The Stelrad group personal pension (GPP) plan was set up with Standard Life in September 2014, following the sale of a related company, Ideal Boilers. It has 125 members in total, of whom 108 are long-serving, active members and 17 are deferred.
The scheme, which is closed to new members, runs alongside a contract-based scheme used for auto-enrolment purposes, also provided by Standard Life, for more recent employees.
The scheme had its triennial review in 2018; the default funds and alternative options were reviewed, but no changes were necessary. There are three funds on offer during the growth phase: a mid-level risk default fund; a lower-risk option; and a fund that is slightly higher risk with potentially higher growth.
All three are a blend of asset classes, using dynamic asset allocation and other risk management solutions to minimise volatility and create a smoother investment journey while still generating growth. Like most schemes, however, 95% of members are in the default fund.
The trustees also took the decision to shorten the de-risking glide path to seven years out from the member’s selected retirement date, where the norm is 10 or more. Due to this change, an individual’s fund could be invested for growth for longer at a time when it is at its largest.
Developing a solution for the pension freedoms was a clear priority, says Kevin Woolley, chairman of trustees at Stelrad. “Our experience is that members have used all three options at retirement: taking an annuity; going into drawdown; and taking a series of lump sums. So, we offer funds targeted on these options, plus a flexible option for those who have not made up their minds. The flexible option fund is also the default, and is composed of a blended solution of equities, absolute return funds and inflation-linked gilts, benchmarked to a composite index.”
The other funds are targeted at the different pathways at retirement; for example, the annuity option fund switches more heavily into bonds as the member’s chosen retirement date nears, while the drawdown fund is a blended, multi-asset fund similar to the flexible option.
To help employees make the best decision, information and communication are key, says Woolley: “We have developed a communication programme with Punter Southall that supplements Standard Life and kicks in at age 55, and we frequently remind members again about their options at certain points, such as three years out.”
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Pensions investment: Ensuring default strategy is fit for purpose
