Scottish Widows’ £60bn default workplace pension fund, Pension Investment Approaches (PIA), is to transition to a new default offering with a higher exposure to equities and a shorter de-risking phase.
The new Lifetime Investment default will leave customers’ pension savings invested in higher-growth assets for longer to boost potential returns, according to Scottish Widows.
Lifetime Investment is available for new employers and for all customers on a self-select basis.
Existing customers invested in the current £60bn PIA default offering, which Scottish Widows claims to be the longest running and largest in the market, will also transition to the new default.
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.
Both options will begin to de-risk from 12 years before the customer’s chosen 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.
The new default will also continue to de-risk customers beyond their selected retirement age, creating a to-and-through retirement option.
The new default has been developed on an exclusive basis with asset manager Robeco and will have a tilt towards companies that have a positive impact on the UN’s Sustainable Development Goals. Customers will also be able to other managers including BlackRock, State Street Global Advisors, and Aberdeen.
Graeme Bold, managing director of workplace and intermediary wealth and Scottish Widows, said the new Lifetime Investment default has been developed with longer life expectancies and phasing of retirement.
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 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.”
Scottish Widows added that it plans to incorporate private markets investment into the new default, with further details to be announced.