The funds selected
The funds selected to match this Investment Pathway are Legal & General Cash Trust and the Prudential PruFund Risk Managed 1.
Why we’ve selected these funds
As you’re not investing for the longer term (5 to 10 years or more) the majority of your money will be invested in a cash fund. Investing in a cash fund is safer than, for example, investing all your money in the stock market. The rest of your money will be invested in a fund which aims to provide some investment growth. The combination of these funds aims to provide returns that keep up with inflation. The value of your investment can go down as well as up, so you might not get back the amount you put in.
Helpful information on investing and PruFund
Here’s some helpful information on investing in general and some more specific information on PruFund, including key points you should be aware of before you invest. We’ll also cover some facts about PruFund Risk Managed 1, including the fund objective, the risks and the charges.
Before we get started it’s important to remember the basics of investing.
Here’s a video covering general information on saving and investing. It talks you through where your money could be invested (known as asset classes), looks at levels of risk and reward and shows you how we spread the investment across different asset classes. Spreading your investment helps to reduce the risk so you don’t have all your eggs in one basket. This is known as multi-asset investing.
PruFund Risk Managed 1 a is a multi-asset fund.
The Legal & General Cash Trust is a single asset fund that invests in cash and cash-like investment (investments that are low risk and can easily be converted into cash).
People have different needs when it comes to their investments. For example, this investment has been selected if you had told us you plan to withdraw all your money within the next 5 years. Some people may want to use the money sooner and if that’s the case another investment may be suitable.
As well as ‘when’ people want to use their money, people also have different needs in terms of the risk they’re willing and able to take and the returns or rewards they’re aiming for.
To help understand the level of risk and reward of a fund, we give each fund a risk rating. Prudential’s risk ratings are between 1 and 6 (with 1 being a lower risk and 6 being a higher risk).
Other companies may use different descriptions and ratings.
If you watched the video, “The basics of investing”, you’ll have seen that markets move up and down. The video also explained that multi-asset funds help reduce the risk associated with this, by spreading the money across different asset classes. This offers some protection compared to the volatility of only investing in a single asset class, for example shares.
PruFund also uses a smoothing mechanism which aims to grow your money while smoothing the short term ups and downs of investment markets. Our smoothed fund range is called PruFund. PruFund is part of our With-Profits fund, the largest in the UK. There may be times when we need to suspend smoothing in order to protect the With-Profits fund and all those invested in it.
We call this smoothing. Our smoothed fund range is called PruFund. PruFund is invested in our With-Profits Fund, the largest of its kind in the UK. There may be times when we need to suspend smoothing in order to protect our customers in the With-Profits fund.
When you invest in PruFund, your money is pooled together with other investors. This pool of money is then used to buy a large range of different types of asset classes, which as we’ve seen, helps reduce risk. Pooling money also brings about other benefits like having access to a wide range of global funds that individual investors may not. And because there are many, many investors, the costs are spread out too.
A key benefit of PruFund is that it’s actively managed by teams of investment experts. Our experts continually assess data and performance information to make ongoing decisions about where to invest (and where not to), as well as looking out for new opportunities. To achieve the right mix of assets at any given time, they also have a regular process of monitoring and adjusting the mix to respond to changing market conditions.
This video shows some of the key important aspects of PruFund you should understand before investing. For example, the aim of smoothing is to protect you from the extreme short-term highs and lows of the market. And remember, there may be times when we need to suspend smoothing in order to protect our With-Profits fund.
We set Expected Growth Rates (known as EGRs) for PruFund. These are the yearly rates we expect your investment to grow at. The EGRs are reviewed every three months, when they could rise or fall.
If returns are not as expected, we may need to adjust the value of your fund, up or down. This is called a Unit Price Adjustment (UPA).
Changing your investment
When invested in PruFund you can only make one switch every three months.
There will be a delay of 28 days if you are moving out of PruFund to another fund, including full or partial switches from a PruFund.
When moving into PruFund your money will initially be put into the PruFund holding account until the 25th of the month when it is moved into the main fund.
For more information please read your Terms and Conditions.
Watch PruFund explained. This 4 minute video will help you to understand the important aspects of PruFund and smoothing, including UPAs and EGRs.
If you choose this Pathway your money will be invested in Legal & General Cash Trust and PruFund Risk Managed 1
All funds have an objective set out by the fund manager.
The objective of Legal & General Cash Trust
The objective of this fund is to maintain capital and to provide a return in line with money market rates, before charges.
What this means
Legal & General Cash Trust aims to provide a safer investment for some of your money than, for example, investing all your money in the stock market.
The objective of PruFund Risk Managed 1
PruFund Risk Managed 1 aims to achieve long-term total returns (the combination of income and growth of capital). The fund is actively managed and aims to limit the fluctuations ('volatility') your investment experiences, after allowing for smoothing, to 9% per annum over the medium to long term. There is no guarantee that the fund will achieve its objective of managing the volatility to the target level.
What this means
PruFund Risk Managed 1 aims to maximise your medium to long term returns (5-10 years) with a low level of risk. Although you’re looking to take your money within 5 years and PruFund is generally a longer term investment, when combined with a cash fund they work together, aiming to provide returns that keep up with inflation.
It also offers you some protection from the extreme, short-term ups and downs of the market by aiming to deliver smoothed returns.
As we have seen from the fund objective, the volatility limit for PruFund Risk Managed 1 is 9%. This means the aim is to try to ensure the fund value doesn’t fluctuate by any more than 9%. If that does happen, as there is no guarantee it will always be within the limits, the fund manager will take action to try to bring it back within the guidelines.
Legal & General Cash Trust invests in cash, and money markets that have a lower level of risk.
On a scale of 1-6 this fund has a risk rating of 1
shown as at 31 August 2021
The PruFund Risk Managed 1 fund invests in a wide range of different assets. The split of these assets determines the risk level of the fund and therefore the potential for reward. In the basics of investing video, it explained that shares tend to be the most risky asset class, with cash being the least risky.
On a scale of 1-6 this fund has a risk rating of 2 and you can see the asset mix as at 30 June 2021.
The asset mix is regularly reviewed and may vary from time to time, but will always be consistent with the fund objective.
On a scale of 1-6 your Investment Pathway has a risk rating of 2 meaning it has a medium to low risk.
In this table you can see the percentage invested along with the costs and charges. The yearly total is made up of the yearly charge and further costs and will be applied proportionately based on the percentage of the investment in each fund. The yearly total is on top of the Product Charge and any Adviser Charges you already pay. Costs and charges are subject to change.
The full details of all these costs and charges are in your illustration.
% of Investment in selected fund
Legal & General Cash Trust
PruFund Risk Managed 1
Also, it’s important to note that the split of your money invested in each fund may change over time due to the performance of the fund. The overall charge you pay will also depend on the actual split and may fluctuate over time.
If you have decided an Investment Pathway is right for you, there are two ways to go ahead. You can call our Customer Service Executives on 0345 268 0488, Monday to Friday 8.30 – 6pm. They can’t tell you which option to go for, or give you advice but they can give you information to help you make a decision.
Or, you can use our Online Service. To register or login, simply go to our website pru.co.uk/pension.
If you go ahead without advice, you’ll be taking responsibility for your choices and your own decision. This means the Financial Ombudsman Service(FOS) doesn’t give you the same protection for the decision you make, but you can still refer any matter to them if you feel you haven’t been treated fairly. The FOS is an independent official body, established by Parliament, for settling disputes between UK-based financial companies and their customers. You can find out more at www.financial-ombudsman.org.uk/.
We know there’s a lot to consider when you’re investing money, and it can be tricky to know where to start. To help you understand all your options, we recommend speaking to your adviser or getting guidance.
We always recommend speaking to your adviser when making decisions about the money in your Retirement Account. Your adviser is best placed to look at your individual circumstances and recommend what is right for you. If you don’t have an adviser, you can find one at unbiased.co.uk.
Pension Wise is a free and impartial government service from MoneyHelper. They won’t make recommendations or tell you how to invest your money, but will provide information on a range of available pension options. You can arrange an appointment to speak to a pension specialist by calling 0800 280 8880 or visiting moneyhelper.org.uk
Be sure to shop around
The drawdown and Investment Pathway options you get from your pension provider might not be the best for you. It’s always worth comparing what you can get from other providers too, because you might be able to get a better deal.
MoneyHelper offers free and impartial guidance services, set up by the government, to help you understand and improve your finances. They can provide helpful information on how to shop around for Pathway options offered by other companies. You can also use their drawdown comparison tool to see what different providers offer. You can find out more on their website "moneyhelper.org.uk"
I have no plans to touch my money in the next 5 years
I plan to use my money to set up a guaranteed income for life (also known as 'an annuity') within the next 5 years.
I plan to start taking my money as a long-term income within the next 5 years (also choose this option if you plan to take out some money, as and when you need it, within the next 5 years)