- Investment strategy for Sustainable Multi Asset to target enhanced long term growth and aiming to be competitively priced, with lower price points
- Newly evolved sustainable strategies to be embedded for over 1.5 million Standard Life pension customers primarily invested in its largest defaults funds – Active Plus and Passive Plus, and for members of its Master Trust schemes
- Growth focused sustainable investment solution will be largely passive and will contain up to 80% plus environmental, social and governance (ESG) growth assets. The strategies manage the financial risks and opportunities associated with sustainability
- Greater equity investment being introduced early in the growth and pre-retirement journey through updated lifestyle profiles
- By the end of 2022 circa £15 billion will be invested in the new sustainable strategies
Standard Life, part of Phoenix Group, is set to make a series of changes to its largest default pension fund propositions, Active Plus and Passive Plus, to provide a mainly passive, lower-cost sustainable solution focused on growth and outcomes. It reflects Standard Life’s Sustainable Multi Asset strategies which aim to simultaneously help employers and trustees meet their member and regulatory needs, and pension customers achieve good outcomes, with robust, growth-focused sustainable solutions, at the right price.
A blended ESG approach with clearly defined targets
With its Sustainable Multi Asset solutions, Standard Life is aiming to enhance returns over the long term by taking appropriate levels of risks earlier and optimising glidepaths to manage that risk. The new strategies will provide increased exposure to equities to target good customer outcomes and will be underpinned by ESG components of up to 80% plus within the asset class, depending on the strategy applied.
This approach will aim for pension fund growth by seeking out responsible investment opportunities combined with better stewardship while simultaneously screening operations that may counter growth prospects. The first step to introducing the new solution was the launch of the Sustainable Multi Asset Universal Strategic Lifestyle Profile for ‘new clients’ at the end of 2020. Standard Life signalled at that time its intention to extend the strategies to ‘existing clients’ as part of an ongoing commitment to embed responsible investment solutions into default portfolios, and to meet the evolving expectations of customers.
A range of enhancements for existing members
- Growth potential – increased alignment to investments that can offer the potential for better growth outcomes earlier, leading to the prospect of improved retirement income over the long term. (The value of investments can go down as well as up, and may be worth less than originally invested.)
- Pricing improvements – charging for the passive investment solutions will see a reduction in the annual management charge for Active Plus and Passive Plus scheme members
- Enhanced, clearly defined approach to responsible investing – the 80%+ allocation to ESG assets is built on transparent ESG targets, which are financially focused
Gareth Trainor, Head of Investment Solutions, Standard Life said: “The enhancements we are making will look to achieve growth earlier in the investment process, with the balance of a suitable glidepath for pension scheme members to help them aim for the best possible outcome when they come to retire. Our investment thinking and philosophy is continually evolving to reflect prevailing market and societal factors. We are focused on taking a financial approach to sustainable investing, which means taking the right amount of investment risk at the right times for all our pension scheme members.
“We are delighted that we’re set to embed our enhanced growth, sustainable focused solutions for our pension scheme members in 2022, beginning in February for Master Trust members.”
Delivering growth – evolving existing solutions
Typical Strategic Asset Allocation for the Growth Phase –
Active and Passive Plus III to Sustainable Multi Asset Universal 15 year
Choice of retirement outcomes
The new investment design considers members’ needs and risks throughout. The core design encompasses more risk in the growth phase and gradually de-risks over a 15-year glidepath. This provides a balanced approach to risk management. To accommodate certain product design considerations a 10 year glidepath will be available for some existing members, with similar outcome aims across both versions.
Sustainable Multi Asset strategies will also offer a number of default outcomes for members from fixed income (annuity), flexible income (drawdown) and lump sum options to our Universal option – for those who haven’t yet planned on how they’ll take their income in retirement.
Timetable to transition
The move will result in the Sustainable Multi Asset strategies being embedded for ‘existing scheme members’ of Active Plus and Passive Plus, including Master Trust arrangements, with Sustainable Multi Asset becoming the default for circa 9000 workplace pension schemes, with the roll out happening throughout 2022.
Scheme members will not have to take any action and the changes will happen automatically