Here we keep you up to date with changes to the funds in our range.
Please note that all announcements were correct at time of publication. On 31 March 2014, Lloyds Banking Group completed the sale of Scottish Widows Investment Partnership (SWIP) to Aberdeen Asset Management.
At Scottish Widows, we regularly review the funds we offer. We’ve decided to close some funds within our Scottish Widows life and pension range.
The funds, listed below, will be closing to new business on the 30th of June 2017. We’ll move customers to defaults on the 10th of October 2017. The fund will close on the 12th October 2017.
We’ve sent letters to all affected customers to let them know a fund they’re invested in is closing. We’ve provided details of the alternate fund we propose moving them to, including the fund’s Total Annual Fund Charge. We’ve also let advisers know about the changes and given information of their clients’ options.
If customers believe the proposed new fund still meets their investment needs, they don’t need to do anything. We’ll move their investments automatically. If it doesn’t meet their needs, they can move their investments into another available fund. They simply need to call us on the number quoted in their letter or write to us at Scottish Widows, 15 Dalkeith Road, Edinburgh EH16 5BU by the 6th of October 2017.
The affected funds will close on the 12th of October 2017 and customers will no longer be able to see them.
New funds launched 14 November 2016
Scottish Widows is committed to maintaining a broad range of high quality, innovative and cost-effective investment solutions for customers and advisers. From 14th November 2016 we have introduced 21 new funds to our Scottish Widows fund ranges for most of our pension and life products. This is a notable development of our fund ranges, and we believe these new funds significantly improve the quality and choice available to our customers.
After thorough research and consultation with advisers, we are expanding our fund ranges to offer some exciting new options from leading fund managers. The new funds include more multi-asset, absolute return funds, and innovative ‘smart beta strategies’ as stand-alone funds for the first time. In addition, within more traditional asset classes we are adding award-winning funds from some of the most respected managers in the industry.
We see our own fund research expertise as a major strength: it allows us to monitor and review our fund ranges, and make changes to meet customers’ evolving needs and keep up with significant new developments. The new funds have been chosen following a market review, extensive due diligence and many face to face fund manager meetings by our experienced Fund Manager Assessment team, using their innovative P6 fund governance model throughout the selection process.
Following on from changes to our core Pension Investment Approaches and Governed Investment Strategies options and the launch of our Premier fund range, these launches are part of a wider initiative and long term commitment to provide what we see as the very best investment solutions for our customers. Further developments are planned to improve the all-round strength and quality of our investment propositions, allowing our customers to benefit from new investment ideas and opportunities.
More information on the funds can be found here where you can find details of the new fund managers and the reasons why we’ve chosen to add these fund to our fund range.
Full details of our fund range options can be found in the Scottish Widows fund guides for life and pension products, or speak to your Scottish Widows representative.
The value of an investment and any income from it is not guaranteed and can go down as well as up. Your clients’ may not get back the original amount they invested.
Fund name changes
On 15 August 2016 we changed a number of our Scottish Widows and Clerical Medical life and pension fund names. This was because some of our Investment Partners have changed the names of funds which we link to through the Scottish Widows and Clerical Medical life and pension fund ranges.
The changes are as follows:
Customers do not need to do anything, but please note that when searching for up to date factsheets you will now need to use the new fund name. For further details, factsheets can be viewed online using the links for Pension Funds and Life Funds located towards the top of this webpage.
As part of our fund management activity, we regularly review the funds we offer. Following a recent review, we’ve decided to close a selection of funds within our SWIS Life and Clerical Medical Pension fund ranges.
The following funds closed to new business on 19 February 2016.
Scottish Widows Investment Solutions (SWIS) Life funds:
Please note: the Scottish Widows Investment Solutions (SWIS) Funds are provided by Clerical Medical, and marketed, administered and sold by Scottish Widows Limited. Prior to December 2010 the SWIS funds were known as the Clerical Medical Investment Solutions (CMIS) funds.
Clerical Medical Pension funds:
Please note: customers who already have a Clerical Medical individual pension can still add to it, but not to the closing fund(s), or make changes to how their plan is invested. However, Clerical Medical individual pensions are no longer open to new investors. Regular premiums will continue into the closing fund until it closes and will then automatically transfer to the alternative fund.
Scottish Widows pension funds are not affected.
Letters have been issued to all affected customers to advise them that a fund they’re invested in is closing and provide details of the alternate fund we propose moving them to, including the fund’s Total Annual Fund Charge. Advisers who we have identified as having clients impacted by these closures have also been mailed to let them know of the changes and provide information on their clients’ options.
If customers believe the proposed new fund still meets their investment needs, they don’t need to do anything and the move will take place automatically. If the proposed new fund doesn’t meet their needs, they can switch their policy into another available fund. To do this, a fund switch form needs to be completed and received by Scottish Widows by midday on 16 May 2016.
For details of the proposed new funds for affected customers, along with access to relevant documentation for switches etc, please visit our dedicated web pages:
The affected funds will close on 24 May 2016, after which the funds will be removed from our systems and will no longer be visible.
From January 2016 we are pleased to introduce our new Premier Pension Portfolio Fund range (Premier range), which builds on our well-established original range of Pension Investment Approaches (PIA) and Governed Investment Strategies (GIS) lifestyling options and Pension Portfolio Funds.
As a result of Auto Enrolment and Pension Freedoms, we believe that customers are going to demand more from their pensions, with the level of net returns becoming increasingly important. This is why we are launching our new Premier range. By accessing specialised investment strategies, more asset classes and an element of active management, we believe the Premier range can generate better annual returns (net of fees) than the equivalent portfolios within PIA and GIS over rolling three year time periods – and for similar levels of volatility.
Our new Premier PIA (PPIA) and Premier GIS (PGIS) options have the same structure as our existing, passively-managed PIA and GIS lifestyling propositions:
In addition to the PPIA and PGIS lifestyling options, our new Premier Pension Portfolio Funds are all available as stand-alone investment choices for individual and corporate pension products. We believe these could be particularly appealing to potential Drawdown customers.
We have added significantly more investment components to the Premier range. These include Smart Beta strategies (Fundamental Index Equities and Low Volatility Equities), Absolute Return, Property and a Tactical Asset Allocation overlay. The cost of these components means the Premier range has a higher charge than our original passively managed range. The greater investment scope for the Premier range means we can offer customers access to:
Full details of our PPIA and PGIS lifestyling options can be found in the Scottish Widows Premier Lifestyling Options guide. For details of the Premier Pension Portfolio Funds as stand alone investments, please see the Scottish Widows Premier Pension Portfolio Funds guide.
On 23 November 2015 we changed a number of our Scottish Widows and Clerical Medical life and pension fund names. This was because some of our Investment Partners have changed the names of funds which we link to through the Scottish Widows and Clerical Medical life and pension fund ranges.
CM Invesco Perpetual Emerging Countries Life and Pension Funds
CM Invesco Perpetual Global Emerging Markets Life and Pension Funds
CM Newton Global Higher Income Life and Pension Funds
CM Newton Global Income Life and Pension Funds
SW Newton Global Higher Income Pension Fund
SW Newton Global Income Pension Fund
CM Newton Higher Income Life and Pension Funds
CM Newton UK Income Life and Pension Funds
SW Newton Higher Income Life and Pension Funds
SW Newton UK Income Life and Pension Funds
Funds closing to new business only on 23 November 2015
SW Investec American Life and Pension Funds
SW Jupiter Undervalued Assets Life and Pension Funds
Customers do not need to do anything, but please note that when searching for up to date factsheets they will now need to use the new fund name. For further details, factsheets can be viewed online through the link to the Fund Prices page located top right on this webpage. Fund guides will be updated in due course to reflect the new fund names.
Changes to some Scottish Widows and Clerical Medical fund names: August 2015
On 17 August 2015 we changed a number of our Scottish Widows and Clerical Medical life and pension fund names. This was because some of our Investment Partners have changed the names of funds which we link to through the Scottish Widows and Clerical Medical life and pension fund ranges.
SW Investec Global Free Enterprise
SW Investec Global Strategic Equity
SW Fidelity International
SW Fidelity Open World
CM Schroder Global Climate Change
CM Schroder QEP Global Core
CM Newton Balanced
CM Newton Multi-Asset Balanced
CM Newton Managed
CM Newton Multi-Asset Growth
CM Newton Phoenix
CM Newton Multi-Asset Diversified Return
Scottish Widows is committed to being a responsible investor on behalf of our customers, with particular focus on Stewardship, Ethical investment and Environmental, Social and Governance (ESG) issues. As part of our ongoing governance process, we have reviewed our Ethical and Environmental funds and we are making some changes as a result.
The funds affected are:
We are writing to all customers invested in these funds, but in summary the main changes are:
In all cases, the funds’ Fund Aim or Investment Objective and Investment Policy will remain broadly the same, but we will make some small changes to provide clarity.
The Ethical Criteria will be updated to better reflect current ESG issues, and because the funds will now use negative screening criteria rather than both negative and positive criteria.*
The Advisory Body, which is responsible for agreeing the ethical criteria which determine the funds’ investment universe, will be replaced by the Scottish Widows investment committee and Aberdeen Asset Management’s Responsible Investment team.
There will be no changes to the funds’ Investment Approaches. But the funds will hold a smaller number of stocks going forward, so an additional risk arises which investors should be aware of: Investing in a limited number of company shares can carry more investment risk than a wider portfolio. If any of these investments fall or rise in value, it may have a greater effect on the fund’s overall value than if a larger number of investments were held.
We believe that these changes will better reflect current ESG concerns and give greater clarity to investors about how their fund will be run and how the screening criteria will be applied.
Further Information: We have provided more information about the changes we’re making to the funds in these Q&A documents:
We will begin to implement these changes from 24 July 2015.
* ‘Negative screening’ means using a fund’s agreed screening criteria to exclude undesirable investments, such as shares in companies which sell weapons or tobacco. ‘Positive Screening’ favours investments in companies with strong records in areas like the environment, sustainability or diversity.
Changes To Pensions
Changes introduced from April 2015 allow greater flexibility in how benefits can be taken from a pension pot. Investors in UK pensions now have three ways to use their pension pot at age 55 or above to provide for their retirement. They could choose one or more of the following:
1 – Annuity Purchase – buying one or more annuities to provide a regular and secure income for life
2 – Pension Encashment - taking all (or part of) a pension pot as a cash lump sum, 25% of which will be tax-free with the remainder subject to tax
3 – Flexible Access – adopting a flexible approach by using a suitable product to keep a pension pot invested and then taking income as it is needed.
Scottish Widows has conducted significant customer research and worked with independent research specialists Moody’s Analytics to identify how we can help meet our customers’ needs in this new pensions environment.
What are we changing?
We’ve introduced new options to our existing Pension Investment Approach (PIA) and Governed Investment Strategy (GIS) risk categories, to take account of the additional retirement choices available.
We now offer three different ‘retirement outcomes’, designed to prepare your clients pension investment in its last five years for whichever retirement choice they expect to make. In addition to the original retirement outcome designed for those planning to buy an annuity, we have added a 2nd outcome for those who plan to encash their fund, and a 3rd outcome for those who will want flexible access and plan to move into a suitable product so they can stay invested.
This means that there are two selections to make as part of the investment choice:
Lifestyle Switching Explained
Our PIA and GIS risk categories all work in a similar way: the difference between them is how much investment risk they take in trying to help a pension fund grow. In the earlier years, more of the money is invested in equities to increase the potential for growth. We then begin to gradually reduce exposure to risk 15 years from the selected retirement date, because this should help to protect the pension pot if there are any market downturns.
Until five years from retirement the ‘investment glidepath’ for a selected risk category is the same, regardless of which retirement outcome a customer is targeting. In the final five years leading up to their selected retirement date the investment will gradually move into one of three carefully selected packages of lower-risk investments. These are different for each retirement outcome, tailored to suit whichever one your client has chosen.
The graph below demonstrates how this works, showing a typical ‘investment glidepath’. Please note that this graph indicates how the overall level of risk changes at different stages, not the likely performance of an investment.
For the reasons outlined below, there may be more day-to-day fluctuations in the prices of the Scottish Widows Property Funds than normal. The prices could fluctuate by 5% to 7% depending on whether the price on each day reflects the costs of buying property or the costs of selling property. This reinforces that Property Funds should only be considered for medium to long term investment.
Why does this happen?
Each day we calculate prices for our Property Funds using two different approaches:
When valuing the Funds we deduct the costs of selling properties to set a ‘selling basis’ price.
When valuing the Funds we add the costs of buying properties to set a ‘buying basis’ price.
Each day’s fund prices will reflect only one of these calculations. When more people are joining a Fund than leaving it, we will usually apply the ‘buying basis’ price to customers’ unit transactions. This means that the costs of buying property are fairly borne by the customers who are joining the Fund. Similarly, when more people are leaving a Fund than joining, we usually apply the ‘selling basis’ price to customers’ unit transactions, so that customers leaving the Fund are bearing the fair costs of selling properties.
However, there are now likely to be more days on which we set our prices using a ‘buying basis’.
Until relatively recently we were able to balance money being invested into the Scottish Widows Property Funds with money being withdrawn from them. This meant we’d been able to avoid switching between ‘selling basis’ prices and ‘buying basis’ prices from day to day. The Funds had consistently been priced on a ‘selling basis’.
However, in the current market the pattern of money coming into and out of the Funds has been less predictable. It’s become increasingly the case that we have needed to change between ‘buying’ and ‘selling’ prices so that we can continue to treat our Property Fund customers fairly (as these customers should not incur buying or selling costs as a result of choices made by other customers). This applies to all transaction types: new premiums, encashments, claims and switches to or from other funds.
This means that an investor who buys units in the Funds and then sells them shortly afterwards could see a reduction in value of 5% to 7% (which is the difference between prices calculated on a buying basis and a selling basis, due to the high transaction costs for property investments, such as stamp duty). This reinforces that Property Funds should only be considered for medium or long term investment.
Update – July 2014
Further to the announcement below, please note that by mid-July 2014 we had completed the following changes:
For Pension Portfolio 4, the reduction in equity content by 10% and the increase to the Corporate Bond allocation by 10% is planned to take place during the second half of 2014 when market conditions permit.
We offer three core investment strategies to our Individual and Corporate Pension customers. These strategies are called our Pension Investment Approaches (PIAs) for Corporate Pensions, and our Governed Investment Strategies (GIS) for Retirement Account, our main Individual Pension product.
When we launched these strategies as the PIAs in 2006, we put in place an ongoing and robust governance process, which uses modelling output provided by independent financial risk specialists Barrie & Hibbert. Part of our governance commitment is to regularly review the underlying asset allocations and investment funds used for these strategies and, if necessary, make any changes which will help us continue to meet our customers’ needs.
As a result of our most recent review, we are now announcing changes to the PIA and GIS underlying asset allocations and the funds they are invested in. We firmly believe that these changes will be of benefit to our customers, offering them higher potential returns for broadly the same levels of risk, and without any increase in charges.
Many pension providers have recently launched default investment strategies following the introduction of auto-enrolment, but we did so back in 2006. Our GIS and PIA strategies are portfolios of funds that are regularly rebalanced and gradually move the plan into lower risk investments as the client approaches their selected retirement date (using Lifestyle Switching).
Each of our three strategies offers an investment selection appropriate to a different level of investment risk: Adventurous has the highest risk rating, followed by Balanced and Cautious. They are designed to make it easier for your client to invest in a mix of funds that suits their attitude to risk and the length of time until their selected retirement date, without the need to choose individual funds.
Each of the strategies is invested in one or a combination of underlying pooled vehicles, the four Pension Portfolio funds, until the customer is five years from retirement. In these last five years, their investment is progressively switched into lower risk funds, our Pension Protector and Cash Funds.
Each year we review the Pension Portfolios’ strategic asset allocation. We adopt a quantitative approach, using outputs from Barrie & Hibbert’s modelling tool, and complement this with a qualitative overlay which helps us select what we consider to be the most effective balance between risk and reward for each strategy. This approach aids us in identifying any changes which we believe will ensure that our strategies continue to meet our customers’ investment goals.
We are making the following changes to the Pension Portfolio asset allocations:
Here is a summary of the underlying Pension Portfolios, showing their investment mix ‘before and after’ the changes:
Overseas Equities (Developed Markets)
Emerging Market Equities
Pension Portfolio 1
Pension Portfolio 2
Pension Portfolio 3
Pension Portfolio 4
Index Linked Gilts
It is important to note that there will be no additional costs to customers as a result of these changes, and there are no material changes to the Pension Portfolios’ overall investment objectives or risk profiles.
Why are we doing this?
We are making these changes because we are confident that they are in the interests of our pension customers.
Barrie and Hibbert completed the latest quantitative analysis of the Pension Portfolios during 2013. The results of this modelling indicated that over a 25 year period, the 30:70 UK to Overseas equity ratio delivers a higher expected retirement income than the 50:50 split, and at a broadly similar level of risk.
In addition, we had recognised that the Pension Portfolios could benefit from more diversification, so the review assessed if any other types of assets should be added. We analysed the likely benefits of adding Emerging Market equities, Commodities and UK Property, again using a 25 year projection. Our review found that introducing a small Emerging Market component would improve the expected risk/return profiles of Pension Portfolios 1, 2 and 3.
We are aware that introducing Emerging Markets equities and increasing the level of Overseas equity may make the strategies appear riskier than previously. However, we firmly believe that allocating more of the equity exposure across international markets can actually be expected to maintain or reduce the current level of risk, whilst enhancing expected returns.
We are confident that over a long time horizon an investment strategy which is mainly invested in equities in the earlier years, followed by a gradual lowering of the strategy’s overall risk, will result in better outcomes for our customers. In addition, our strategies have a longer run-in to retirement than some others in this market: we start to switch our customers’ assets out of equities 15 years before retirement, instead of the more typical 10 years.
What will be the impact of these changes?
We are committed to completing all these changes with minimal disturbance to our customers, and it is worth noting again that there will be no increase in charges or changes to any fund’s risk profile as a result of what we are doing.
The increase to Overseas equities means we can no longer use the SW SSgA 50:50 Global Equity Index Fund for the strategies’ equity investments. This fund is being replaced with direct holdings in the SSgA target regional equity index funds which are already available within the Scottish Widows fund range.
All Fixed Income investment will be managed by SWIP on a passive basis following the launch of a new Scottish Widows Corporate Bond Tracker Fund in 2014. This means that going forward:
How are we communicating these changes to customers?
Customers will find details of these changes in their annual Pension Benefit Statements, and we will direct them to a dedicated area on the Scottish Widows consumer website if they would like more information. The changes will also start to be reflected in the factsheets produced for the period to 31 March 2014.
Please read our fuller summaries of the 2013 PIA review and the 2013 GIS review for more details about what we are changing and why we are making these changes now.
As detailed in their policy paper PS13/1, our regulator, the Financial Conduct Authority, has introduced rules to make it easier for investors in fund supermarket funds to see what charges they are paying. To comply with the rules, fund managers are closing bundled funds and, in most cases, replacement clean funds are available. If your clients are invested in those funds, so the investment make-up of their Retirement Account is going to change.
In November, we’ll move any customers’ money which is still in bundled funds into clean funds or into the Control Account.
What are we doing?
On 1 October, we are again writing to IFAs who have clients invested in affected funds and then writing to the customers (in early October) to remind them about the changes. We initially wrote to IFAs and customers in July.
Trading Restriction Period
From 6 November for a maximum period of up to 3 weeks there will be a trading restriction period where old bundled funds can’t be traded .
Why are we writing to them now?
We’re reminding IFAs and their customers to review the funds they are invested in and to consider moving into clean funds in advance of our deadline. This would mean they are taking control of their investments and also will ensure that they aren’t affected by the trading restriction period. They can move out of the funds by getting an adviser to send us instructions, or be writing to us at Scottish Widows Retirement Account Team, PO Box 28090, 15 Dalkeith Road, Edinburgh, EH16 5UG giving us their Account number, and the fund they are moving out of and that they’d like to move into.
What we’d like you to do
We want your clients to be in control of their investments and fund selection throughout this regulatory driven change and would appreciate your support and assistance in this.
If you have any questions about these changes, please contact your usual Scottish Widows account manager in the first instance.
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Scottish Widows Limited. Registered in England and Wales No. 3196171. Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 181655.
Scottish Widows Unit Trust Managers Limited. Registered in England and Wales No. 1629925. Registered Office in the United Kingdom at Charlton Place, Andover, Hampshire SP10 1RE. Tel: 0345 300 2244. Authorised and regulated by the Financial Conduct Authority. Financial Services Register number 122129.
HBOS Investment Fund Managers Limited, registered in England number 941082. Registered office in the United Kingdom at Trinity Road, Halifax, West Yorkshire HX1 2RG. Authorised and regulated by the Financial Conduct Authority. Financial Services Register number 119223.
Scottish Widows Bank is a trading name of Lloyds Bank plc. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales, no. 2065. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under number 119278.