 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.”
Data from the Department for Work and Pensions, published today (27 March), showed that, while the average pensioner’s weekly income had doubled in real terms since 1995, inflation has eroded the value of much of this increase.
Bold said the new fund was also designed to account for “longer life expectancies and phasing of retirement”.
Scottish Widows worked with asset manager Robeco to ensure the new default reflects the pension provider’s responsible investing commitments by tilting towards companies that aim to have a positive impact on the UN’s Sustainable Development Goals.
This follows research showing that customers increasingly want their pensions invested in a way that improves the world that they will retire into.
The new default will offer members a choice between 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.
Regardless of the chosen path, both options will begin to derisk from 12 years out from a customer’s chosen retirement date. The default derisking path targets drawdown, but there are other paths available for those wanting to buy an annuity or take cash.
