Executives at multiemployer trust NOW: Pensions, London, have made changes to the plan following announcements in the U.K. budget, said a spokeswoman.
The plan — which does not disclose assets but whose investments are managed by a subsidiary of the 600 billion Danish kroner ($108.3 billion) ATP, Hilleroed, Denmark — eliminated two components of its single investment fund and added a new Retirement Countdown Fund, which invests in cash deposits, money market funds, short-dated bonds with low credit risk and interest rate derivatives.
The other component of the fund is a diversified growth fund. By default, participants switch from the diversified growth fund to the countdown fund 10 years before their selected retirement date.
Participants can remain in the diversified growth fund longer if they wish, by changing their retirement age or altering to five years the period in which they are in the countdown fund.
Prior to the changes, which came into effect this week, participants moved from the DGF into a Retirement Protection Fund 10 years from retirement. The protection fund was invested in assets that were tailored to an annuity purchase at retirement and used interest rate risk as a hedge. Then, 6.5 years from retirement, participants moved into a Cash Protection Fund, which followed the same investment strategy as the new countdown fund.
The moves are in reaction to changes in the U.K. pensions industry that mean participants no longer will have to purchase an annuity to fund post-retirement income.
Given the profile of its membership, plan executives expect the vast majority of participants to take advantage of the ability to take their pension savings as cash at retirement, said Morten Nilsson, CEO of NOW: Pensions, in a news release.
“We expect the vast majority to take all of their pension pot as cash at retirement,” Mr. Nilsson said in the release. “The new lifestyle investment strategy therefore focuses on funding for cash but gives consideration to those that want to take an alternative route.”