HSBC’s Protected Retirement Funds, described by the bank as the only protected funds available to UK group pension schemes, have locked in gains of over 32 per cent in their first year.
HSBC has so far launched five Protected Retirement Funds, with charges varying between 0.35 and 1 per cent, which includes the cost of providing the protection. The funds, available to the group DC market through EBCs and corporate IFAs and aimed at more cautious pension investors or those wanting part of their portfolio to be invested cautiously, are a series of target date funds that aim to deliver growth from global equity markets with 100 per cent capital protection.
Gains are locked in on a daily basis and investors receive at maturity a value based on the highest unit price achieved whilst exposed to equity markets. Five Protected Retirement Funds have been launched to date, offering maturity dates between 2020 and 2040. Pension savers would normally invest in the fund which matures before their chosen retirement date. Returns for the year to the end of May 2010 range between 22.13 per for the fund maturing in April 2020 to 32.03 per cent for the 2030, 2035 and 2040 versions of the fund.
The Protected Retirement Funds invest in a combination of‘performance assets’and ‘protection assets’. The performance assets are linked to stock market growth through the HSBC Life PRF Performance Asset Fund, a fund specifically designed for the Protected Retirement Funds which tracks the performance of various global stock market indices. The protection assets are a blend of the HSBC Life Cash Fund and fixed income instruments, entered into with HSBC Bank plc and/or other members of the HSBC Group, which are AA-rated institutions by Fitch and Standard & Poor’s.
Balancing the allocation between the performance and protection assets is conducted on a daily basis according to a rules-based algorithm. This is designed to optimise the exposure to performance assets while ensuring that the protected unit price can be delivered at maturity.
Rob Pearce, Head of Workplace Retirement Services, HSBC, says:“The Protected Retirement Fund range fills an important gap in the group pension market. By making these funds available to pension schemes through employee benefit consultants and corporate IFAs, we are providing their members with exposure to potential growth in global stock markets, while protecting the value of their contributions against any fall in value, as long as they remain invested until the maturity date. The funds may be suitable for cautious investors who want to invest for their future but also to ensure their hard-earned savings are protected in volatile markets. For the more adventurous investor, having a proportion of their pension invested in a protected fund will give them a safety net if markets fall.”