The impact of COVID-19 on investments
Towards the end of 2020 you will have received your benefit statement either by post or through the online portal. At the same time, we signposted this investment report written by AON, our investment advisers.
They explained that as the COVID-19 outbreak turned into a global pandemic in the first few months of the year, its impact on investment markets was severe. In particular, global equities (used in the Aon Managed Retirement Pathway Funds when you are far from retirement) suffered the worst quarter since the 2008 global financial crisis and this is the quarter that benefit statement figures were based on. There was a much less severe impact on the fixed income market (bonds) which are used in the Aon Managed Retirement Pathway Funds as you start to approach retirement which means some of our members who are closer to retirement may not have seen so much of an impact on the value of their pension fund.
It is important at this time you do not panic or make hasty decisions regarding your investments. Pensions are a long-term investment and there is time for the market to go up, as well as down.
We recommend that you log in to the online portal to see the latest value of your own fund. If you have not yet registered for the portal you can do so via the same link below.
See my fund value
Responsible investment changes
Responsible investing considerations have been a focus of the Trustees for some time in relation to the Plan's assets. We’re therefore pleased that our appointed investment manager, Aon Investments Limited (AIL), made changes that relate to this during November 2020.
You do not need to take any action.
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Three important areas of investing responsibly are:
- Environmental – issues relating to our planet, such as climate change, deforestation and waste management.
- Social – issues such as wealth inequality, gender discrimination and working conditions.
- Governance – ensuring companies are well run, balancing the interests of company management with those of their employees and suppliers.
Together, these issues are often referred to as ESG considerations.
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AIL have changed what's inside some of the Plan's funds to include:
- more investment in companies that manage the risks associated with climate change and moving to a low carbon economy, and
- less investment in companies that produce coal, manufacture tobacco or are involved with controversial weapons.
Which funds are affected?
This affects investments in two of the Plan's funds:
- Aon Managed Retirement Pathway Fund
- Aon Managed Global Equity Fund
What are the changes?
AIL have moved about 60% of the global equities held within these funds to a new fund – a ‘multi-factor’ equity fund, designed by Aon with an ESG focus on climate risk. It’s managed by Legal & General. The remaining global equities within the three funds continue to invest in developed and emerging market equities.
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Multi-factor equities are company shares with certain characteristics, or factors, that have been shown to outperform the market over the longer term. Examples of factors include lower share price volatility and the quality of the company itself.
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There is no change to the Annual Management Charge on any of these funds.
The ESG overlay
This is an extra set of guidelines for choosing the investments inside the fund. The ESG guidelines included within the new fund are:
- Low carbon: this reduces the overall carbon footprint of the fund by around 50% compared with the wider market.
- Social exclusions: this removes exposure to tobacco, coal, weapons and companies that violate the UN Global Compact.
- Climate change pledge: this is a commitment by Legal & General to actively engage with the largest companies across six sectors identified as being key to meeting global climate change goals.
We believe that these changes will enhance the performance of the fund over the longer term. We also believe that the ESG overlay will reduce the investment risk for your savings and have a positive effect on the environment and investment returns.