Investments (AVCs)
Your AVCs build up from the money you pay in plus investment returns. This means that the way your AVCs are invested will have an impact on how much they’re worth when you retire. You can choose how your AVCs are invested.
- Prefer your investments to be managed for you? You can choose a ‘lifestyle’ option.
- Want to manage your investments yourself? You can choose from the ‘self-select’ fund range.
Before making any investment choices you may wish to speak to a financial adviser (at your own cost). If you need help finding a financial adviser, please visit: www.moneyhelper.org.uk/choosing-a-financial-adviser.
Lifestyle options – managed for you
Lifestyle investment options aim to grow your money while you’re a long way from retirement, then gradually reduce the investment risk as you get closer to your target retirement age.
Everything is managed for you, and you don’t need to make specific investment decisions.
Continued growth lifestyle
prepare fund
Source: L&G
Why choose this option?
The continued growth lifestyle strategy gets your AVCs ready for you to take a flexible income at retirement, called drawdown.
See Retirement options for more details.
Shariah lifestyle option
The Shariah investment funds follow the requirements of Shariah law and the principles of Islam.
The Shariah lifestyle option follows a similar staged approach to the continued growth lifestyle but using Shariah-compliant funds.
This graph shows the stages of the Shariah lifestyle option:
Source: L&G
Please be aware, the value of your AVC fund may go down as well as up and cannot be guaranteed. You may receive back less than your original investment.
Your target retirement age
If you’re invested in a lifestyle option, your target retirement age controls how your AVCs are invested over time.
Lifestyle funds automatically move your savings from higher‑risk to lower‑risk investments as you get closer to the age you’ve set. This means….
- If you retire earlier than planned, your savings might still be in higher-risk investments, which could fall in the short term.
- If you retire later than planned, you might switch to safer investments too soon and miss out on potential growth.
It’s important to choose a target retirement age and make sure you keep it up to date with your plans for retirement.
If you don’t make a choice
If you don’t choose a target retirement age, we’ll set it as your State Pension age.
State Pension age
The State Pension age is currently age 66. It’s gradually increasing to age 67 between 2026 and 2028, depending on when you were born. A further increase to age 68 is planned for 2037 to 2039.
If you choose a different target retirement age in the Plan, bear in mind when you’ll be able to claim your State Pension.
You can check your State Pension age at www.gov.uk/state-pension-age.
Update it today
You can change your target retirement age at any time by logging in to My Pension Tracker. Go to View account and select Account details.
Self-select options – manage yourself
If you have the time and knowledge to manage your investments yourself, you can choose from the ‘self-select’ fund range.
You’ll be responsible for monitoring your investments and switching them as you approach retirement. No changes will be made for you.
You can make changes at any time in My Pension Tracker.
You can choose from the following 12 funds, which cover different asset classes, sectors and geographical areas.
Each fund has its own level of risk.
| Fund name | Description | Factsheet link |
|---|---|---|
| AAA-AA-A corporate bond all-stocks index fund | This fund aims to capture the returns of the iBoxx £ Non-Gilt (ex-BBB) index and invests primarily in sterling-denominated AAA, AA and A-rated corporate bonds paying a fixed rate of interest. | See factsheet |
| Annuity focused fund | This fund aims to invest in assets that reflect the investments underlying a typical non-inflation-linked pension annuity. | See factsheet |
| Cash fund | This fund aims to provide capital protection with growth at short-term interest rates. It invests in short-term money markets such as bank deposits and Treasury Bills. | See factsheet |
| Ethical global equity index fund | This fund tracks the sterling total returns of the FTSE4Good Global Equity index (including reinvested income, less withholding tax) to within +/- 0.5% per year for two years in three. | See factsheet |
| Grow fund | This fund aims to capture the returns of equity markets through exposure to global equity markets. The allocation to the underlying stocks is weighted based on different risk factors to reduce concentration to any particular company or industry. | See factsheet |
| Property fund | This fund aims to get the best return from a portfolio of first-class freehold and leasehold interests in commercial and industrial property. This includes industrial warehouse buildings, shopping units and office blocks. It is also permitted to invest up to 15% in other external property funds in order to take advantage of investment opportunities in niche or specialist sections. | See factsheet |
| Shariah equity fund | This fund aims for long-term capital growth through a diversified portfolio of securities, as defined by a relevant world index, which meets Islamic investment principles as interpreted by the Shariah Committee. | See factsheet |
| Strengthen fund | This fund invests across a broad range of asset classes including equities, bonds and alternatives such as property and commodities. | See factsheet |
| UK equity fund | This fund aims to mirror the performance of the FTSE All-Share index, with income reinvested. | See factsheet |
| World emerging markets equity fund | This fund aims to capture the returns of the world’s emerging markets. It tracks the FTSE Emerging index. | See factsheet |
| World equity fund (hedged) | This fund aims to capture world equity market returns, tracking the FTSE World index, with an added element of currency hedging. | See factsheet |
| World equity fund (unhedged) | This fund aims to capture world equity market returns, tracking the FTSE World index. | See factsheet |
The value of your AVC fund may go down as well as up and cannot be guaranteed. You may receive back less than your original investment.
You may wish to take financial advice if you are thinking of investing in any of the self-select options.
Charges
You pay charges on your investments, which are calculated as a percentage of the value of your AVC fund invested in each investment fund. Any administration fees are paid by Cummins.
Lifestyle fund charges
Here are the charges for the individual funds that make up the lifestyle options. You can see the ongoing charges in the Chair’s governance statement.
| Fund name | Annual management charge | Additional expenses | Total expense ratio |
|---|---|---|---|
| Grow fund | 0.12% | 0.00% | 0.12% |
| Strengthen fund | 0.28% | 0.02% | 0.30% |
| Prepare fund | 0.38% | 0.04% | 0.42% |
| Shariah equity fund | 0.18% | 0.17% | 0.35% |
| Shariah multi-asset fund | 0.17% | 0.15% | 0.32% |
| Shariah bond fund | 0.12% | 0.20% | 0.32% |
Self-select fund charges
Here are the charges for the self-select funds. You can see the ongoing charges in the Chair’s governance statement.
| Fund name | Annual management charge | Additional expenses | Total expense ratio |
|---|---|---|---|
| AAA-AA-A corporate bond all-stocks index fund | 0.15% | 0.00% | 0.15% |
| Annuity focused fund | 0.14% | 0.00% | 0.14% |
| Cash fund | 0.13% | 0.00% | 0.13% |
| Ethical global equity fund | 0.30% | 0.00% | 0.30% |
| Grow fund | 0.12% | 0.00% | 0.12% |
| Property fund | 0.74% | 0.13% | 0.87% |
| Shariah equity fund | 0.18% | 0.17% | 0.35% |
| Strengthen fund | 0.28% | 0.02% | 0.30% |
| UK equity fund | 0.10% | 0.00% | 0.10% |
| World emerging markets equity fund | 0.34% | 0.01% | 0.35% |
| World equity fund (hedged) | 0.15% | 0.00% | 0.15% |
| World equity fund (unhedged) | 0.13% | 0.00% | 0.13% |
Investment switching charges
There’s also a charge for switching your investments within the Plan or when your funds move automatically within the lifestyle option.
The charge for switching is deducted from your AVC fund and is based on several factors, including the value of your fund at that time and the types of units you are switching into or out of.
The Trustee has reviewed the switching charges and decided that the need to offer you the opportunity to switch into lower-risk funds as you get closer to retirement outweighs the charges.
Investment jargon
Cash – returns on cash investments generally vary in line with bank lending rates.
Corporate bonds – issued by a company to raise money. When you invest, you are effectively lending money to the company. In return, it typically pays regular interest and repays the loan at a set date (known as maturity).
Diversification – this is a mixture of different types of assets within a portfolio. When one type of investment is doing poorly, another might be doing well. The winners help offset the losers, and the value of the overall portfolio doesn’t move up and down so much.
Equities – these are shares in a company. Owning shares means you own a little bit of that company and are entitled to a dividend (annual payment).
FTSE All-Share index – the Financial Times Stock Exchange is a UK index of around 800 companies trading on the London Stock Exchange.
FTSE4Good – includes socially responsible companies that meet certain environmental, social and governance (ESG) standards.
FTSE All-World (ex-UK) index – a list of thousands of companies around the world, excluding UK companies.
Gilts – similar to corporate bonds but issued by the UK government. Fixed-interest gilts pay a specified rate of interest. Index-linked gilts pay a variable rate of interest linked to inflation.
Property – this is generally an investment in commercial property such as office buildings, shopping centres and factories. There is little, if any, exposure to residential property. These investments can fluctuate in value but are often used for diversification.
Volatility – the amount of uncertainty or risk that the value of an asset will change. High volatility means that the value could change dramatically, up or down, usually in a short period of time.
Investment risk
All investments involve a certain level of risk and you should think about how much risk you’re comfortable with. Your AVC fund value can go down as well as up and you may not get back what you put in.
Putting all your savings into one high-risk investment fund until the moment you retire would be considered risky but so too would putting them all ‘safely’ under your mattress, where they wouldn’t earn you any investment return at all.
Investing is about finding the balance that’s right for you and your circumstances.
Types of risk to think about:
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Low long-term returns
Being too cautious may mean slower growth over time but some level of caution can protect you from short-term market ups and downs (see 3). -
Annuity pricing
If interest rates fall, the price of an annuity will rise, which could give you a lower income. If interest rates rise, the price of an annuity will fall, which could give you a higher income.
The annuity focused fund aims to remove some of this risk by matching movements in annuity prices. See Retirement options for more information.
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Market ups and downs
World events can affect investment prices overnight. We saw this with the property crash of 2008, the war in Ukraine, and the 2022 mini-budget.Switching investments at the wrong time could mean you lock in these losses or miss out if the market rebounds. -
Your circumstances
You attitude to investment risk might also depend on:- your general attitude to risk
- other pensions or savings you have elsewhere
For example, if you also have a pension from a previous employer or substantial savings, you may feel more relaxed about the amount of risk you’re prepared to take with your AVC fund investments in the Plan.