summer 2016 myfuture… · read ‘money multimedia’ for some useful tools. log into your account...

Your choice of…

OR

Lifestyle set menuThe “choose for me” option

SELF-SELECT BUFFETThe “I’ll choose” option

myfutureFIDELITY’S RETIREMENT SAVINGS MAGAZINE

SUMMER 2016

Fidelity’s Investment GuideKeep an eye on global events

How do you take your risk?

MYFUTURE SUMMER 20162

Contents

15 Money MultimediaTake up the reins of your financial planning

16 ViewpointHow do you take your risk?

Issued by FIL Pensions Management. Authorised and regulated by the Financial Conduct Authority. Registered in England and Wales No. 201514. Registered offices at: Oakhill House, 130 Tonbridge Road, Hildenborough, Kent, England TN11 9DZ. Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo and F symbol are trademarks of FIL Limited 2016. UKM0716/10505/SSO/1216

11 Number Power Saving and investing go head-to-head

12 Top Five TipsIf you’re planning for retirement

13 Five minutes with…Tom Stevenson, Investment Director at Fidelity International

14 The InsiderKeep an eye on global events

4 Ask PennyMaking an investment choice doesn’t have to be complicated

6 Your investments menu Investing for retirement is a lot like eating out

10 Spotlight on: Fidelity’s Investment Guide Three easy steps to investing for retirement

MYFUTURE SUMMER 2016 3

Your contactsEverything you need is online:

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If you need to contact us:

Email [email protected]

Call +44 1737 838 585 (open Monday to Friday from 8am to 6pm, UK time)

To give us feedback or share your thoughts on the magazine:

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Get involved

WELCOME TO MYFUTURE

It will be a good while before we understand the full economic and political impact on Britain, Europe and the rest of the world of Britain’s decision to leave the EU. You may have read some of the gloomy commentary about the potential longer-term impact of Brexit but there are still too many unknowns right now.

We’ll cover Brexit and how it may affect you in future editions. In the meantime, read ‘The Insider’ for more on the potential impact of global events on our finances.

Financial planning is never simple. With so many more options available, and the effect that external events, such as Brexit, can have, it’s more important than ever that you give your choices careful thought. Staying on top of your financial planning is crucial.

We’re here to help you. If you have questions, please call us. If you want details of your account, log into PlanViewer.

And of course, read myfuture. It’s always jam-packed with tips to help you along the way. We’re simplifying your investment choice in this edition. As several of the articles make clear, it can be as simple as you’d like it to be.

If there’s something we can help you with, please get in touch.Julian Webb Head of Workplace Investing


PennyAsk Penny Lummes explains how making an investment choice doesn’t have to be complicated.

Sahil Kapoor asks:“ I know nothing about investing. It seems far too complicated so how can I make my own investment choice?”


Penny replies: “ The thing is, Sahil, you don’t have to be an expert to make investment choices.

First of all, investing isn’t complicated as long as you’re happy to spend some time familiarising yourself with the basics. For investing that’s finding out about different types of investments, what risk means when you’re investing, and different investment strategies. You don’t have to become an expert. And finding this out isn’t hard – the internet is a great source of information.

Once you understand the basics and how to apply them, making investment choices isn’t difficult. But as I said, you’ll need to invest some time.

If you’d prefer not to make a choice, then you’ll be pleased to hear that your retirement savings plan is set up so you don’t have to. The choice can be made for you. This is called lifestyle. Investment experts put together a selection of funds that your retirement savings are invested in. The funds they choose depend on how old you are, so they change as you get older. The experts make the changes – you don’t have to do a thing.

So if you don’t want to choose your own funds you don’t have to. Go the lifestyle route. But, if you do prefer this, I’d suggest you don’t forget about your investments. Log into your retirement savings account on PlanViewer to see which funds you’re in. Look at their factsheets so you have a general idea about them, and know the answers to questions like: do they invest in the UK only or in other countries too? You don’t need to find out enough to take an exam on them! But find out a little so you know where your account is invested.

If you have any other questions or need help, please let us know.”

Penny Lummes manages Fidelity’s Service Centre. Her team’s focus is supporting you. If you call, email or write to us, one of them will help you.

Have a question for Penny that we can share with other readers? Email her at [email protected]

Penny’s first steps to finding out more about investments:

Read ‘Your investments menu’ to find out more

about lifestyle.

Take a look at Fidelity’s online investment guide. It sets out three steps to understanding investments. Find it

at fidelity.co.uk/static/pensions/ investment-guide/index.html

Read ‘Money Multimedia’ for some

useful tools.

Log into your account on PlanViewer at planviewer.com.

It has the information you need about the funds you’re in and your other options, including where they invest and performance.

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Investing for retirement is a lot like eating at your favourite restaurant.

Kate loves Chinese food. She loves wandering around the buffet at her local restaurant considering its endless choices. She likes being able to take as little or as much as she likes, and going back for more when she wants to.

Her best friend Sarah prefers French food. Her favourite French restaurant offers a set dinner menu – the chef’s choice. She prefers to go with the chef’s recommendation as she feels he is the expert and will make a good choice for her.

Investing for retirement is like eating outKate likes the choice of a buffet. Sarah prefers the chef’s recommendation. When it comes to investing for retirement, they – and you – can follow the same path and choose the menu they like best.

This is because your retirement savings plan makes it easy for you. You can choose one of two options: lifestyle or self-select. Both mean your retirement savings account is invested with the aim of your money growing over the long term.

You don’t have to be an expert to choose between them. What’s important is to know the funds your account is invested in and what they aim to achieve, regardless of whether you choose lifestyle or self-select.

SPEED READ

1. Investing for retirement is simple

because you have two distinct choices, and you can get help when you need it.

2. With lifestyle you’re saying “Choose for me”. It’s a ready-made option where all decisions

are made for you.

3. With self-select you’re saying

“I’ll choose” – all decisions are under your control.


Lifestyle set menu“Choose for me, thanks.”If you’re like Sarah and would rather someone choose funds for you, lifestyle is your ready-made investment choice.

How it worksYour retirement savings account is invested in one or more funds depending on how old you are. Lifestyle is based on the principle that as you get older your investment style should change. Over time your account will be automatically switched into different funds. When you’re younger, you can afford to be more aggressive with your savings – growth (such as equity) funds typically offer good growth potential. As you get closer to your selected retirement age*, you probably want to protect the value of the savings you’ve built up, so more conservative funds become appropriate.

The fund(s) that your account is invested in will be a combination of equity, bond and cash funds. The combination of funds at different ages depends on how your plan’s lifestyle works. This is decided by your plan’s trustees or investment adviser, or your employer.

All the decisions – which funds to invest in and when to switch into and out of funds – are made for you.

What it means for you• Think about the age you hope to retire at, as the

funds your account is invested in are based on it. Please let Fidelity know what it is.

• Switching between funds happens automatically.

• Lifestyle is a ‘one-size-fits-all’ investment. Make sure you’re happy with its aim of matching the more conservative risk profile that a typical investor prefers as they get older.

• Lifestyle doesn’t consider your plans or circumstances. For example, if you intend to leave your account invested when you retire, then being in low-risk funds at that time might not be the best option for you.

Self-select buffet menu“I’ll choose, thanks.”If, like Kate, you prefer options and want to make the choice yourself, self-select is for you. You can choose one or more of the funds from your plan’s options. It’s all under your control.

You don’t need to be an investment expert, but you should think about what you’d like your savings to achieve, and which funds are best suited to meet your needs.

How it worksYour plan’s trustees or investment adviser, or your employer decide on a list of fund options.

You choose the fund or combination of funds that offer what you’re looking for. All the decisions are yours – which funds to invest in, and if and when to make changes to them.

What it means for you• Self-select is a ‘do-it-yourself’ approach but Fidelity is

here to help if you need it.

• You’re in control of your investments.

• You choose funds and make changes based on your plans and circumstances.

* This is the age you plan to retire at. It’s important as the funds your account is invested in will be based on this age. Please let Fidelity know what it is, so we can make sure your account is switched at the right time based on your plans.

Food for thoughtInvesting for retirement isn’t hard:

1. You don’t have to choose which funds to invest in – choose lifestyle and it’s done for you.

2. You can change your choice whenever you like.

3. There are many ways to get help.


You’re an investorYou’re currently saving money for retirement. But you’re not a saver. You’re an investor.

This is because the contributions you and your employer make are invested in funds, which then invest in stock markets and other types of investments. People invest money like this because they hope to make more money.

Find out more? Read ‘Five minutes with…’

Contributions

Investment fund 1

Investment fund 2

Your retirement savings account

Equities (shares) on stock markets

Bonds sold by governments or companies

Commercial property (e.g. shopping centres)

Cash (special cash instruments)

Your account may be invested in one or more

funds.

Funds invest in one or a combination of

these assets.

The prices of these assets can go up and down, which affects the value

of your account.

How INVESTING FOR RETIREMENT works


The chef recommendsChoosing the investment menu that suits you will take some thought, and once you’ve chosen you’ll want to review your choice every so often.

If your account is invested in lifestyle, keep up-to-date with the funds you’re invested in. If you’ve chosen self-select, take a few extra trips to the buffet to keep an eye on your account.

There are many tools to help you track your investments:

• Log into your retirement savings account on PlanViewer (planviewer.com) to see all the funds you can invest in, where you’re invested now, how lifestyle works, and to change your investment choice if you’d like.

• There are many online investment tools. They range from helping you think about risk to letting you bring all your investments together in one place to track them more easily (see the doggy bag box for some tools you can start with).

Food for thoughtYou’re an investor not a saver:

1. Your retirement account is invested in funds that invest in different assets.

2. The prices of these assets can change over time.

3. Changing prices lead to changes in the value of your account. This means your account can be worth more or less from one day to the next.

Don’t forget your doggy bagTo get you started:

• Log into your account on PlanViewer at planviewer.com

• Read ‘Number Power’ to see what investing can mean in practice.

• Read ‘Money Multimedia’ for useful financial planning tools.


SPOTLIGHT ON: Fidelity’s Investment GuideThree easy steps to investing for retirement

Nothing is too complicated when it’s broken down into simple steps. The same applies to investing.

‘My guide to investing’, our online investment guide, takes you through the stages of making investment choices – whether you’re happy invested in lifestyle but want

to understand how it works, or you want to choose your own funds (self-select).

Step 1 – Introducing the basics

We start by introducing the investment basics you need to know, including types of investments and funds, and investment risk.

After Step 1, you’ll know the basicsWhat are equities and bonds? What’s the difference between investing in equities and property? What does investment risk mean and how does it affect investments?

Step 2 – How to choose funds

Then we look at ways of investing, strategies, and how you can choose funds to hold in your pension account.

After Step 2, you’ll be able to apply the basicsWhat’s the difference between lifestyle and choosing funds yourself? Which strategies do investors who choose their own funds follow?

Step 3 – How to manage your money

Finally, we explore how to manage your money and develop plans for your future savings, and where to find more information.

After Step 3, you’ll know how to keep an eye on your investmentsHow does PlanViewer help you manage your investments? How can Fidelity help? What are the tools you can use?

Find the investment guide on our website.


“I want to set money aside for

whenever I need it.”

Samantha the saver

“I want my money to grow so I have

more in the future.”

Isabelle the investor

Samantha the saver Isabelle the investor

Source:Fidelity, April 2016. Based on returns of the MSCI World Index and USD 1M LIBID, and do not take into account the impact of any charges or fees. Past performance is not a guarantee of future returns.

Saving and investing go head-to-headWhen it comes to managing your money, saving and investing both have

a role to play. The key is to know when each will work best for you.

“ I want my money to grow so I have more in the future.”

“ I want to set money aside for whenever I need it.”

$1,785

$10,633

$25,024

$66,317

$1,802

$9,020

$18,352

$42,307

After 1 year

10 years

5 years

20 years

How their money grows

Samantha is better off in the short term. Isabelle is better off in the medium term and much better off in the long term.

What they can expect to get

out of it

Earns interest. Currently low but predictable. Earns investment returns. Potentially higher returns especially over five years or more.

The risk

Quite low. Returns are more certain and the value of cash in the bank is unlikely to fall. BUT bank interest doesn’t keep up with inflation, so Sam’s money could be worth less over time.

Higher. Investing money in the stock market comes with risk – Isabelle could get back less than she invests. BUT investors accept risk in the hope that it brings higher returns over time.

Recommended

time frame

Under five years. More suitable for short-term goals when you don’t want to lose money e.g. house deposit, emergencies.

Five years or more. More suitable for medium and long-term goals when you can afford to take some risk with your money, as you have time to make up any losses e.g. retirement, university fees.

What they doSaves $150 every month in a bank savings account.

Invests $150 every month in the stock market.


TOP FIVE TIPS

If you’re planning for retirement

There will be ups and downsThe value of your retirement savings account will go up and down – this is a normal part of investing for retirement. What matters is not how much it has gone up or down recently, but what it will be worth in 20 or 30 years’ time. Over the long term, your account should have time to recover from any setbacks and achieve greater levels of growth.

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It’s best to be a creature

of habit

The benefits of contributing every month – as you and

your employer do to your account – stack up. It m

eans you

can smooth out the ups and downs of the market, so you

reduce the risk of paying too much when markets are high,

or not buying at all when markets are low.

Take care of the people you loveIf something happened to you, your retirement savings account can be left to your loved ones. Fill in a beneficiary form to make sure we know who they are. The form is on PlanViewer or contact Fidelity for a copy.

Tell us when you plan to come of ageIf your account is invested in lifestyle, tell us the age when you think you’ll retire. Your investments are based on this age, so it will affect any changes to the funds you’re in.

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Cover your basesKeep an eye on your retirement savings account. Spending half an hour once or twice a year looking at it on PlanViewer (planviewer.com) isn’t a lot when you think about it.


FIVE MINUTES WITH…Tom Stevenson, Investment Director at Fidelity International

Fish & chips. Laurel & Hardy. Saving & investing. Put the right ingredients together and you can create something special. Two plus two really can equal five.

Saving and investing sound similar but they’re quite different. And they both play an important part in our financial planning.

Acorns are a good analogy. If you’re a squirrel, you care about getting through the next winter. So you put aside enough acorns to keep you fed. You’re a saver.

But plant your acorns in the right place and over time they can grow into something spectacularly bigger and better, a giant oak tree. Do this and you’re an investor.

We all need to be savers in the first instance. A good rule of thumb is to hold six months’ salary in an easy access cash account. Until you have put this cushion in place you shouldn’t really be thinking about longer term investments.

The most important thing about short-term savings is that they’re accessible and safe. The price you pay for this convenience and security is usually an unexciting return.

Investment offers the prospect of better growth but it involves taking a bit more risk with your money. That’s why you should only invest cash that you will not need at short notice. You need to be able to ride out the inevitable ups and downs of financial markets.

The better returns that an investor receives are their compensation for the risk that they might lose some of their capital – in the short term.

Those last four words are important because in the long run volatility is not the same thing as risk. The evidence of the past hundred years and more is that supposedly riskier investments like shares are actually more likely to deliver your financial goals.

According to Barclays, which has monitored investment returns since 1900, a stock market investor who is prepared to put their money aside for as long as 18 years has outperformed cash 99% of the time. Even over a shorter period of ten years, shares outperform more than nine times out of ten.¹

The magical force that long-term investors can tap into is called ‘compounding’. It’s the exponential growth you can achieve when one year’s earnings are re-invested to generate even greater earnings the next year and so on, year after year. Einstein called it the “eighth wonder of the world”. It is the real difference between saving and investing.

Source:1. Barclays Equity Gilt Study, 2016

SPEED READ

1. Saving and investing are different.

2. Both play a key part in financial planning.

3. Savings are safe, offering an unexciting return.

4. Investments involve risk but over the long term outperform savings.


THEPhilip Scott explains why keeping an eye on global events is important, but the best approach is to ‘keep calm and carry on’.

When it comes to saving for your retirement there is one simple truth always worth bearing in mind, that global events are key influencers of investments, and therefore your retirement savings account.

Fundamentally the trajectory of stock markets on any given day is never just a function of what investors are buying or selling but a reflection of what is going on in the wider world.

When the mood is upbeat, markets typically rise, but when concerns set in, they tend to dive for cover.

Believe it or not, the Chinese economy could potentially have an impact on your retirement – after all it boasts the world’s second largest economy next only to the US, and what happens there matters greatly to the wider world.

For example, the start of 2016 saw markets nosedive in the wake of poor economic numbers coming out of China.

However markets managed to claw their way back into positive territory. And this is the key – markets are cyclical. They bounce back.

Take the recent hit the FTSE 100 felt when the UK voted by a narrow margin to leave the European Union. When the ‘Brexit’ referendum result was announced on the morning of 24 June, the blue-chip index fell sharply and while it still closed down, it managed to recover much of the day’s earlier losses. Perhaps most notable was the fact that it finished that Friday, actually, 2% higher¹ than where it had been a week earlier.

But this sort of pattern is par for the course when it comes to stock markets. Since the turn of the century, the world’s population and markets have witnessed and endured some very hard times. There has been the bursting of the dotcom bubble, the horror of terrorist attacks across the globe, and of course the recent financial crisis and subsequent recession.

All of these, and more, have an impact on retirement savings plans. After all plans primarily use stock and bond markets to help drive the long-term returns for their employees’ nest eggs.

But when calamity strikes, while it is natural to care, it would be unwise to panic and say pull your retirement contributions.

Despite the obstacles already faced during the 21st century, markets are still ahead. In fact, since the nadir of the financial crisis in March 2009, the MSCI World Index has soared by almost 155%.²

As an investor for retirement, if you decided to adjust – or even cease – your retirement savings every time markets got spooked in the wake of some real world event, it would most likely be to your financial detriment.

While past performance should not be taken as a guide to future returns, history shows us that successful long-term investing is all about ‘time in the market, not timing the market’ – and investing for retirement is a long journey.

To put this into perspective, an investor who put $1,000 in the MSCI World Index 30 years ago but missed out on just the ten best days in the market, would have witnessed their original sum grow to $22,689.

However, had they stuck to their guns and stayed invested throughout all the ups and downs, they would today instead be sitting on a grand total of $54,864 – just over $32,000 difference.³

Of course right now, many investors might understandably be getting jittery as a result of the ‘Brexit’ backdrop but the reality is that no one knows how it will ultimately all play out in the long term.

As such, when it comes to thinking about your retirement and how world events impact it, the best strategy might well be to ‘keep calm and carry on’, especially if you are years from retirement, as making a hasty decision, as the above statistics highlight, may not necessarily work out in your favour.

Philip ScottPhilip Scott is a freelance financial journalist. He was awarded Investment Association Freelance Journalist of the Year in 2014 and 2015, and Kames Capital Freelance Investment Journalist of the Year in 2015

Sources: 1. FE Analytics return of the FTSE 100 in GBP between

17 June and 24 June 2016.2. FE Analytics return of the MSCI World Index in USD

between 27 February 2009 and 31 March 2016.3. DataStream, Fidelity International, July 2016, based

on performance of the MSCI World Index between 31 March 1986 and 31 March 2016.

Keep an eye on global events


Take up the reins of your financial planningMONEY MULTIMEDIADOWNLOAD The Bloomberg app gives you access to global business and finance news and stock market data. You can personalise it to prioritise the information you’re most interested in, and monitor your investments with portfolio tracking tools. Managing your investments and considering your options has never been easier. Visit the app store on your device.

READ Investing for Dummies offers a step–by–step guide to understanding investing and making investment choices. Search for it online or at your local bookstore.

VISIT Not sure what a financial word means? Use the Financial Times’ online dictionary of financial terms. Visit lexicon.ft.com

LISTEN Listen to TEDTalks Business podcasts for ideas and insight from some of the world’s greatest innovators, entrepreneurs, and business leaders. Search online for ‘TEDTalks Business’.


We do them because we’re hoping for a reward – whether that’s adrenalin, money or enjoyment. Yet when it comes to investing, many of us are too cautious…

Different types and levels of risk bring the potential for different rewards. Investing does involve a certain amount of risk. You just need to know your risk tolerance. Don’t avoid it all together. As in your everyday life, understand the investment risk you’re comfortable with, and the rewards it could translate to.

68%of people prefer to play it safe with their savings – even if investing in higher-risk investments could make them more money.4

9.2% of people would accept a moderate amount of risk.6

Sources:1. International Association of Amusement Parks

and Attractions2. bbc.co.uk3. World Health Organisation4. DWP Research Report 701, 20095. Pensions Institute, Cass Business School, 2014 6. Analysing the Determinants of Attitudes to

Risk and Their Role in Pension and Investment Decisions in Ireland and the UK, Nuala O’Donnell, Central Bank of Ireland, 2011

VIEWP INTHow do you take your risk?

Every year more than 300 million people in the US ride roller coasters.1

We all do things that other people might consider risky…

More than 500 000 people in the UK bet on soccer games each week.2

One billion people smoke worldwide.3

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52%of people prefer to miss their savings goals rather than take any investment risk.5

42.6%of people won’t accept any risk at all that they might lose some of the money they invest.6

Visit us:planviewer.com (you’ll need login details)

Call us:+44 1737 838 585 (open Monday to Friday from 8am to 6pm, UK time)

Email us:[email protected]

summer 2016 myfuture… · read ‘money multimedia’ for some useful tools. log into your account...

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