The Pensions Trust has selected AllianceBernstein’s target date funds for its new auto-enrolment SmarterPensions scheme.
The Trust originally announced that it was to offer an auto-enrolment scheme in September, with a March 2013 launch.
Now it has released more details about SmarterPensions, including the choice of AllianceBernstein’s as fund manager and its target date funds as a default for the defined contributions (DC) scheme.
A target date fund is a type of pension scheme that matches the individual’s retirement timeframe. As the retirement date gets nearer, the fund moves its allocation to more conservative mutual fund investments (holding bonds and cash) and away from riskier mutual fund investments (holding equities).
Annual fee removed for flexible retirement plan
The Pensions Trust will also offer ethical fund options, including ethical target date funds, which it says are the first of their kind offered in the UK and will use the FTSE4GoodFunds and UK government gilts to provide the required growth and risk characteristics.
In conjunction with the launch of SmarterPensions, the Pensions Trust has also announced it will no longer charge employers an annual fee for its 'flexible retirement plan', with immediate effect.
In addition, the annual management charge (AMC) for the flexible retirement plan is being reduced to 50 basis points, from the previous 60.
The Pensions Trust says that this will reduce further with the roll out of the SmarterPensions platform next year, and that similar reductions will be announced “in due course” for the AMC's 'ethical fund' and 'growth plan' DC products as well as its multi-employer DC Schemes: the 'social housing pension scheme (SHPS)' DC and 'the CARE scheme' DC.
A defined contribution plan is a type of retirement scheme in which the amount of the employer's annual contribution is specified. This differs from a defined benefit pension plan, where an employer promises a specified monthly benefit on retirement based on a formula derived from the employee's earnings history, tenure of service and age – rather than depending on investment returns.
Target date funds 'individually tailored'
Stephen Nichols, chief executive of the Pensions Trust, said that target date funds were chosen because they tailor the investments for the individual rather than working with a ‘one-best-way’ approach.
“We believe that the traditional lifestyling approach, whereby the transition to a lower risk asset class prior to retirement is based on a time based formula, is not seen as flexible enough today,” he said.
“By having an individual pensions pot which is regularly managed to help achieve the target required, people are more likely, we think, to end up with the pension they expect. We chose AllianceBernstein because they impressed us most in being able to provide an exciting and innovative approach to target date funds.”
