Investment and Retirement Focus Issue 5

F CUS

INVESTMENT & RETIREMENT

A Tenet Group Publication Issue 5 | Spring 2019

A focus on… Providing clarity in uncertain times

Auto Enrolment - Can we do better? Generating alpha in todays fixed income markets Diverse opportunities drive consistency

ALSO IN THIS ISSUE: Is there a problem with BBB credit? Can we create additional value in long-term savings? Finally, progress on retirement outcomes Making more of multi-asset

F CUS

INVESTMENT & RETIREMENT

A Tenet Group Publication Issue 5 | Spring 2019

A focus on… Providing clarity in uncertain times

Auto Enrolment - Can we do better? Generating alpha in todays fixed income markets Diverse opportunities drive consistency

ALSO IN THIS ISSUE: Is there a problem with BBB credit? Can we create additional value in long-term savings? Finally, progress on retirement outcomes Making more of multi-asset

IT TAKES IM GINATION TO BUILD THE MODERN WORLD

The M&G Global Listed Infrastructure Fund

The M&G Global Listed Infrastructure Fund invests in the foundations of a modern society – from transportation, housing and hospitals to the communications that connect us and the energy that powers it all. In its first year the fund has achieved a positive return, offering its investors downside protection in falling markets and capturing the upside during market rallies. The value of investments will fluctuate, which will cause fund prices to fall as well as rise and you may not get back the original amount you invested.

2018 2017 2016 2015 2014 Inception

M&G Global Listed Infrastructure Fund I Acc (%) Return

1.1

N/A

N/A

N/A

N/A

0.3

Source: Morningstar as at 31.12.18. Price to price with income reinvested, based on Sterling Class I shares.

Past performance is not a guide to future performance. Find out more at www.mandg.co.uk/infrastructure

For financial advisers only. Not for onward distribution. No other persons should rely on any information contained within. This financial promotion is issued by M&G Securities Limited which is authorised and regulated by the Financial Conduct Authority in the UK and provides ISAs and other investment products. The company’s registered office is Laurence Pountney Hill, London EC4R 0HH. Registered in England No. 90776. JAN 19 / 340907

340907 GLIN FP Advert Update PROINV 01-19-02.indd 1

05/02/2019 16:25

INVESTMENT & RETIREMENT FOCUS | 3

Foreword From the Editor

CONTENTS

4

Welcome to the spring edition of Investment & Retirement Focus.

4-5

Technical Services & Research Auto enrolment - Can we do better?

13

Fidelity A troubled marriage to tech

Two and a half years after the FCA set up its Retirement Outcomes Review; it seems to be reaching some conclusions at last, states Andrew Tully, Pensions Technical Director from Canada Life. FCAs latest policy statement introduced changes from November to wake-up packs, retirement risk warnings and the annuity information prompt. We open this issue with Tenet’s Technical Services & Research’s piece entitled, Auto Enrolment – Can we do better? In this article, they try to identify some of the key areas that need addressing as well as highlighting any actions that you should consider in this area. How Schroders have been preparing their portfolios for whatever Brexit brings has, unsurprisingly, been a question they have fielded with increasing regularity in recent months and years. Justin Taurog, Deputy CEO of VitalityInvest, proposes an innovative new way to create additional value in long- term savings. Policy uncertainty and market volatility of late have prompted Vanguard to revise their expectations for the Fed’s target for short-term interest rates in 2019. As Global Chief Economist Joe Davis explains, Vanguard’s new baseline forecast is for a single additional rate increase, the tenth since December 2015 and perhaps the final hike of the current monetary-policy cycle. It represents a change from their 2019 outlook. In his latest insight note, Simon Evan-Cook, Senior Investment Manager for Premier Multi-Asset Funds, revisits the classic Western from an investment perspective. Big changes have been made to Prudential’s multi- asset range. Paul Fidell, Head of Business Development, Investments at Prudential, explains why the changes have been made and how the team are approaching asset allocation within the multi-asset portfolios given today’s challenging economic climate. I hope you find this edition informative and supportive with the excellent and varied selection of articles supplied by Tenet’s provider partners.

19

Vanguard US Fed policy update: A single rate hike likely in 2019

13

26

Premier Asset Management

 Should you invest with Butch Cassidy and the Sundance Kid?

30-31 The Tenet Platform Providing clarity in uncertain times

19

26

Kind Regards Cristina Marketing Consultant

EDITOR Cristina Giovanelli

Tenet Group Limited, 5 Lister Hill, Horsforth, Leeds, LS18 5AZ Tel 0113 239 0011 Fax 0113 258 6959

This publication is for internal purposes only and is not intended as an advertisement. As a result this should not be issued in any form to clients. Not all the products in this feature are the responsibility of the Tenet Group Limited. Terms and Conditions. Although every effort has been made to ensure the accuracy of the information contained in this publication, The Tenet Group cannot accept responsibility for any errors it may contain. The Tenet Group cannot be held responsible for the loss or damage of any material, solicited or unsolicited. No reproduction of any part of this publication, in any form or by any means, without prior written consent from The Tenet Group. The views ex- pressed in this publication do not necessarily reflect those of the advertisers or the publishers.

4 | INVESTMENT & RETIREMENT FOCUS

Auto Enrolment - Can We Do Better? Since its launch in 2012, more than 10 million workers have been enrolled in a workplace pension scheme, according to figures published by The Pensions Regulator – this is equivalent of the entire population of Scotland, Wales and Northern Ireland combined. However, whilst this is a laudable achievement for the industry, there is still plenty of work to be done to ensure that people remain engaged with their pensions, making sure schemes are well run, have rigorous governance and that those running them make the right decisions. In this article, we’ll try and identify some of the key areas that need addressing as well as highlighting any actions that you should consider in this area. n A total of 10 million workers have been automatically enrolled into a pension scheme. n Over 84% of staff are now saving into a workplace pension. n In excess of 1.4 million employers operate an appropriate workplace pension. n Defined Contribution scheme membership in 2018 increased by 33%, compared to 2017. AUTO-ENROLMENT BY THE NUMBERS

Source – The Pensions Regulator, 11 February 2019

INVESTMENT & RETIREMENT FOCUS | 5

Scheduled Contributions Increase As part of the phasing process, minimum contribution levels for auto enrolment schemes are due to increase for the final time in April 2019: n The minimum employer contribution increases from 2% to 3%, n The total minimum contribution increases from 5% to 8%. The employer must make at least the minimum employer contribution towards this amount with the employee making up any difference (unless the employer is meeting the full contribution level). It has been acknowledged by the industry that further increases are necessary and that this should not be considered as ‘job done’. However, there is no current commitment beyond a vague aspiration to do so by the middle of the decade. For advisers who have established auto enrolment schemes, it is important to ensure that the employers are aware of their obligation to apply the April increase and continue to meet the triennial re- enrolment duties to ensure they remain compliant. This can provide an opportunity for advisers to re-engage with employers to undertake a pension governance review and ensure that the current scheme remains appropriate and good value. Shortfalls in Auto Enrolment Policy Whilst auto enrolment pensions should be looked at as a success overall, there are still areas that need further attention with pressure to reduce or remove eligibility thresholds and remove age barriers to ensure as many people as possible are saving. The government set out its intention to remove the earnings threshold in the 2017 AE review, making every pound earned pensionable from the mid-2020s. However, the limit is set to rise from £6,032 to £6,136 in April for the 2019/20 tax year which is counter to the government’s intention. Additionally, it is widely acknowledged that the policy only covers those who earn more than £10,000 a year with a single

be both available and appropriate. If the previous pension is considering closing or going through the consolidation process, it could be time to review whether a more appropriate scheme is available. The Much Awaited Pensions Dashboard Key to engaging individuals in retirement savings will be the introduction of a pension dashboard. Proposals unveiled by the government confirm that the pension dashboard will allow people to access their information from most pension schemes in one place online for the first time. This is designed to increase engagement from savers as well as giving people easy access to the required information to review their retirement options. Whilst it was initially thought that there would be a single dashboard, proposals have opened the door to multiple dashboard providers to enter the market. However, the first will be introduced in 2019 by the Single Financial Guidance Body (SFGB). There is a lot of support across the industry for the introduction of the pension dashboard although, as with all these measures, we will have to wait and see how they are implemented before judging whether they are as successful as intended. Conclusion Many advisers may have considered their responsibilities regarding auto enrolment to have ended once a suitable scheme was recommended. However, as highlighted above, this may not be the case and there remains ample opportunities for advisers to provide valuable advice to corporate

employer, meaning many savers who work part-time or have multiple jobs do not benefit. This results in a high proportion of women being left out of the auto- enrolment process which is an obvious flaw in the system designed to boost pension savings for all. Advisers will be key to helping pick up this shortfall, ensuring that as many people as possible are engaged in their pension savings and are actively planning for their retirement. It is always advisable to ascertain the level of pension savings that your client can afford and whether these provisions are likely to be adequate to meet their objectives in retirement. It is often forgotten that pension contributions can be made on behalf of somebody else, allowing clients to contribute into their partner’s or children’s pensions for example, ensuring that as many annual allowances are utilised throughout the family. Master Trusts The majority of schemes adopted by employers to comply with auto enrolment were established under Master Trusts. These are multi-employer occupational schemes with each employer having their own division within the master arrangement. As there is only one legal trust, there is only one set of trustees across all schemes allowing employers to benefit from this governance function at a lower operating cost than with a single employer scheme. However, existing Master Trusts are having to apply for authorisation from The Pensions Regulator in order to continue operating, leading to many Master Trust schemes closing or consolidating with other schemes. This means that employers need to keep a close eye on the sustainability of their chosen pensions vehicle and could be put in the position where the scheme they have been using to meet their auto enrolment duties could be closed. As such, it is important to re-engage with any employers where you have arranged auto enrolment schemes to ensure that these pensions continue to

clients to help them to meet their pension obligations.

David Lloyd Technical Services & Research Team Leader

6 | INVESTMENT & RETIREMENT FOCUS

The latest raft of economic >Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36

www.tenetgroup.co.uk

Made with FlippingBook - professional solution for displaying marketing and sales documents online