Transcript Fidelity PowerPoint Presentation - Lotus Pensions

Lotus Development Pension
Investment Plan
Investing for retirement
Presentation
Name
Andrew Strathdee
Richard Smith
Rita Galbraith
November 2011
Welcome to our 2011 Lotus Development Pension
Investment Plan Members Day
 Agenda for Today
– Introduction – Andrew Strathdee - Trustee and Secretary
– Plan Update – where are we now?
•
•
•
•
Age Discrimination Legislation
State Retirement Age
The New Funds
Member Nominated Trustees
– Thinking about retirement – Richard Smith - Plan Administrator
• How much do I need to retire?
– Expectations and Aspirations – Rita Galbraith – Fidelity
•
•
•
•
Contributions
Investments
Tools to help you
What to do now
Plan Update
Andrew Strathdee
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Age Discrimination
 Following legislation in 2006, the Trustees have agreed:
– To allow “late retirement” after the scheme normal retirement age of 60
– New Tier for contributions for members under age 35
– Under 35 Tier applies equally to members over 60
The Trustees are still awaiting formal agreement from the Company
New Contribution Rates (over 60s/under 35s)
Option 1
Option 2
Option 3
Member
2% (4%)
3% (5%)
4% (6%)
Company
6% (12%)
7% (13%)
8% (14%)
Total
8% (16%)
10% (18%)
12% (20%)
IBM PPP - Member
3%
4%
5%
IBM PPP - Company
8%
9%
10%
Total
11%
13%
15%
Figures in brackets are current Lotus rates for members over age 50
5
Options at 60
 Check contribution rates of the schemes
 Are you on a Sales Plan? Pensionable Salary may be higher in Lotus Plan
 If you leave Lotus Plan you cannot rejoin
 IBM matching rates not contractual
 TAKE ADVICE!
State Retirement Ages
Still some uncertainty. Latest Position:
 For men born before 6 December 1953, the current State Pension age is 65.
 For women, the current State Pension age is increasing from 60 to 65 from April 2010.
This affects women born on or after 6 April 1950.
Proposal to increase State Pension age to 66:
 The government has published new proposals for increasing the State Pension age to
66.
 Women’s State Pension age will increase more quickly to 65 between April 2016 and
November 2018.
 From December 2018 the State Pension age for both men and women will start to
increase to reach 66 in 2020.
 These proposals affect you if you are one of the following:
– a woman born on or between 6 April 1953 and 5 April 1960
– a man born on or between 6 December 1953 and 5 April 1960
These proposed changes are not yet law and still require the approval of Parliament.
State Retirement Ages
People not affected by these proposed changes
These proposals do not affect you, if you are one of the following:
 a woman born on or before 5 April 1953
 a man born on or before 5 December 1953
 a man or woman born on or after 6 April 1960
The current law already provides for the State Pension age to increase to:
 67 between 2034 and 2036
 68 between 2044 and 2046
However, the government is considering how the State Pension age should be
changed in the future. This may mean the timetable for increases to 67 and 68
will be revised. The government will bring forward proposals in due course. Any
change to the timetable would require the approval of Parliament.
The New Funds
 Part of Trustee’s Role is to:
– Monitor investment arrangements, performance and prospects and review choices available
– Implement changes after appropriate professional advice
– Review new opportunities and developments
 Trustee’s concerns
– Concerned about disappointing past performance and about the suitability of the Fidelity
International Equity Fund as a long-term investment option for Plan members
– Over the past few years, investment markets suffered as global economy went into recession.
– Poor performance of many asset classes, in particular equities, has shown that investing Pension
Account in one single asset class can increase risk
The New Funds
 Trustees took advice and decided to:
– Replacing the Fidelity International Equity Fund with a new, actively managed, global equity fund
• Design a new global equity fund (“Lotus Active Global Equity Fund”) that will invest in
actively managed equity funds, split between overseas and UK equities.
– Introducing a new type of actively managed fund: the Schroder Diversified Growth Fund
• Spreading or “diversifying” Pension Account across different asset classes spreads investment
risk
• Different asset classes have different characteristics; giving different performance depending on
the economic climate, leading to smoother investment return for investors over most time
periods.
 Rita will talk more about these funds Later
Member Nominated Trustees
 We will need to elect new Member Nominated Trustees (MNTs) next year
– There are three MNTs for the Fund and six Company appointed.
– The responsibilities of all Trustees are identical
• To ensure contributions are received from the Company and invested in line with
members’ wishes;
• To keep records of members benefits and Pension Accounts;
• To keep beneficiaries informed;
• To appoint the Plan’s advisers;
• To review the performance of the Plan’s investment managers and to appoint new
managers if necessary;
• To act in the interests of the beneficiaries and ensure that benefits are paid in
accordance with the Plan Rules.
Member Nominated Trustees
 You can be a Member Nominated Trustee if:
– You are an active member of the Lotus Plan;
– You understand the need for confidentiality;
– You have an interest in pensions;
– You are prepared to commit to the role for approximately 5 years.
– You can attend approximately four meetings per year and undertake training as
required, including attending appropriate training courses and seminars, as well as
taking the time to familiarise yourself with the Plan’s various documents
– Have the support of your manager
– But NOT:
• undischarged bankrupts;
• anyone either disqualified from being a director or convicted of an offence involving dishonesty
or deception
• Not of sound mind!
Member Nominated Trustees
 The Trustees will announce the nomination process early next year
– Will require Nominees to produce a personal statement supporting their nomination, will check to
ensure they are eligible and get them to sign a declaration of eligibility
– Publish a list of nominees to the members
– Arrange selection panel of Trustees to identify the successful .nominee(s)
– Announce the results
 New MNTs will be formally appointed by Deed
 MNTs who cease to be a member of the Plan for any reason, or to be an employee of
IBM (UK) Limited will automatically be ineligible for continued Trusteeship
Thinking about
Retirement
Richard Smith
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Thinking about retirement
1. Income in Retirement - what do I need and get?
2. Outliving your money – How long will I need it for
3. Inflation – the ever present threat
4. Investment Risks on my retirement income
5. Health Risks – Paying for care as I get older
 Today we will look at the first three
The three pillars of Retirement
Income
State
Pension
Company
Pension
Savings
Income in Retirement
 What do I need?
– Comparing gross Lotus pension with gross IBM Salary can be misleading
•
•
•
•
•
You don’t pay National Insurance
You don’t pay Pension Contributions
Tax may reduce
Other deductions will cease
Many work related expenses are no longer payable (e.g. Professional memberships , work clothing etc)
– Some expenses will increase
• Home heating
• Leisure and outings
• Home entertainment equipment
 What do I spend it on?
– Varies by stage of retirement - On top of living expenses,
• Early in retirement - travel and recreation
• Later in retirement - health, care and heating
Longevity – will I run out of money?
Life Stage
Life Expectancy
Life Expectancy
Male
Female
At Birth
78.2
80.3
At age 50 years
79.0
82.7
At age 60 years
80.9
83.9
At age 65 Years
82.2
84.9
Actuarial Tables
Buy yourself some extra time…
You could gain this…
If you do this…
Get married
Man: 7 years. Woman: 2 years.
Moderate cardiovascular exercise
2 to 4 years
Five-a-day fruit and vegetables
3 years
Sleep 8 hours a night
6 years
Stop smoking
6 years
Keep a pet
1 year
Chat to friends
3 to 4 years
Do brain exercises
5 years
Have sex every day
8 years
Source: The Daily Telegraph, 17.09.07
(article re Laindon Model); Life Trust
presentation for ILAG.
Inflation Risk
 At retirement, you will be able to choose between a fixed rate pension and one that
increases in value
 Whichever option you choose, it is likely that the real value will reduce over the course of
your retirement
Fixed v Escalating Pension
 Assume a fund of £250,000 for a male member retiring at 65
 Flat pension = £15,400
 Pension increasing at 3% = £10,600
These figures are based on current annuity rates and are subject to
fluctuation. They assume a 50% spouse’s pension on death.
Level or increasing?
 Annual pension
available from £100,000
pot
180,000
160,000
Cumulative Pension (£)
in today's money terms
140,000
 Retirement Age 65
120,000
 Annuity rates: October
2008
100,000
80,000
Cumulative pension
payments cross
over after 23 years
60,000
40,000
20,000
Level
Year
Increasing 3%
29
27
25
23
21
19
17
15
13
11
9
7
5
3
1
0
Actual pension
payments cross
over after 11 years
22
Inflation Risk
 With inflation at 3%, an annual fixed pension of £15,425 will reduce in real terms to
£8540 in 20 years.
 You may have other sources of income, eg State Benefits, that are fully protected
against inflation.
Your personal inflation rate
 Official figures – whether RPI or CPI – are a “broad brush” – everyone has their own
individual rate according to their own life style and circumstances
Average Personal Inflation Rates, by age, September 2011
Spending Patterns of retired people
Spending by Age
Inflation over 25 years
Inflation since 1997
Expectations
Aspirations
Rita Galbraith
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Basic State Pension
 Paid from state pension age – currently age 65 for men and between 60 and 65 for
women
 Set to increase over the coming years to 68 for those born after the 5th March 1959.
 The full amount of Basic State Pension from 6 April 2011 is £5,311.80 a year for a
single person
 State Second Pension also available. Top up to Basic State Pension
State Benefit
 DWP State Pension Forecasting Team on 0845 3000 168
www.thepensionservice.gov.uk
Lotus plan
At retirement
Company contributions Your contribution
Contributions invested
31
Tax free cash
Pension income
Annuities vary with time
Annual Pension Bought With £100,000
£7,076
£6,478
£6,028
Lowest Rate
Average Rate
Highest Rate
Source: Canada Life based on £100,000 male joint life at
65 / 60 March 2011
Rates: February 2002 To June 2010
Annuities vary with age
£8,303
£6,478
£5,535
Age 55
Age 65
Age 75
Average Annuity Rates
Source: Canada Life based on £100,000 male joint life
Rates: February 2002 To June 2010
Contributions
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How much should I save?
 www.fidelitypensions.co.uk
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Investments
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Investment choices
Self-select
Lifestyle strategy
‘Hands on’ approach
 ‘Hands off’ approach
 10 Funds
 Ready-made investment option
 New funds
– Schroder Diversified Growth Fund
– Lotus Global Equity Tailored Portfolio
The value of investments may go down as well as up and an investor may not get back the
amount invested. Fund charges and expenses may change in the future.
Risks
Pension conversion
Capital Falls
Missed opportunity
Price inflation
0
Time to retirement
Lifestyle option
 Automatic investment process
 60 – default target retirement age or select
own retirement age The lifestyle strategy is
an investment strategy driven by your
retirement date. If selected it is important
that you keep Fidelity informed of any
changes to this date.
Equities – Fidelity BlackRock Global Equity
50/50 Fund
Bonds Fidelity Lotus Bond Fund
Cash - Fidelity Cash Pensions Fund
Lifestyle option
Equities
Bonds
Cash
Years from retirement age
More than 7
6 and 7
5 and 6
4 and 5
3 and 4
2 and 3
1 and 2
Less than 1
0%
10%
20%
30%
40%
50%
60%
% invested
70%
80%
90%
100%
Tools to help you
PlanViewer
Help and support
 Pensions Service Centre 08457 234 235
 www.fidelitypensions.co.uk
Pensions Service Centre
08457 234 235
Account balance
Personalised illustrations
Fund performance information
Switching & redirecting investments
Investment options
Open UK business days
8am to 6pm
What you should do
now
How do you make a difference?
 Review your contribution level
 Review your fund choice
 Engage with your plan & take financial advice, if required
Important Information
No statements or representations made in this document are legally binding on Fidelity or
the recipient.
Fidelity only gives information about its own products and services and does not provide
investment advice based on individual circumstances. If you would like advice, please
contact a Financial Adviser.
Past performance is not a reliable indicator of future results.
FIL Limited, and its subsidiaries are commonly referred to as Fidelity International. Fidelity,
Fidelity International and the Pyramid Logo are trademarks of FIL Limited. Issued and
approved by FIL Life Insurance Limited (FSA registered number 186526). Authorised and
regulated by the Financial Services Authority. Registered in England and Wales No.
3406905. Registered Office at: Oakhill House, 130 Tonbridge Road, Hildenborough, Kent,
England TN11 9DZ.
October 2011 MDC05429