If you have any deferred DC benefits (which may include AVCs) you have an individual account, which is invested with the aim of growing its value through investment returns. Depending on what section you were a member of in the past, your individual account will either be in DC Core, DC Start or an external AVC provider. You can find out which section you are in by contacting Nestlé Pensions.
In DC Start, your account is automatically invested in the Lifetime Pathway fund with a target retirement age of your State Pension age (which may change in line with government legislation in future) and you don’t have any investment decisions to make. For more information see Lifetime Pathway fund.
In DC Core, you can choose how your contributions are invested. You can put all your contributions into either:
- the Lifetime Pathway fund; or
- any combination of nine other individual 'self-select' funds.
If you haven’t chosen how to invest your contributions, they will be invested in the Lifetime Pathway fund. We think this is appropriate for most members. However, it may not suit everyone and you should consider if it is right for you and at what age you think you’ll retire (known as your target retirement age).
The Lifetime Pathway fund
In the Lifetime Pathway fund, your contributions are automatically divided between investment funds and switched into lower-risk, less volatile investments as you approach your selected ‘target retirement age’. Your target retirement age is the age we assume you’ll take your benefits by, if you have chosen to invest in the Lifetime Pathway. This is to help us work out when we need to start switching you out of higher-risk investments into more stable investments. Your target retirement age doesn’t have to be the same as your normal pension age in the Fund.
You can change your target retirement age once a quarter by completing a Deferred Member Investment Choices Form and returning it to Nestlé Pensions.
In the Lifetime Pathway fund, the switching takes place in three phases:
Over 15 years from retirement
To grow the value of your investment.
Made up of:
Higher-risk investment funds with the potential for higher returns.
Equities and Blended Assets.
5-15 years from retirement
To keep a level of growth, and begin to protect the value of the Funds you have already built up.
Made up of:
Medium-risk investment funds with the potential for higher returns while aiming to protect the value of your account.
Less than 5 years from retirement
To protect a level of growth, and begin to protect the value of the Funds you have already built up.
Made up of:
Lower-risk investment funds to further protect the value of your account.
Blended Assets and Pre-retirement cash.
For information about the individual funds, see self-select funds.
The graph below shows how the automatic switching starts to move your investments once you are 15 years away from your target retirement age:
What does it cost?
To cover the cost of managing your investments, a percentage of the total value, known as the annual management charge, is automatically taken out of your DC account via an adjustment to the unit prices. Other charges may apply to certain funds. The annual management charge plus the other annual charges give the total fund charge, which is known as the total expense ratio.
Please refer to the fund factsheets for the current total expense ratio.
During the three phases of the Lifetime Pathway, the charges are currently:
Total expense ratio: 0.33%
The total expense ratio increases from 0.33% to 0.65% between 15 and 10 years before retirement as your DC account gradually moves into the Blended Assets fund. The total expense ratio stays at 0.65% from 10 to 5 years before retirement.
The total expense ratio decreases from 0.65% to 0.34% from five years before retirement as your DC account gradually moves into the Pre-retirement to Cash fund.
If you prefer to select your own investment funds, you can choose from nine self-select funds. These funds don’t automatically move your investments into lower-risk investments as you approach retirement, but you can move your investments yourself. For more information, see Changing your funds.
Pre-retirement to annuity
Pre-retirement to cash
Changing your funds
As your attitude to risk may change over time, you may want to change your investment choices from time to time. It's important that you regularly review your investment choices to ensure that they are still right for you.
In DC Core, you can change your investment choices quarterly by completing a Deferred Member Investment Choices Form and returning it to Nestlé Pensions.
When you change your investment choices, you have various options:
- to invest in the Lifetime Pathway fund – in this case, all of your account (either your Main account or your AVC account) must be invested in the Lifetime Pathway;
- to invest all your DC Core account in any combination of the nine self-select funds; or
- to change the way your account is split across the range of self-select funds you have chosen.
If you select the Lifetime Pathway option, you also need to select the age at which you would like to retire. This can be any age from age 55 to 75 and can be different to your Normal Pension Age. If you do not select a target retirement age, we will use your current Normal Pension Age.
If you change your investment choices, all of your DC Core account will be invested in line with your new investment instructions. If you have them, you can invest your AVCs differently to your main contributions if you wish.
If you ask to change your investment choices, we will sell the units you hold in your current funds and use this money to buy units in the new funds you have chosen.
The costs of buying and selling units
You won't be charged for switching funds, but if you decide to change funds there are costs that need to be paid when selling units in your old funds and buying units in your new funds. These costs are included in the daily unit price of each fund. Our investment provider will try to keep these costs as low as possible, but this may not always be doable.
The fund manager may take steps to make sure that existing investors are protected by 'swinging' the unit price. This means that only the member who is making a transaction on a particular day pays the sale and purchase costs, which could both be as much as up to 1% of the value of the money being disinvested and reinvested.
Generally, our investment provider will be able to sell and buy units on the same day, so that you are constantly invested in the financial markets. However, sometimes this won’t be possible, in which case our investment provider will sell units one day and purchase new units a few days later. If this happens, your money will be ‘out of the market’ between the sale and the purchase date. As a result, you could either make a gain or a loss if the markets move while you are out of the market.
If you would like advice about your investment choices, you should contact an independent financial adviser. The Money Advice Service has a directory of advisers who are authorised by the Financial Conduct Authority and can be found at: www.moneyadviceservice.org.uk.
Information about the funds
Our investment provider, Fidelity, prepares information on each of the funds in a ‘fund factsheet’. The factsheets include the objective of the fund, the risk rating, where it is invested, the fund charges, and the fund performance. Fidelity updates the factsheets each quarter and new factsheets are generally available about eight weeks after the end of each quarter.
The following fund factsheets from Fidelity give more information about the available funds.Growth Equities Property Blended Assets Corporate Bonds Pre-retirement to annuity Pre-retirement to Cash Cash Ethical Growth Ethical Consolidation