AXA UK Group Pension Scheme Investment Options Introduction

Contents This short booklet gives an overview of the funds and strategies available to you. Throughout your career, you and AXA make contributions to your Personal Account. These contributions are invested in particular funds selected by you. This booklet will give you some things to consider when selecting how and where to invest your contributions. If you would like further details on investing, please refer to your relevant Investment Guide.

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1. Choosing the right investment approach

Shopping for the right investment approach isn’t a ‘one size fits all’ deal. There are a How much can you afford to contribute now? number of factors to consider when deciding what the best investment approach is for While investing for the future is important, you must be careful not to overstretch yourself you. Making your choice can be broken down in to four simple steps. financially today. Make sure your monthly contribution amount is affordable to you now. As your contributions are tax efficient it may not be cost as much as you realise, please see Step 1: Understand your personal circumstances our “Contribution Calculator tool”. Alternatively, if you are contributing a lower amount When thinking about how and where to invest your contributions, start by asking than you would like but are keen to grow your Personal Account quickly, you may wish to yourself the following four questions. consider investing in the higher risk funds which tend to provide a higher rate of return, but please also consider your attitude to financial risk. When do you want to retire? If you’re thinking of retiring early, you will need to build up a bigger Personal Account in a shorter space of time. This might mean that you need to think about maximising your monthly contributions and/or investing in higher risk funds, such as equities, which tend to offer a higher rate of return. However, higher returns are usually associated with higher volatility of returns meaning that they can go up as well as down.

How much money will you need to live off in retirement? Remember that once you reach retirement, your outgoings may not be as high as they currently are, meaning that your monthly budget could look very different. For example, you may no longer have a mortgage to pay for once you reach retirement. To help you plan how your retirement might look, try using the BlackRock Target Plan. It includes a budget planner, which breaks your retirement budget planning in to easy sections and provides an estimate of how much you need in retirement.

Will you have any other sources of income? You may not only be expecting a pension from the AXA UK Group Pension Scheme. You may have accrued benefits in other pension schemes over the years, or have your own private pension that you’ve been paying in to. If you have alternative savings, these will contribute towards your spending in retirement.

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1. Choosing the right investment approach (Continued)

Step 2: Understand the different types of investment If investments is not something you’re used to or have a particular affinity for, looking at all the different options can be a fairly daunting task. The Investment Guide provides full details regarding the different types of investment available. Here’s a quick overview of the main types:

Equities Equities Equities are shares in companies and tend to have a better growth value than that Multi Return Assets of bonds, gilts or cash. However their higher rate of return means that there is more chance that the value of the funds will fluctuate. As a result, equities are considered to Bonds be higher risk. If you’re looking for long-term returns, equities may be a good option if Cash you don’t mind potentially losing value in the short-term.

Bonds and gilts Risk Bonds are loans to a company, government or other organisations; UK Government bonds are called ‘gilts’. The level of return you can expect from bonds and gilts are somewhere between the higher risk/return of equities and the lower risk/return of cash. The return on your investment is based on the interest accumulated from the loan. Investment Management It’s not just the types of investment you need to think about; there are also two Diversified Growth (Multi-assets) different styles of investing – active and passive management. Each style involves Diversified Growth Funds (DGFs) invest in a wide variety of asset classes in order to different risk so it’s important that you understand how they work. deliver investment returns over the medium to long term. Generally, the long-term aim is to produce a similar level of return to equities, but with a lower volatility. Passive management - the investment manager aims to produce a return that mirrors that of a specific index, such as the FTSE All Share Index. Passive Cash funds are sometimes called ‘index-tracker’ funds. As the name suggests, cash funds invest in various cash-based investments. Cash funds tend to have a lower rate of return than equities or bonds and gilts, however Active management - the investment manager uses its expertise to try it does mean that the associated risk of investing in this type of fund is considered and choose investments that will exceed the returns of a specific index – this to be low as well. Cash funds can provide good security for your Personal Account is known as ‘outperforming’. if you’re about to retire, but may not provide good enough long-term returns for younger members.

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1. Choosing the right investment approach (Continued)

Step 3: Understand what risk means to you Step 4: Choose how you want to manage your investments The types of funds you invest in or the investment approach that you choose to take is The Investment Guide explains in detail how you can manage your investments in one closely linked to your attitude to financial risk. And your attitude to financial risk can be of two different ways: dependent on factors such as your age, where you are in your career and how close you are to retirement. For example, a younger member may be more inclined to invest Lifecycle – which is how your fund will be invested if you do not want to make an in higher risk funds as they have time to weather any fluctuation in the funds over the investment decision. This is known as the ‘default’. long-term. However, members who are approaching retirement may wish to consider switching any investments in higher risk funds to lower risk funds, such as cash, in Freechoice – where you choose to invest within 12 funds chosen by the Trustees order to protect their Personal Account as they approach retirement. which are managed by leading investment managers.

The Investment Guide explains the different types of risk and why they matter:

• Capital risk - the risk that your investments may drop in value. This can happen with all equity, bond and even cash funds. The younger you are, the less worried you might be about short-term ups and downs. Instead you might want to look for long-term investment growth.

• Inflation risk - the risk that your investments won’t grow quickly enough to sufficiently outpace inflation (the increase in the cost of living). Even if they do grow in value, if they don’t grow quicker than inflation then their real value goes down. This can happen with low capital risk funds, such as a cash fund.

• Pension conversion risk - When you retire, you might want to use the majority of your Personal Account to buy a pension. The cost of buying a pension varies from time to time and moves broadly in line with the price of bonds and gilts. By switching your investments into a fund that invests in bonds when you’re closer to retirement, you can help to protect them against this risk.

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2. The Lifecycle strategy

The Lifecycle strategy has been devised by the Trustees with the assistance of their Lifecycle – Default Option expert advisers. It aims to manage some of the risks for you. 100%

• It is an investment strategy that will automatically switch your funds into less risky 90%

assets as you approach age 65 or your target retirement age. 80%

• When you’re younger, your Personal Account is invested in funds that aim for 70% long-term growth – this is known as the accumulation phase. 60% ed st

ve 50% Cash • As you approach retirement, your Personal Account is moved automatically into In lower-risk, lower-growth funds such as bonds, gilts and cash – this is known as % 40% Corporate Bonds Long Gilts the consolidation phase. 30% Diversified Growth If you do not make a decision about your investments, you will automatically be 20% Equities invested in the Lifecycle strategy. Please see the diagram on the right-hand side 10% which shows you how it works. This shows that over the 10 years leading up to the 0% target retirement date, your personal account is gradually moved into a bond and cash 10+ 10 9 8 7 6 5 4 3 2 1 0 portfolio Years to retirement (TRA 65) Please see the Investment Guide in the Library for further details.

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3. Freechoice

There are 12 funds available within the Scheme in which you can invest: For further information regarding the 12 different funds available within the Scheme, visit the Library where you will find: Investment fund • Fund Factsheets – providing further information regarding where the funds are Equities invested and the fund performance over the last quarter, year, three years and five years • – providing a high level summary of the 12 different funds, detailing where they are invested and the charges that apply.

A high percentage of members remain in the Lifecycle strategy, however this may not be suitable for all members depending upon their attitude to risk and whether they have pension benefits accrued elsewhere. If you are considering investing in other funds we Alternative suggest accessing BlackRock Target Plan online where you can:

Bonds • use the modelling tool to see the impact of changing your investments, retirement and contribution choices • assess yourself using the risk questionnaire to determine your appetite for risk (can be located under the Plan Information and Documents tab or alternatively under the Knowledge Centre – “Investor Questionnaire”). Cash

Other funds

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4. Partial transfer

If the Lifecycle Strategy or Freechoice isn’t for you and you would like to invest your fund somewhere other than the 12 funds associated with the Scheme, you can have a partial transfer.

Once a year you can contact the administrators to request a partial transfer of your DC fund to another approved pension arrangement. Please note you must leave at least £1,000 invested within your Personal Account.

If you wish to investigate the option of a partial transfer further please contact BlackRock at AXAPensionsAdmin@blackrock.com

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5. Next Steps

You can make your investment choices online through the website by logging on with your allocated User Name and Password.

Alternatively you may complete and return an Investment Choices Form to BlackRock; you can download a copy of the form here.

What do I need to do? It’s important that you review your investment choices regularly, at least once a year.

AXA UK Group Pension Scheme - Investment Options 9 6. Contacts

BlackRock – our Administrator of the DC Section If you have any queries about the Scheme or your benefits, you can contact BlackRock.

BlackRock Churchgate 1 New Road Peterborough PE1 1TT Email: [email protected] Helpdesk: 0845 601 7720

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