Standard Life is increasing the risk on its Active Plus and Passive Plus range of default funds, with risk profile 3 offering increasing its equity content by 5 per cent per cent.
The restructure of the default, which applies to both the Standard Life Master Trust and its contract-based GPP, sees Standard’s high-profile GARS absolute return fund dropped.
The default has until now held a 13-14 per cent exposure to GARS.
Standard’s performance has significantly lagged the master trust sector, with its five-year annualised return for younger savers standing at 5.07 per cent, compared to an average of 7.78 per cent across the 24 defaults that make up the Corporate Adviser Pensions Average (CAPA), and less than half the 10.6 per cent of the table-topping SuperTrust UK.
Standard says the default is undergoing a root and branch review, with its portfolio optimisation process leading to an increase in defensive assets as well as equities, at the expense of the absolute return component. Gilts are also dropped from the portfolio, while emerging market debt and Japanese equities are being introduced.
The default strategy still sits within the same objective parameters, enabling the changes to be made for contract-based customers as well as those in the master trust. The changes will take place from Q2 2019.
Standard Life head of investment solutions Gareth Trainor says: “Our recent review has indicated that our Active Plus and Passive Plus funds have delivered the level of return needed to support good outcomes over the longer term. The changes we’re making are designed to make sure they continue to do this. We have looked at all parts of the funds and taken into account the latest thinking on target replacement rates and member outcomes. We have also considered the risk levels that we believe people will need to take to reach these targets in the future. We’ve been working closely with our Independent Governance Committee and the Trustees of our Master Trust board throughout our review and they’re supportive of the changes we’re making.”
Asset allocation for Standard Life Passive Plus III and Active Plus III changes
Current:
Money Market 3%
Govt bonds 7%
Sterling corporate bonds 11%
Global bonds 11%
UK equities 15%
US equities 13%
European equities 6%
Asia-Pacific equities 3%
Emerging market equities 3%
UK direct commercial property 6%
Global REITS 2%
Hedged high-yield bonds 2%
Absolute returns 14%
Future:
Money Market 1%
Sterling corporate bonds 16%
Global corporate bonds 15%
UK equities 21%
US equities 9%
European equities 6%
Japanese equities 5%
Asia-Pacific equities 4%
Emerging market equities 4%
UK direct commercial property 8%
Global REITS 2%
Hedged high-yield bonds 2%
Emerging market debt 7%
