We're making changes to your workplace pension

While we would expect PIA Cautious to continue to deliver good outcomes, we believe having a larger amount of your pension savings in growth-focused investments when you’re years away from retirement can help you achieve the level of growth required to provide a sustainable income in later life. Growth-focused investments are higher-risk than other types of investment and can rise and fall more in value, but aim to deliver better long‑term growth.

As you get closer to your selected retirement age, we’ll continue to gradually move your pension savings into lower-risk investments, with less growth potential, to help protect the value of your pension pot. 

If you don’t want these changes to apply to you, you’ll need to select alternative investments. We wrote to you last year to provide more information.  

Bear in mind, if you select an alternative investment we won’t move your pension savings into lower-risk investments as you get closer to your selected retirement age. You’ll need to keep your investments under review and decide if or when to make any changes. We suggest you seek financial advice before making any choices. We can help you find a financial adviser if you don’t already have one. Advisers will normally charge for advice.

Diversification, or having a mix of different investments, is crucial for spreading risk. This is because different types of investments can perform better or worse than others at different times depending on many factors, such as the state of the economy, interest rates, and world events. So, if one type of investment falls in value, others could rise in value, cushioning the impact. It’s also important to ensure investments are diversified across different markets and parts of the world.

The funds PIAs invest in are ‘passively-managed’. This means they aim to match, or track, the performance of a benchmark which is typically a relevant stock market index. A stock market index is a selection of publicly-listed company shares. 

We’ve moved to a more globally-diversified benchmark based on the MSCI All Companies World Index to aim to capture more growth opportunities from across different markets and parts of the world.

We review our approach on an annual basis and, where appropriate, may include a higher weighting to UK company shares which is sometimes known as a home bias.

The way we invest isn’t only important to help you reach your retirement goals. It can also have an important role to play in shaping a better world to retire into. This is because the money you’re saving into your pension is likely to be predominantly invested in companies. These companies have an impact on the world around us. By investing in them, we can have an impact too.   

It’s important we take into account how companies behave in relation to the planet and people, and the way they’re managed. These are known as environmental, social and governance factors – or ESG for short.  

We’ve enhanced our responsible investment approach to better manage ESG opportunities and risks in our PIAs. 

We’ll invest more in companies with stronger ESG credentials. These include companies that are fair and inclusive, those working hard on things like reducing their negative impact on the planet and society, reducing their carbon emissions and those developing environmental solutions like clean energy. They’re typically better positioned to adapt to long-term challenges, such as climate change.  

We’ll invest less in companies we believe aren’t dealing well with ESG factors – like carbon emissions, waste and water management, workers’ rights, gender equality and board diversity. They’re more likely to suffer falls in their value from scandals or fines, or because they’ve fallen out of favour with their customers or investors.  

We won’t invest in companies we believe present too much investment risk due to the nature of their businesses and the negative impact they have on the planet and society.  

Find out more about our responsible investment approach

For customers invested in a PIA, when you're years away from your selected retirement age, we invest with the aim of giving you what we believe is the best chance of growth. As you get closer to your selected retirement age, we gradually move your pension savings into lower-risk investments with less growth potential. This is known as a ‘glidepath’ and aims to help protect your pension’s value.

Previously we told you we’d start to move you into lower-risk investments from 15 years before your selected retirement age. We’re shortening this to 12 years, meaning your pension will be invested for longer in growth-focused investments. These are higher-risk than other types of investment and can rise and fall more in value, but aim to deliver better long‑term growth.

Your PIA currently moves a significant amount of your pension to cash-type investments starting when you’re five years from your selected retirement age. While cash investments can protect your pension pot's value in the short term compared to other types of investments, they typically produce lower long-term returns and might not keep up with price inflation.  

• If you’re in a PIA that’s targeting flexible access or annuity, we’ll be removing this build-up of cash.  
• If you’re less than 2 years to your selected retirement age you’ll retain an allocation to cash.
• If you’re targeting encashment (taking all your pension as a cash lump sum) you won’t be affected by this change.