For financial adviser use only. Not approved for use with customers.
Our investment proposition
for auto-enrolment pension
schemes
A guide for financial advisers
Ready-made and bespoke approaches available
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About this guide
This guide explains the investment options you can use for
Aviva’s Group Personal Pension Schemes, our Company
Pension and Company Stakeholder Pension.
How to find your way around
Click on the tabs at the bottom of the page to head straight to the section you want.
Or click on a title in the contents list to go to a particular page.
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Contents
Introducing our investment proposition
4
How it works
5
Ready-made approaches
6
Introducing our Future Focus range
7
The approaches in detail
9
Bespoke approaches
19
Take the tailored route
20
How to create your own investment approach
21
More information
24
Recommending a ‘core’ fund range
25
Governance of auto-enrolment defaults
26
Next steps
27
Introduction | Ready-made approaches | Bespoke approaches | More info
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Introducing our investment
proposition for auto-enrolment
pension schemes
Our investment proposition is designed to help you set
up an investment option, or range of options, for your
clients’ auto-enrolment pension schemes.
With a selection of off-the-shelf lifestage approaches available and the ability to devise your own,
you’ll be able to create an investment solution to suit even the most demanding client.
What our proposition includes:
A
selection of lifestage approaches: You can choose from our ‘Future Focus’
range of ready-made lifestage approaches (ready to use with any auto-enrolment
scheme). You can also create your own lifestages from scratch. Or you can use a
combination of the two.
●
A selection of lifestage outcomes: Our Future Focus range offers ready-made
lifestage approaches that target drawdown, annuity and cash lump sum retirement
outcomes. These options are available to employees in addition to any bespoke
investment options created specifically for a scheme.
●
Flexibility over default choice: Any of our Future Focus approaches can be used
as an auto-enrolment default, giving you plenty of flexibility. You can even create
your own lifestage approach to use as a default, if you wish (subject to approval
from our governance team – see page 24 for details).
Why we’re using
lifestaging
Our investment approaches for
auto-enrolment all use lifestaging
because we believe it’s the best
solution to the best practice guidelines
issued by the Department for
Work and Pensions1 (DWP).
●
G
overnance you can count on: Our fund governance team handles all the ongoing
governance required for auto-enrolment investment approaches, so you don’t have
to. The team reviews all the approaches you’ll find in this guide (including any you’ve
designed) to ensure they’re performing in line with their objectives. Aviva has also
established an Independent Governance Committee. Please see page 26 for details.
●
T
he option to recommend core funds: Provide your client with even more value
by recommending a number of investment funds to include in a ‘core’ fund range.
Choose your recommendations from our full range of over 230 funds from some of
the top names in investment.
●
P
lus – literature for employees: Once you’ve set up your client’s scheme, we’ll
produce literature to explain the scheme default and any other investment options
to employees. We will also send each member an annual statement explaining, in
plain English, how their pension plan has performed.
●
Lifestaging aims to help protect the
retirement benefits the member
could get and requires little or no
input from them. We designed it
with the majority of employees
in mind, who typically aren’t
sophisticated investors and don’t
have ready access to financial advice.
What’s more, our lifestage
approaches come with automatic
rebalancing as standard. The fund
splits are moved back to their
original levels at regular intervals
– so employees should rarely (if
ever) be exposed to a higher level
of investment risk than they’re
comfortable with.
Designed with auto-enrolment in mind
We’ve designed our investment proposition based on best practice guidelines issued
by the Department for Work and Pensions1 (DWP). So with an Aviva pension scheme,
your clients can feel confident they’re offering their employees investment options that
are in tune with the regulator’s recommendations.
1
Guidance for offering a default option for defined contribution automatic enrolment pension schemes, DWP, May 2011.
Introduction
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How to create an investment
solution for your client’s scheme
Creating an investment solution for your client’s Aviva pension scheme is
very straightforward, even if your client’s needs aren’t. Here’s how to do it:
Choose from
and
Future Focus investment
approaches (page 7–16)
Five ‘ready-made’ lifestage
investment approaches.
●
Three different retirement
outcomes.
●
Three different risk profiles
to choose from.
●
Bespoke investment
approaches (page 17–21)
Create your own lifestage
investment approaches.
●
Choose from 230+ high
quality funds.
●
You can white label
your approach.
●
plus (optional)
A core fund range (page 23)
Recommend a ‘core’ range
of investment funds.
●
Choose your selection from
our range of 230+.
●
A good way of adding
more value for your client.
●
Designed by Aviva’s
investment experts.
●
Please note: scheme members have a range of investment options to choose from and can change their investments at any time.
Your questions answered
Q: How many investment options can my client offer scheme members?
A: We don’t impose a limit, but its worth noting that The Pension Regulator has issued guidance that “too much choice can
be confusing for members”. We expect that most auto-enrolment schemes will offer a choice of investment options that cover
different potential retirement outcomes.
Q: Can my client offer different investment options to different employees?
A: Yes. Your client can offer different options to different categories of employee – all within the same scheme. For instance:
they could give their office-based staff a separate range of investment options from their sales force.
The same applies to auto-enrolment defaults; your client can have a different default option for different categories of employee.
Q: If I’m adapting an existing scheme for auto-enrolment, can my client keep any of their
existing investment options?
A: They can. However, if they want to do so, we recommend adding one of our Future Focus investment approaches to the
scheme as a default option. This range is specially designed to be suitable for auto-enrolment pension schemes. Speak to your
usual Aviva consultant for more information.
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Ready-made investment
approaches
Introducing our Future Focus range
7
The approaches in detail
9
Introduction
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Introducing our
Future Focus range
Our Future Focus range of ready-made lifestage approaches
gives you a way of putting together an investment solution for
your client’s scheme.
A fast-track way to build an investment solution
Our Future Focus range consists of five lifestage investment approaches. This allows you to put together an
investment solution for different member retirement needs.
Our Future Focus range at-a-glance
Lifestage
approach name
What’s available
Member target retirement outcome
Aviva Future
Focus 1 Drawdown
Lifestage Approach
This approach is only available to
employers who have taken financial
advice.
Aviva Future
Focus 2 Drawdown
Lifestage Approach
This is Aviva’s standard default
option. If an alternative default isn’t
selected this approach will be used.
Aviva Future
Focus 3 Drawdown
Lifestage Approach
This approach is only available to
employers who have taken financial
advice.
Aviva Future
Focus 2 Annuity
Lifestage Approach
This approach is only available to
employers who have taken financial
advice.
To use their pension pot to buy an income
for their lifetime (an annuity) when they
reach their chosen retirement age.
Aviva Future
Focus 2 Lump Sum
Lifestage Approach
This approach is only available to
employers who have taken financial
advice.
To withdraw all their money in their pension
pot as a one-off cash lump sum when they
reach their chosen retirement age.
To take some of their money from their
pension pot as and when they need it,
for example as cash sums or as a flexible
income (known as drawdown) when they
reach their chosen retirement age.
A range of retirement outcomes available for employees to select
This includes our full Future Focus range which is available to all employees to select in addition to any other
investment options created specifically for a scheme. Employees can only invest in one approach at a time.
All suitable as auto-enrolment defaults
All our Future Focus approaches are designed for those employees most likely to end up in their scheme’s
default. Which means you can use any of them – right off-the-shelf – as the default option for your client’s
auto-enrolment scheme.
No governance for you or your client
What’s more, if you use one of our Future Focus range for your client’s auto-enrolment default, we’ll handle
all the governance required – right from day one. Please see the governance section on page 24 for full details.
“All governance is handled by Aviva”
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Specially designed for auto-enrolment
Our Future Focus approaches are designed to be used as an auto-enrolment default option. Every aspect
of each approach has been designed with this in mind – from the funds used right through to how the
investments change as employees using these approaches near their chosen retirement age.
The early years of the approaches are designed to provide investment growth. For the Future Focus 1, 2
and 3 Drawdown and Future Focus 2 Lump Sum Lifestage investment approaches, the aim is to invest
in funds with the potential for growth in the early years, and then automatically and gradually move the
member’s money into lower risk funds in the years before they are due to take their retirement benefits.
For the Future Focus 2 Annuity Lifestage investment approach, as the member nears their chosen
retirement age, their investment is moved into different types of fund to help protect the level of income
they could get. All of this happens automatically.
Low cost
The DWP charge cap statement means default fund charges cannot exceed 0.75% from April 2015.
Good news then, that our Future Focus range is specifically designed never to breach this cap.
Volatility-targeted
The Aviva Diversified Assets Funds we’re using for the growth stage of each approach target volatility,
not return. Why?
In turbulent economic conditions, funds that aim for a certain return target have to take more risk to achieve
that return. But by targeting volatility, there will be a greater correlation between the level of investment risk
a scheme member thinks they’re taking, and the risk they’re actually taking.
In short, we believe this makes volatility-targeted funds far more appropriate to use for auto-enrolment
defaults than funds which target a certain return.
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Our Future Focus range –
the approaches in detail
There are five lifestage investment approaches in our
Future Focus range. Read on for details of how each approach
works, what its objectives are and what funds it uses.
Overview and objectives
Each approach in our Future Focus range is designed to offer an appropriate balance of risk and return
for employees being automatically enrolled into a pension scheme.
Aviva’s Future Focus 2 Drawdown Lifestage Approach is Aviva’s standard default option. If an alternative
default isn’t selected, Future Focus 2 Drawdown Lifestage Approach will be used.
Approach name
Objectives
Aviva Future Focus 1
Drawdown Lifestage
Approach
This approach aims to minimise large fluctuations in the value of the member’s pension pot, but the
potential for growth may be limited. It is designed to prepare their pension pot for flexible access at
their chosen retirement age:
●
●
taking some of the money as and when they need it, either as cash sums or as flexible income
(known as drawdown) or
leaving their money where it is and making their choices later
Please note: At their chosen retirement age the member will have a number of retirement options,
(even if they remain invested in this lifestage approach), however this lifestage investment approach
has been designed to prepare for the particular retirement options shown above.
This approach is not designed to prepare for:
Aviva Future Focus 2
Drawdown Lifestage
Approach
●
withdrawing all the money in their pension pot
●
buying an income for life (known as an annuity) at the member’s chosen retirement age.
This approach aims to provide growth in the early years, although the value of the member’s pension
pot could fluctuate. It is designed to prepare their pension pot for flexible access at their chosen
retirement age:
●
●
taking some of the money as and when they need it, either as cash sums or as flexible income
(known as drawdown) or
leaving their money where it is and making their choices later
Please note: At their chosen retirement age the member will have a number of retirement options,
(even if they remain invested in this lifestage approach), however this lifestage investment approach
has been designed to prepare for the particular retirement options shown above.
This approach is not designed to prepare for:
●
withdrawing all the money in their pension pot
●
buying an income for life (known as an annuity) at the member’s chosen retirement age.
More overleaf
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Approach name
Objectives
Aviva Future Focus
2 Annuity Lifestage
Approach
This approach aims to provide growth in the early years, although the value of the member’s pension
pot could fluctuate. It is designed to prepare their pension pot for:
●
buying an income for life (known as an annuity) at their chosen retirement age.
Please note: At their chosen retirement age the member will have a number of retirement options,
(even if they remain invested in this lifestage approach), however this lifestage investment approach
has been designed to prepare for the particular retirement option shown above.
This approach is not designed to prepare for:
●
Aviva Future Focus 2
Lump Sum Lifestage
Approach
taking some of the money as and when they need it, either as cash sums or as flexible income
(known as drawdown)
●
withdrawing all the money in their pension pot or
●
leaving their money where it is and making their choices later
This approach aims to provide growth in the early years, although the value of the member’s pension
pot could fluctuate. It is designed to prepare their pension pot for:
●
withdrawing all the money in their pension pot at their chosen retirement age.
Please note: At their chosen retirement age the member will have a number of retirement options,
(even if they remain invested in this lifestage approach), however this lifestage investment approach
has been designed to prepare for the particular retirement option shown above.
This approach is not designed to prepare for:
●
Future Focus 3
Drawdown Lifestage
Approach
taking some of the money as and when they need it, either as cash sums or as flexible income
(known as drawdown)
●
buying an income for life (known as an annuity)
●
leaving their money where it is and making their choices later
This approach offers the potential for good returns over the long term, although the value of the
member’s pension pot could fluctuate significantly. It is designed to prepare their pension pot for
flexible access at their chosen retirement age:
●
●
taking some of the money as and when they need it, either as cash sums or as flexible income
(known as drawdown) or
leaving their money where it is and making their choices later
Please note: At their chosen retirement age the member will have a number of retirement options,
(even if they remain invested in this lifestage approach), however this lifestage investment approach
has been designed to prepare for the particular retirement options shown above.
This approach is not designed to prepare for:
Introduction
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●
withdrawing all the money in their pension pot
●
buying an income for life (known as an annuity) at the member’s chosen retirement age.
Ready-made approaches
Bespoke approaches | More info
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How the approaches work – Future Focus 2 & 3 Drawdown
100%
90%
80%
70%
60%
50%
Stage 2
Stage 1
Stage 3
40%
30%
20%
10%
0%
10
years
Aviva Diversified Assets Fund II or III
9
8
7
6
5
4
Aviva Diversified Assets Fund I
3
2
1
At
retirement
Aviva Deposit fund
Stage 1 is the growth phase, when all the employee’s payments are invested in the
Aviva Diversified Assets Fund II (Future Focus 2) or Aviva Diversified Assets Fund III (Future Focus 3).
The purpose of this stage is to maximise the growth of the employee’s pension pot, while
keeping the risk profile consistent.
tage 2 is when consolidation begins. It kicks in when the employee reaches 10 years from their
S
chosen retirement age. During this stage, we gradually (and automatically) move the scheme
member’s money into the lower volatility Aviva Diversified Assets Fund I.
1
2
T he purpose of this stage is to move the investments into a lower risk fund as they near their chosen
retirement age.
tage 3 begins three years from the employee’s chosen retirement age. During this stage,
S
we start moving money into the Aviva Deposit fund, as well as continuing to move it into the
Aviva Diversified Assets Fund I.
3
This stage is designed to help protect the value of the tax free cash lump sum the employee can choose
to take when they take their benefits – along with continuing to move the client’s investments into
lower risk funds.
By the time the employee reaches their chosen retirement age, 25% of their pension pot will be invested
in the Aviva Deposit fund, and 75% will be invested in the Aviva Diversified Assets Fund I.
The exact fund split at the start of the investment depends on how far the employee is from their chosen
retirement age when they become a scheme member.
Automatic Rebalancing
From the start of stage 2 onwards, the funds are automatically rebalanced back to their original weightings
at set intervals. This will happen every 3 months.
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How the approaches work – Future Focus 2 Annuity
100%
90%
80%
70%
60%
50%
Stage 1
Stage 3
Stage 2
40%
30%
20%
10%
0%
10
years
Aviva Diversified Assets Fund II
9
8
7
6
5
4
Aviva BlackRock Aquila Over 15 Years
Corporate Bond Index Tracker
3
2
1
At
retirement
Aviva Deposit fund
Stage 1 is the growth phase, when all the employee’s payments are invested in the
Aviva Diversified Assets Fund II. The purpose of this stage is to maximise the growth of the
employee’s pension pot, while keeping the risk profile consistent.
tage 2 is when consolidation begins. It kicks in when the employee reaches 10 years from their
S
chosen retirement age. During this stage, we gradually (and automatically) move the scheme
member’s money into the Aviva BlackRock Aquila Over 15 Years Corporate Bond Index Tracker.
1
2
The purpose of this stage is to help protect the level of income the employee’s pension pot could buy at
their chosen retirement age.
tage 3 begins three years from the employee’s retirement date. During this stage, we start moving
S
money into the Aviva Deposit fund, as well as continuing to move it into the Aviva BlackRock Aquila
Over 15 Years Corporate Bond Index Tracker.
3
This stage is designed to help protect the value of the tax free cash lump sum the employee can choose
to take when they take their benefits – along with continuing to help protect the level of income their
pension pot could buy.
By the time the employee reaches their chosen retirement age, 25% of their pension pot will be invested
in the Aviva Deposit fund, and 75% will be invested in the Aviva BlackRock Aquila Over 15 Years
Corporate Bond Index Tracker.
The exact fund split at the start of the investment depends on how far the employee is from their chosen
retirement age when they become a scheme member.
Automatic Rebalancing
From the start of stage 2 onwards, the funds are automatically rebalanced back to their original weightings
at set intervals. This will happen every 3 months.
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How the approaches work – Future Focus 2 Lump Sum
100%
90%
80%
70%
60%
50%
Stage 1
Stage 3
Stage 2
40%
30%
20%
10%
0%
10
years
Aviva Diversified Assets Fund II
9
8
7
6
5
Aviva Diversified Assets Fund I
4
3
2
1
At
retirement
Aviva Deposit fund
Stage 1 is the growth phase, when all the employee’s payments are invested in the
Aviva Diversified Assets Fund II. The purpose of this stage is to maximise the growth of the
employee’s pension pot, while keeping the risk profile consistent.
tage 2 is when consolidation begins. It kicks in when the employee reaches 10 years from their
S
chosen retirement age. During this stage, we gradually (and automatically) move the scheme
member’s money into the Aviva Diversified Assets Fund I.
1
2
The purpose of this stage is to move the investments into a lower risk fund as they near their chosen
retirement age.
tage 3 begins four years from the employee’s chosen retirement age. During this stage, we start
S
moving money into the Aviva Deposit fund.
3
This stage is designed to help protect the value of the pension pot, assuming the employee is considering
taking it all as a lump sum.
By the time the employee reaches their chosen retirement age, 100% of their pension pot will be
invested in the Aviva Deposit fund. There is a greater possibility that the investment returns on the
Aviva Deposit fund may not cover the scheme charges.
The exact fund split at the start of the investment depends on how far the employee is from their chosen
retirement age when they become a scheme member.
Automatic Rebalancing
From the start of stage 2 onwards, the funds are automatically rebalanced back to their original weightings
at set intervals. This will happen every 3 months.
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How the approaches work – Future Focus 1 Drawdown
100%
90%
80%
70%
60%
50%
Stage 2
Stage 1
40%
30%
20%
10%
0%
10
years
Aviva Diversified Assets Fund 1
9
8
7
6
5
4
3
2
1
At
retirement
Aviva Deposit fund
Stage 1 is the growth phase, when all the employee’s payments are invested in the
Aviva Diversified Assets Fund I. The purpose of this stage is to maximise the growth of the
employee’s pension pot, while keeping the risk profile consistent.
tage 2 is when consolidation occurs. Stage 2 begins 3 years from the employee’s chosen
S
retirement age. During this stage, we start moving money into the Aviva Deposit fund, as well as
continuing to invest in the Aviva Diversified Assets Fund I.
1
2
This stage is designed to help protect the value of the tax free cash lump sum the employee can choose
to take when they take their benefits – along with continuing to invest in a lower risk fund as they near
their chosen retirement age.
By the time the employee reaches their chosen retirement age, 25% of their pension pot will be invested
in the Aviva Deposit Fund, and 75% will be invested in the Aviva Diversified Assets Fund I.
The exact fund split at the start of the investment depends on how far the employee is from their chosen
retirement age when they become a scheme member.
Automatic Rebalancing
From the start of stage 2 onwards, the funds are automatically rebalanced back to their original weightings
at set intervals. This will happen every 3 months.
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The funds used
For the growth stage (stage 1)
Aviva Diversified Assets Fund I (used for Future Focus 1)
Aviva Life risk rating: 2 (low to medium)
Target volatility: 7% (+/− 2%)*
Annual management charge: 0.0%
Fund objective: To provide long-term growth through exposure to a range of asset classes, that can include, but is
not limited to equities, fixed interest, cash, property and commodities. The fund may also use derivatives. This fund
is part of a range of funds that have been designed to offer different risk options. This fund is designed to provide a
lower risk option, with the expectation of less potential for growth, than Diversified Assets Fund II.
Asset allocation:
0.0%
0.0%
0.1%
0.8%
14.9%
3.2%
34.7%
12.9%
16.0%
International Equities
Property
UK Gilts
Alternative Trading Strategies
UK Corporate Bonds
Managed Funds
International Bonds
Other
UK Equities
Cash and Equiv
17.5%
Please note: This is the fund’s asset allocation as at 30/09/2015
Aviva Diversified Assets Fund II (used for Future Focus 2)
Aviva Life risk rating: 3 (medium)
Target volatility: 10% (+/− 2%)*
Annual management charge: 0.0%
Fund objective: To provide long-term growth through exposure to a range of asset classes, that can include,
but is not limited to equities, fixed interest, cash, property and commodities. The fund may also use derivatives.
This fund is part of a range of funds that have been designed to offer different risk options.
Asset allocation:
-0.1%
0.0%
0.1%
1.2%
16.6%
4.7%
International Equities
Property
UK Gilts
Alternative Trading
Strategies
UK Corporate Bonds
51.4%
7.1%
International Bonds
UK Equities
8.8%
Managed Funds
Other
Cash and Equiv
10.1%
Please note: This is the fund’s asset allocation as at 30/09/2015.
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Aviva Diversified Assets Fund III (used for Future Focus 3)
Aviva Life risk rating: 3 (medium)
Target volatility: 13% (+/− 2%)*
Annual management charge: 0.0%
Fund objective: To provide long-term growth through exposure to a range of asset classes, that can include, but is
not limited to equities, fixed interest, cash, property and commodities. The fund may also use derivatives. This fund
is part of a range of funds that have been designed to offer different risk options. This fund is designed to provide
a higher risk option, with the expectation of greater potential for growth, than Diversified Assets Fund II.
Asset allocation:
-0.2%
0.0%
15.9%
0.1%
1.5%
3.5%
4.3%
5.2%
64.0%
5.7%
International Equities
Property
UK Equities
Alternative Trading Strategies
UK Gilts
Managed Funds
UK Corporate Bonds
Other
International Bonds
Cash and Equiv
Please note: This is the fund’s asset allocation as at 30/09/2015.
Additional information
Fund manager profile (for the three funds above): Our Diversified Assets Fund range is managed by Gavin Counsell
and Nick Samouilhan of Aviva Investors. Managers of this fund range since December 2013 and September 2014
respectively.
How the funds are managed: Under normal conditions, Aviva Investors will review the strategic asset allocation of
the funds every six months, in line with long-term asset class risk expectations. Tactical asset allocation will also be
allowed on an ad-hoc basis if there is a clear valuation argument for doing so.
*As a reference point, a reasonable long-term volatility assumption for developed global equities would be 16%.
At the other end of the scale, a reasonable long-term volatility assumption for cash would be 0.5% or less.
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For the de risking/consolidation stages (stages 2 and 3)
Aviva Diversified Assets Fund I
Aviva Life risk rating: 2 (low to medium)
Annual management charge: 0.0%
Benchmark: No benchmark applicable
Fund objective: The objective of the fund is to provide long term growth through exposure to a
range of asset classes, that can include, but is not limited to equities, fixed interest, cash, property and
commodities. The fund may also use derivatives. This fund is part of a range of funds that have been
designed to offer different risk options. This fund is designed to provide a lower risk option, with the
expectation of less potential for growth, than Diversified Assets Fund II.
Fund manager: Gavin Counsell and Nick Samouilhan: Managers of this fund since December 2013 and
September 2014 respectively.
Aviva BlackRock Aquila Over 15 Years Corporate Bond Index Tracker Fund
Aviva Life risk rating: 3 (medium)
Annual management charge: 0.0%
Benchmark: iBoxx £ Non-Gilts Over 15 Years Index
Fund objective: This fund invests in investment grade corporate bonds denominated in sterling. The
fund aims to achieve a return consistent with the iBoxx £ Non-Gilts Over 15 Years Index. This index
consists of bonds with a maturity period of 15 years or longer.
Fund manager: Team managed by BlackRock.
Aviva Deposit Fund
Aviva Life risk rating: 1 (low)
Annual management charge: 0.0%
Benchmark: LIBID GBP 7 Days
Fund objective: The fund aims to protect capital by investing typically in deposit investments and
similar assets with governments, first class banks and major companies. Although the fund aims to
provide a lower risk return, the value can fall.
Fund manager: Richard Hallet, Aviva Investors. Richard joined the firm in 1998, and was appointed
Cash Fund Manager following the merger of Commercial Union and General Accident.
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Aviva’s risk and return ratings defined
We give each of our funds a risk rating, ranging from 1 (low) to 5 (high).
Risk is the possibility of losing money and return is how much it could grow. Risk and return are linked. This
means funds with a rating of 1 have a low risk of losing money, but it might not grow very much. Funds with
a rating of 5 have a higher risk of losing money, but the potential for it to grow over the long term is higher
too. The funds used in these approaches are all between risk rating 1-3.
Risk Rating
Fund type
1 – Low
Funds with this rating usually aim to provide returns similar to those of deposit
and savings accounts, although there’s still a risk the value of the investment
could fall.
2 – Low to Medium
Expected to provide better long-term returns than savings accounts. Typically
invest in high quality corporate bonds or provide a form of guarantee or capital
protection, although there is still a risk the value of the investment could fall.
3 – Medium
Typically don’t offer guarantees, but have the potential for better long-term returns
than lower risk funds, although there’s a risk the value of the investment could
fall. Generally invest in a diversified mix of assets or in fixed income bonds
issued by higher risk companies.
4 – Medium to High
Funds that typically invest in shares of companies in the UK or other major
stock markets. Fund prices may fluctuate significantly but offer the potential for
good returns over the long term.
5 – High
Funds that invest in the higher risk sectors (typically emerging markets or
specific themes), offering the greatest potential for long-term returns but the
highest prices fluctuations and risk to the scheme member’s money.
Get the latest fund information
For the latest performance data, fund factsheets and other information about each of these funds,
visit the Fund Centre at aviva.co.uk/adviser/fund-centre
Governance and review – for auto-enrolment defaults
If you use one of our Future Focus lifestage approaches as a default option for your client’s auto-enrolment
scheme, we’ll take care of the governance required. So you or your client don’t have to. Please see page 26
for more details.
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Bespoke investment
approaches
Take the tailored route
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How to create your own approaches
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Take the tailored route
– creating bespoke
investment approaches
With our ‘create-a-bespoke’ option, you can devise your own,
tailor-made lifestage investment approaches in a few simple steps.
This option gives you the opportunity to provide an even more valuable advice service to your employer
clients. Using your investment expertise, you can create investment approaches designed to fit your client
and their scheme members perfectly.
Key benefits:
Devise a single approach or several: Design as many bespoke approaches as your client requires.
Create just a single approach – or several, to give employees greater choice. You can even create
approaches to use as auto-enrolment defaults.
●
Choose from 230+ quality funds: Your approaches can use as many underlying funds as you want from
our range of over 230, including many from the world’s top investment companies. The only funds you
can’t use are with-profits and any that invest directly in property.
●
Create your own investment glide-paths: You decide how the investment mix should look at each
stage. Giving you the freedom to devise your own strategies for providing growth in the earlier years,
before consolidating that growth in the run-up to retirement.
●
Keep risk consistent: Like all the approaches in this guide, any approaches you design come with
automatic rebalancing at no extra cost. Choose from monthly or quarterly rebalancing, starting when
you want it to.
●
Name your approach(es): Not only can you design your own approaches; you also get to name them.
The name you choose could incorporate your client’s company name, for instance. A little personalisation
can make a big difference.
●
A perfect combination
Bespoke approaches can work well as a supplement to our Future Focus range. See page 15 for details
of this range.
Important notes
Any bespoke approaches you design must meet our suitability criteria. See page 22 for details.
There is a charge of £1,000 for creating a bespoke investment approach/approaches.
The employer is responsible for ensuring their default bespoke lifestage approach and any alternative bespoke
lifestage approaches are reviewed by a financial adviser every 3 years, failure to do so is a breach of their auto
enrolment responsibilities.
“Add value for your client and exercise your
investment expertise.”
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How to create your
own approaches
The process for creating your own lifestage
approaches is very straightforward. When you’re
ready to begin, simply follow these five steps.
Step 1: Design your approaches
First things first, you need to design your approaches. This means identifying which funds you want to use,
devising your investment glide paths, deciding when to auto-rebalance and giving each approach a name:
Choosing your funds
You can pick from our range of 230+ carefully selected investment funds. The only funds you can’t use
are with-profit funds and any that invest directly in property. Research and pick your funds at aviva.co.uk/
adviser/fund-centre.
DWP command paper – better workplace pensions
In March 2014 the Department for Work and Pensions announced a set of measures to make workplace
pensions fairer for employees. One of these changes is the introduction of a ‘default fund’ charge cap of
0.75% from April 2015. This means that we will no longer accept a bespoke default investment approach
that brings the overall scheme charge above 0.75%, or could risk bringing the charge over 0.75% with
market fluctuations. All new bespoke default lifestage approaches will now be checked to make sure that
they will not breach the cap.
Designing your investment glide paths
You decide what the investment glide path for each of your approaches should be. You’ll need to choose
how many phases you want and when you want them to start (eg 10 years from retirement). And you’ll also
need to decide how you want the fund mix to change during each phase.
Setting automatic rebalancing
You’ll need to decide when you want auto-rebalancing to start, and whether you want it to take place
monthly or quarterly. When it takes place, the rebalancing moves all the funds in your approach back to their
original benchmark weighting.
Naming each approach
You’ll have to give each of your approaches a name, keeping to 40 characters or less. For instance, you could
call it the “Company X 5-year lifestage,” the “Company X lifestage 1” or simply the “Company X Default”.
Top tip
Please avoid using “lifestyle,” “lifestyling” or your company name in the name you give your approach.
Please also avoid using “approach,” as this will automatically appear at the end of the name you choose in
scheme literature.
Step 2: Send us the details
Once you’ve designed your approach(es), get in touch with your Aviva consultant. They’ll help you fill
in the forms you need to complete. In addition to the details of your approach, we’ll need to know:
how you intend to use each approach (eg as an auto-enrolment default, a nominated approach,
or simply as an alternative investment option)
●
your FCA number.
●
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Step 3: Confirmation
Once you’ve submitted your approach we’ll play back the details to you. This is your chance to make sure we’ve
captured everything correctly. If something isn’t right, we’ll update your approach and play the details back to you again.
When you’re happy, just send us an email to confirm.
Step 4: Governance checks
Our governance team will check your proposed approaches to make sure they meet our suitability criteria.
Our suitability criteria
1. We’ll check the funds you propose against our latest ‘watchlist’. If a fund is on the watchlist but not earmarked for closure,
we’ll inform you and give you the opportunity to change the fund – but if you choose not to, we won’t reject your approach
on this basis alone. If a fund is to be closed then we’ll inform you and you’ll need to choose another fund.
2. We’ll check the funds you want to use for any pending corporate actions (eg a fund merger). If an action is pending, we’ll
assess the approach as though the action has taken place, but will also give you the option to alter your fund choice.
3. The name you choose mustn’t give an unfair reflection of its risk/reward profile, or use terminology that’s inappropriate
for scheme members.
4. The total charge a scheme member has to pay (including scheme charges and fund charges) shouldn’t normally exceed
1%p.a. at any point in the approach (or risk exceeding 0.75% for default approaches). If the charges involved in your
approach exceed this, we’ll need you to justify it.
5. The maximum number of funds you can use in any phase is 10.
Default approaches only
6. Your approach must include at least one accumulation phase and at least one de-risking/consolidation phase.
7. In line with DWP changes to regulation, we will no longer accept a bespoke default investment approach that brings the
overall scheme charge above 0.75%, or could risk bringing the charge over 0.75%. All new bespoke default lifestage
approaches will now be checked to make sure that they will not breach the cap.
8. The de-risking/consolidation phase(s) should normally feature a smooth glide path aiming to either reduce volatility or help
protect the level of income the employee’s pension plan could buy when they retire (eg by moving the investment into
long-dated gilts or corporate bonds). We will consider each approach on a case by case basis.
We aim to tell you if we’ve accepted your approach within five working days of you confirming we’ve captured
your requirements correctly. If our governance team has any concerns, we’ll offer you guidance on what changes you
can make to ensure your approach meets our criteria.
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Step 5: Sign-off
Once your approaches have been accepted by our governance team, you’ll need to sign them off.
We’ll also ask you to sign a form on behalf of the employer you’re acting for. When you’ve done this,
we’ll upload your approaches to our systems.
Step 6: Bespoke lifestage brochure
Once your approaches have been accepted, we can produce a brochure to explain your approaches to
the employee.
Requesting changes in future
You can request two types of changes to your approach after it’s been accepted and uploaded to
our systems: 1) Changes to any of the funds used; and 2) Changes to the name of your approach.
We’ll consider your suggested changes using the same review process as when we first accepted
your approach (above). But please note that we’re not bound to accept any changes you request.
Using a bespoke lifestage approach as a default?
If you’re creating your own approach to use as an auto-enrolment default, you’ll need to ensure
it’s suitable for the particular employee category it will be used for. Our governance team will assess
this when you submit your approach (see step 4, above).
The employer is responsible for ensuring their default bespoke lifestage approach and any alternative
bespoke lifestage approaches are reviewed by a financial adviser every 3 years, failure to do so is a
breach of their auto enrolment responsibilities.
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More information
Recommending a core fund range
25
Governance of auto-enrolment defaults
26
Next steps
27
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Recommending
a core fund range
Give your client an even more valuable service by recommending
a number of investment funds to include in a ‘core’ fund range.
Having a core fund range can be a great idea for clients who want to give their employees a little extra choice.
It gives their employees the chance to pick their own investment funds, but without having to root through
our full range of over 230. Instead, they choose from a handpicked selection, recommended by you.
These core funds are for recommendations only, and we will not restrict customer access to our full range of
funds on our systems.
Tools to help you choose
The Fund Centre on our website for advisers includes plenty of research tools to help you decide which funds
to recommend. There, you can search for specific funds, view and compare performance statistics, view fund
factsheets and more.
Visit the Fund Centre at aviva.co.uk/adviser/fund-centre
Making your selection
Once you and your client have decided which funds to include, simply speak to your Aviva consultant. If you
have chosen to use a bespoke lifestage approach, we can include reference to your core fund range in the
bespoke lifestage brochure.
There’s no limit on the number of funds you can include in a core range, but most clients tend to choose
around 10.
Why recommend a core range?
Ideal for employers who want to offer a range of investment options.
●
A good accompaniment to our lifestage investment approaches.
●
Add more value for your client.
●
Makes it easier for employees to pick their own funds.
●
“Give your client and scheme members the benefit of your
investment knowledge by recommending some core funds.”
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Governance of
auto-enrolment defaults
The Department for Work and Pensions (DWP) has issued
guidance2 explaining how auto-enrolment default options
ought to be governed. When you choose an Aviva company
pension scheme, we handle most of these tasks.
In fact, if your client uses one of our Future Focus range as their default, we handle 100% of the governance
recommended by the DWP. And even if they use an approach of your design, we handle all the ongoing
governance once you’ve established it’s suitable for scheme members.
Who’s responsible for what?
Future Focus approaches
Bespoke approaches
Who handles it?
Governance task
Aviva
You
Aviva
Ensure the approach is suitable for auto-enrolled employees and meets
regulatory standards. For bespoke approaches we require you to check
whether it’s still suitable for scheme members every 3 years.
4
Review the approach at least every three years* to make sure it still meets
regulatory standards.
4
4
Review the performance of underlying funds to check whether they’re
performing in line with their objectives.
4
4
Replace any funds that are not performing as they should with alternatives.
4
4
Communicate information about the default option to scheme members.
4
4
You
4
*The DWP recommends reviewing the default option at least once every three years. However, we review all our Future Focus
approaches on a biennial basis, for any bespoke approaches you decide to use as a default we will conduct our reviews once a year.
Independent Governance Committee
Aviva has established an Independent Governance Committee which helps govern both Aviva and bespoke
default investment strategies. For more information on the Independent Governance Committee and the
work that they do please visit aviva.co.uk/pension-essentials/your-pension-scheme/igc
If changes are needed
If we find that an investment approach or fund isn’t performing as it should, we’ll make changes. We can
replace an underlying fund with an alternative. We can change the name of an approach in conjunction with
you should the name no longer be suitable. And we can alter the volatility target of a fund.
We’ll notify you and scheme members if we make any changes to a default approach used by any schemes
you’ve set up (with the exception of alterations to the volatility target, in which case we may not notify
scheme members). We will also update scheme literature.
2
Guidance for offering a default option for defined contribution automatic enrolment pension schemes, DWP, May 2011.
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Speak to your
Aviva consultant today
We hope you’ve found this guide useful.
If you’re interested in setting up an investment solution for a client’s
scheme, get in touch with your usual Aviva consultant. They’ll help you
submit your solution and will be able to answer any queries you have.
You can also visit aviva.co.uk/adviser for more information about our
corporate pension products.
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Aviva Life Services UK Limited. Registered in England No. 2403746. 2 Rougier Street, York, YO90 1UU.
Authorised and regulated by the Financial Conduct Authority. Firm Reference Number 145452.
aviva.co.uk
SP03332 11/2015 © Aviva plc
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