investment guide - sept 2013

7/30/2019 Investment Guide - Sept 2013

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Investment GuideFrom September 2013

Further inormation:

www.gmgpensions.co.uk


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This guide gives you detailed

inormation about the

investment o your Liestyle

account and is aimed at

helping you get the mostrom your membership o the

company pension plan. It is

important that you understand

how the Liestyle Plan works

and the choices open to you,

so that you can make inormed

decisions about your uture

and play an active part in

saving or your retirement.

We have tried to explain the

issues as clearly as possible

keeping the use o technical

jargon to a minimum. The

glossary, at the back o thisguide, should also help your

understanding.

I you have any questions

about the Liestyle Plan please

do not hesitate to contact the

Pensions Department see

back page or details.

John Woodman

Pensions Manager

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SummaryYour Liestyle account

Your contributions, together with the

companys contributions and anything youtranser in, will all be allocated to your

individual Liestyle account. You will receive

a benet statement each year showing

details o your individual account. The

statement will show the value o the

contributions you and the company have

made during the year and will also give

details o the way your account is invested.

At retirement, your accumulated account is

available or you to choose your LiestylePlan benets.

Your investment choices

You have a choice over how to invest your

own Liestyle account. You can spread your

investment amongst the available unds in

whatever way you choose.

However, i you dont eel comortablemanaging your own investments, there is an

automatic, deault, arrangement. The

deault strategy has been designed to

provide a careully worked out investment

strategy that can be suitable or many

members through their careers. However,

there could be a number o reasons why you

might want to override the automatic

arrangements and make your own

investment choices, perhaps ater seeking

independent nancial advice.

It is important to understand that in amoney purchase arrangement such as the

Liestyle Plan it is the responsibility o

members to ensure that the unds in which

they are invested are best suited to their

individual requirements. Whilst over the

long-term the expectation remains that

unds with high equity content (investment

in companies on the stock market) will

provide a higher return than unds investedin bonds or cash, albeit with higher volatility,

this cannot be guaranteed.

The role o the Trustees

The role o the Trustees is to provide an

appropriate range o unds or members and

to review the investment strategies o the

various unds rom time to time, but it should

be stressed this does not include the Trusteestrying to orecast investment market

movements.

The investment strategy aims to reduce

some volatility by investing in index

tracking unds. This simply means that the

investments are made in a broad range o

shares or bonds in such a way that the return

should be virtually identical to the overall

return o the relevant index. You should

remember though that investments in

equities, corporate bonds and government

stocks can all go up and down as a result omarket movements generally. The Trustees

have appointed Legal and General

Investment Management Limited to carry

out the index tracking strategy.

The Trustees investment strategy is set out

in their Statement o Investment Principles,

which is available on our website

www.gmgpensions.co.uk or rom the

Pensions Department (see back page orcontact details).

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I you dont eelcomortablemanaging your

own investments,there is anautomatic,deaultarrangement.


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Choosing yourown undsYou can speciy how you want yourLiestyle account to be invested, split

between the nine available unds.

More detailed inormation on each und iscontained later in this guide. The tableopposite has been designed to help youassess the risk and reward you couldexpect rom each und. A risk/rewardrating o 1 represents the lowest riskand 4 represents the highest risk interms o volatility in the capital valueo your liestyle account.

I you want, you can speciy dierent mixesor a) your existing und and b) uturecontributions.

You should monitor the relativeinvestment returns and make urtherchanges as required. Adjustments to yourinvestments will take place on the nextavailable dealing day ater receipt oyour instructions. This normally occurs ona Wednesday o each week and on the

last working day o every month but thereare exceptions so you should check on ourwebsite www.gmgpensions.co.ukor withthe Pensions Department i you requireexact details.

Fund What it is Risk/Reward

Long TermFund

Mainly invested in a wide spread o company shares both in the UK and abroad,together with a smaller amount in corporate bonds and gilts. The capital value o yourpension account is not protected here, so this option would tend to be used when youare a number o years away rom retirement or as part o your overall investmentstrategy.

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Short Term Fund(Bonds)

All company bonds. The returns received on bonds tend to be in line with prevailinginterest rates which, in turn, aect the cost o annuities (pensions). Bonds thereoretend to be used more in the run up to retirement to keep the capital value o yourinvestments in line with the cost o your pension.

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Short Term Fund(Cash)

The objective o this und is to preserve the capital value o your Liestyle acount byinvesting in a well diversied range o investments, with a good geographicalspread. This is probably not a suitable long term option as your investment heremay not keep pace with infation or the cost o buying an annuity at retirement.

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UK Equity FundUK company shares only, based on the FTSE All Share (5% Capped) Index. As withthe Long Term Fund, this und looks to get good returns over a long period o timeand has a wide spread o assets.

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Overseas EquityFund

A wide spread o company shares in Europe, North America, Japan, Pacic Basinand Emerging Markets. Again, long term and could be used as part o a mixedstrategy to get your investments to beat infation. To reduce the currency risk, 50%o these overseas shares have been hedged.

3.5

Ethical GlobalEquity Fund

This und invests in a wide spread o global company shares, tracking a speciallyconstructed index which has been designed to take account o ethical, social andenvironmental principles.

3.5

Corporate BondFund

Invests in bonds issued by companies . Bonds are considered a low risk option whichwill help your pension und keep its value in terms o what it will buy. However,prices do go down as well as up.

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UK GovernmentStocks Fund

Invests in bonds issued by the UK government. Oten considered the most secureoption, these are also known as gilts. 1.5

UK GovernmentIndex-LinkedStocks Fund

Invests in bonds issued by the UK government which give a return that keeps in linewith infation. 1.5

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Automatic(deault)investmentstrategyI you dont eel comortable managing your

own investments and speciying your own mix o

unds, then your Liestyle account will be invested

in accordance with the deault strategy. Under this

arrangement, your account is normally invested

in the Long Term Fund, which is currently invested

in a mixture o Equities and Bonds. The value o

these investments can be volatile rom time to

time and can sometimes suer sharp setbacks in

times o economic or political diculty. Despite

this volatility and the absence o guarantees,

these types o investments are nevertheless

generally considered appropriate or long term

growth.

The Trustees note about Extreme Market

Volatility on our website (www.gmgpensions.co.uk)

has important reminders about the long-term

nature o saving or retirement and the protection

built into the Liestyle Plans deault strategy.

As you approach retirement, it is usually helpul

to try to reduce volatility by switching your

Liestyle Account into the Short Term Fund which

is currently invested in Bonds and Cash. WhilstBonds can fuctuate, they tend to move in line with

interest rates generally thus giving some stability

to the pension which you can purchase with your

accumulated account. However, Bonds cannot

protect against changes in other actors which

insurance companies use to determine annuity

rates such as mortality trends.

As you approachretirement, it is usuallyhelpul to try to reduce

volatility by switching

your Liestyle accountinto the Short Term

Fund

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Years to TRD

Proportion oyour liestyle

account in theLong Term Fund

10 90%

9 80%

8 70%

7 60%

6 50%

5 40%

4 30%

3 20%

2 10%

1 0%

Automaticswitching -deault strategyThe Liestyle Plan will normally automatically

switch 10% o your accumulated account in each

o the ten years beore your Target Retirement

Date (TRD) rom the Long Term Fund to the Short

Term Fund (in practice the rst switch is 10% then,

each year, our quarterly switches o 2.5%). Thus,

during the last year the whole o your account will

be in the Short Term Fund. For some members, the

switching period is 5,6,7,8 or 9 years dependent on

how ar away rom TRD they were at 1st April 2003.

Assuming a ten year switching period, the table

opposite shows the proportion o your account that

will remain in the Long Term Fund at given periods

beore TRD. The remainder o your account will be

invested in the Short Term Fund. See overlea or

more details about the switching arrangements

and the choices you have in setting your TRD.

The deault strategy has been designed to provide

a careully worked out investment stategy that

could be suitable or many members throughout

their careers. However, there could be a number

o reasons why you might want to override

the automatic arrangements and make your

own investment choices, perhaps ater seeking

independent nancial advice.

You should bear in mind that the automatic

switching arrangements into the Short Term

Fund may not be suitable i, or example, you are

intending to choose a non-conventional annuity or

income drawdown arrangement (see the brochure

Your Pension Your Choice or more inormation

regarding these choices at retirement).

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Liestyle Investment Switching Over 10 Years to Retirement

Percentage

ofYourFund

Years to Target Retirement Date

0%11 10 9 8 7 6 5 4 3 2 1 0

50%

25%

75%

100%

KeyShort TermFund (Cash)

Short TermFund (bonds)

Long TermFund

Choose yourown TargetRetirement

Date (TRD)It is important to set your own TRD at the

date you think you are most likely to take

your retirement benets.

TRD is automatically set to age 65 but or

the purpose o the automatic switching you

can set your own TRD to any age between

50 and 75. (Switching will take place overthe 10 year period up to your chosen TRD.)

You can change your TRD at any time.

Remember that i you joined the Plan ater

5th April 2006, you can only take your

benets rom 55 onwards.

I you change your TRD (orm available

on the website) the adjustment to your

investments will take place on the next

available dealing day. This oten occurs

on a Wednesday o each week and on the

last working day o every month but there

are exceptions so you should check on our

website www.gmgpensions.co.uk or ask

the Pensions Department i you require

exact details.

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Focus on thethree undsused in the

deault strategyThe Long Term Fund

The distribution o the Long Term Fund will

vary rom time to time but the ollowing gives

a broad indication o its structure. Up to date

details can be obtained rom the Pensions

Department.

The value o equities can be volatile rom

time to time and can sometimes suer sharp

set backs in times o economic or political

diculty. Despite this volatility and the absence

o guarantees, equities are nevertheless

generally considered to provide an appropriate

investment class or long term growth.

Returns rom overseas equities come through in

dierent currencies, which mean that changesin exchange rates aect the returns in pounds

sterling. 50% o this currency risk has been

taken out (hedged) to reduce the volatility o

this und.

In a low and stable infation environment,

investment in bonds can be expected to

produce reasonable returns above infation.

The market or corporate bonds has expanded

signicantly over the past ew years and such

bonds oer a higher return than government

bonds, albeit with a slightly higher degree o

risk. In the light o volatility o equity markets,

an element o high quality corporate bonds

and government bonds are included in the

Long Term Fund aiming to reduce volatility.

The Short Term Fund (Bonds)

AAA Corporate Bonds

(Over 15 Years)50%

6A Corporate Bonds

(Over 15 Years)50%

The objective o the Short Term Fund is to

reduce volatility as you approach retirement.

Whilst corporate bonds can fuctuate, they

tend to move in line with interest rates

generally thus giving some stability to the

pension which you can purchase with your

accumulated account. However, bonds

cannot protect against changes in other

actors which insurance companies use to

determine annuity rates such as mortality

trends. You should also bear in mind that the

Short Term Fund might not be appropriate

i you intend to choose a non-conventional

annuity or income drawdown arrangement

(see the brochure Your Pension Your Choice

or more inormation regarding these choices

at retirement).

The Short Term Fund (Cash)

This und aims to preserve the capital value

o your Liestyle account by investing in a well

diversied range o investments with a good

geographical spread. Types o investment

include certicates o deposit, commercial

paper, foating rate notes, medium term

notes, government bonds, corporate bondsand cash deposits. (See Glossary).

UK Equities Circa 14%

Overseas Equities:North AmericaEurope (excluding UK)JapanAsia Pacifc (excluding Japan)Emerging Market

Circa 56%

TOTAL EQUITIES 70%

Coporate Bonds 20%

Fixed Interest Gilts 5%

Index-Linked Gilts 5%

TOTAL BONDS 30%

GRAND TOTAL 100%

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Monitoring undperormanceEvery week, the unit prices or each o the unds are

updated on our website www.gmgpensions.co.ukYou can ask the Pensions Department or an

update on your individual Liestyle account at any

time.

The trustees employ independent advisers to

monitor the unds investment returns. Each

summer a detailed investment bulletin is produced

giving details o the investment perormance or

each o the unds.

Financial adviceFor urther general pensions and nancial advice

you may want to consider getting your nancial

aairs reviewed by an Independent Financial

Adviser (IFA) who would be able to advise on your

pension situation as well as other aspects o your

personal nances. You can nd a local IFA via the

website www.unbiased.com

Changing yourmix oinvestmentsAdjustments can be made by completing the

relevant Investment Choices orm available rom

our website www.gmgpensions.co.uk or rom the

Pensions Department. Details o the orthcoming

weekly dealing dates are shown on the website.

You need to get your signed orm to the Pensions

Department by no later than 3.00 pm, two days

beore the dealing date.

e.g. or a Wednesday dealing date the deadline is3.00 pm on the Monday.

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Long TermFund

The UK equity element aims to track the FTSE All-Share Capped 5% Index. Each o the overseas equityelements aim to track the appropriate FTSE World Index. The 6A corporate bond element aims to trackthe iBoxx Non-Gilts (ex BBB) All Stocks Index. The xed interest gilts aim to track the FTSE All Stocks Giltsindex. The index-linked gilts aim to track the FTSE All Stocks Index-Linked Gilts index.

Short Term Fund(Bonds)

The AAA corporate bonds element aims to track the iBoxx AAA Fixed Interest Over 15 Year Index and the6A corporate bonds element aims to track the iBoxx Non-Gilts (ex BBB) Over 15 Year Index.

Short Term Fund(Cash)

This und aims to preserve the capital value o your liestyle account by investing in a diversied rangeo investments, with good geographical spread.

UK Equity FundThis und invests solely in UK equities, with the aim o tracking the perormance o the FTSE All-ShareCapped 5% Index. This und orms the underlying UK equity element o the Long Term Fund.

OverseasEquity Fund

This und invests in various overseas markets , aiming to track the appropriate FTSE World Index in eachregion. The distribution o the und will vary rom time to time but the ollowing gives a broad indicationo its structure. Up to date details can be obtained rom the Pensions Department. North America 44% Europe (excluding UK) 25% Japan 9.5% Asia Pacic (excluding Japan) 9.5% Emerging Markets 12%The returns rom these overseas equities come through in dierent currencies, which means that changesin exchange rates aect the returns in pounds sterling. 50% o this currency risk has been taken out(hedged) to reduce the volatility o this und.

This und orms the underlying overseas equity element o the Long Term Fund.

Ethical GlobalEquity Fund

This und aims to track a specially constructed index, the FTSE4 Good Global Index, which has beendesigned or investors who wish to take account o ethical, environmental, social and governance actors.Further background on the und can be obtained rom the Pensions Department.

Corporate BondFund This und invests in 6A corporate bonds, with the aim o tracking the iBoxx Non-Gilts (ex BBB) All StocksIndex. This und orms the corporate bond element o the Long Term Fund.

UK GovernmentStocks Fund

This is a und invested in government stocks which aims to track the perormance o the FTSE All StocksGilt Index.

UK GovernmentIndex-LinkedStocks Fund

This und invests in index-linked government stocks, with the aim o tracking the perormance o the FTSEAll Stocks Index-Linked Gilt Index.

Available undsThe ollowing table gives more technical details on each und.

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regions (eg Europe, North America, etc)

reers to the stock market grouping or the

particular pooled und.

Floating Rate Note (FRN)Also known as a foater. A note with a

variable interest rate. The adjustments to theinterest rate can be made on a 1, 3, 6 month

or 1 year basis and are tied to a certain

money-market index.

FTSE All Share IndexThe All Share Index is generally regarded as

the most representative index o the overall UK

stock market. The index currently comprises

over 700 UK companies and represents over95% o the value o the stock market.

FTSE All Share (5% Capped)IndexAs above, but no more than 5% o the Index is

invested in any one company. The Liestyle

Plan uses this index or its UK Equities to

reduce the risk o having too much money

invested in one or more o the very largecompanies on the stock market.

Government Bonds or StocksSometimes called Gilts. These are securities

issued by the UK government and thereore

GlossaryThis glossary aims to provide a relatively

straightorward explanation o some o the

technical expressions used in this Investment

Guide.

The exact interpretation o words used is

always subject to the denitions used in the

Trust Deed and Rules o the Liestyle Plan.

Certifcate o Deposit (CD)A tradable savings certicate entitling the

bearer to receive interest by way o a discount

at purchase or with a coupon. A CD bears a

maturity date, a specied xed interest rateand can be issued in any denomination. CDs

are only issued by nancial institutions (FI) and

range rom one month to one year.

Commercial Paper (CP)Generally an unsecured, short-term debt

instrument issued by a corporation, typically

or the nancing o accounts receivable,

inventories and meeting short-term liabilities.

CP can also be issued as asset backedsecurities. Maturities on CP rarely range any

longer than 270 days. The debt is issued at a

discount, refecting prevailing market interest

rates. CPs are similar to CDs but can be issued

by corporate or Financial Institutions.

Corporate BondsThese are similar to government bonds, but

they are issued by non government agencies

and companies. Interest is paid at a xed rate

over the term o the bond and the capital is

repaid at the end o the term. Corporate bonds

are rated by independent organisationsaccording to their ability to be able to pay the

interest payments and the capital at the end

o the term. Investment grade bonds are those

rated AAA, AA, A and BBB, with the highest

rating AAA, ollowed by AA, A and BBB.

Corporate bonds rated below this are known

as sub investment grade, high yield or junk

bonds.

The Liestyle Plan unds only invest ininvestment grade bonds rated AAA, AA

and A.

EquitiesOrdinary shares in companies ie stock market

investments. In the context o the Liestyle

Plan we usually mean investment in a pooled

und which comprises shares in a wide range

o companies rather than shares in just onecompany. UK equities reers to pooled unds

investing in companies quoted on the London

Stock Exchange although most o these

companies do have trading operations all over

the world. Similarly each o the overseas

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the interest payments and the capital repaid

at the end o the term are guaranteed and

can be regarded as absolutely secure.

iBoxx IndexThis is a specially constructed index designed

to provide a reliable benchmark or indextracking o corporate bond investments.

Index TrackingThis is the term given to an investment

approach that is designed to specically track

the perormance o a market index.

Liestyle Account

We allocate all your contributions and theCompanys contributions or you into your

Liestyle account which is then invested. Your

Liestyle account is thereore part o the overall

unds o the Liestyle Plan, but we keep track o

the contributions and changes in value or

each member separately.

Long Term Fund

This is part o the Liestyle Plans unds. It isour own in-house description or the und

which is designed to meet the needs o a

typical member during the majority o his or

her career. It will be invested in the types o

investments which suit this objective.

Medium Term Notes (MTN)A corporate note continuously oered by a

company to investors through a dealer.

Investors can choose rom diering maturities,

ranging rom nine months to our years.

Money Purchase PensionSchemeThe Liestyle Plan is sometimes reerred to as a

Money Purchase pension scheme or a

Dened Contribution pension scheme. This

means that contributions made by you and

the company are invested until you are ready

to draw your benets. The benets at

retirement may be partly in the orm o a lump

sum and the balance o your accumulatedaccount is then normally used to buy an

annuity with an insurance company. There are

a variety o choices available to you at

retirement see Liestyle brochure Your

Pension Your Choice or more inormation.

Mortality TrendsWhen insurance companies calculate how

much pension (annuity) they will give inexchange or a sum o money (e.g. your

Liestyle account), they need to estimate the

length o time that they will have to pay the

pension, i.e. how long you will live. Mortality

trends are used by insurance companies to

help estimate how long people are likely to live

in retirement.

SwitchingIn our deault arrangement, the investments

in your Liestyle account are normally

automatically moved rom the Long TermFund into the Short Term Fund as you

approach retirement to gradually reduce

volatility. For many members this is the most

suitable arrangement and it is thereore a

vitally important eature o the Liestyle Plan.

This is oten reerred to as liestyle switching

and is refected in the name o our company

pension plan!

Target Retirement Date(TRD)This is the date you set or yoursel to control

the timing o the switching o your Liestyle

account rom the Long Term Fund into the

Short Term Fund. It does not mean you must

retire at TRD. It is simply the way in which you

can have personal control over your Liestyle

account in the years leading up to your

expected retirement. You can change yourTRD at any time to refect the best estimate o

when you think you may draw your benets.

(The deault TRD is age 65).

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Helpul Websiteswww.unbiased.co.uk Contains listings o local independent nancial

advisers plus a large amount o savings

inormation

www.moneyadviceservice.org.ukJargon ree guidance on a wide range o topics

rom the Money Advice Service in partnership with

Government.

www.learnaboutmoney.org A nancial education site sponsored by the

pre-Retirement Association in association with a

number o blue chip companies

www.theguardian.com/uk/money A constantly updated site with news and

inormation on personal nance

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Note: This guide is

designed to explain the

main aspects o the

investment arrangements

o the Liestyle Plan. All

aspects o the Plan are

subject to the provisionso the Trust Deed and

Rules.

Contact DetailsFor urther inormation

about the Liestyle

Plan, please contact thePensions Department.

See overlea or details.


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The Pensions DepartmentGuardian Media Group plcCenturion House, 129 Deansgate,Manchester M3 3WR

Tel: + 44 (0)20 3353 2000Fax: + 44 (0)20 3353 3125

Email: [email protected]

investment guide - sept 2013

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