Since the introduction of auto enrolment, the Department for Work pensions (DWP) stated that all employers should offer their employees schemes with a suitable default investment.
With this in mind we’ve designed our default investment based on the DWP guidelines*, so your clients can feel confident they’re offering members an investment solution that’s in line with the regulator’s recommendations.
The Royal London default investment is the Balanced Lifestyle Strategy (Drawdown) and this strategy is reviewed on a regular basis to ensure it remains a suitable default for members invested in it.
*Guidance for offering a default option for defined contribution automatic enrolment pension schemes, DWP, May 2011.
The Royal London default investment is the Balanced Lifestyle Strategy (Drawdown) which is part of our range of Target Lifestyle Strategies that are designed to reduce investment risk as retirement approaches.
Our default investment is invested in three of our risk-targeted Governed Portfolios, built for saving for retirement. Each portfolio within the strategies is invested in a mix of assets. They are all reviewed regularly by our Investment Advisory Committee to make sure they perform in line with their overall objectives, taking into account current market and economic conditions.
On retirement, members will move into a Governed Retirement Income Portfolio that is designed for taking a regular income in retirement.
|Your lifestyle journey
|Risk||At 15 yrs +||At 10 yrs||At 5 yrs||Retirement|
|Balanced||Governed Portfolio 4||Governed Portfolio 5||Governed Portfolio 6||GRIP 3|
The diagram below shows the asset allocations in the 15 years before retirement. This shows how the investment risk is automatically reduced as members move closer to retirement gradually switching from higher to lower risk investments.
Benefits of the Target Lifestyle Strategies
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If your client wants to keep responsibility for the suitability of the default or the design of the default, then we can help them meet many of the government guidelines and deliver a good outcome for members
Our range of default options are shown below and have been categorised depending on who is taking responsibility for suitability and design.
|Range||Responsibility for default suitability||Responsibility for default design||Default options|
|Royal London||Royal London||Balanced Lifestyle Strategy (Drawdown)|
|Royal London||Royal London||Balanced Tracker Lifestyle Strategy (Drawdown)|
|Employer/Adviser||Royal London||All of our Lifestyle options which can include bespoke branding, bespoke lifestyle route and choice of at retirement targets1|
|Employer/Adviser||Employer/Adviser||All of the options available under Royal London Designed, plus build your own custom lifestyle including your asset allocation, fund selection and lifestyle switch points1|
1 Default investment strategies may only use our internal funds and BlackRock passive funds to ensure that fund charges will not cause the scheme to breach the 0.75% pa charge cap.