Zurich launches risk-managed default solution

Zurich Corporate Savings has today launched an auto-enrolment default fund solution in conjunction with Schroders and Threadneedle. The Zurich Dynamic Lifestyle Portfolio will be available to new and existing members of Zurich’s workplace pension schemes.

Zurich’s new default fund consists of three underlying funds. Schroders are managing the Mixed Investments and the DC Pre-Retirement funds, while the Zurich Deposit & Treasury fund is managed by Threadneedle.
The Zurich Dynamic Lifestyle Portfolio offers a growth engine that combines a core equity portfolio, diversifying assets and explicit downside risk management that is applied automatically in volatile market conditions.
It describes the fund as having a new approach to annuity price targeting in the pre-retirement phase, with a portfolio that also seeks to reduce the effect of possible future rises in bond yields. Its automated de-risking facility starts five years from an individual’s selected retirement date. This allows DC members the possibility of benefiting fully from the growth potential, whilst at the same time protecting them from large capital losses.
Zurich UK Life head of corporate propositions Dave Lowe says: “Auto-enrolment has provided a timely opportunity to review our default option. We undertook extensive customer research to find out what is important to them when making investment decisions. We have listened to what our customers want and have designed our new default fund to provide an effective, outcome-driven investment solution.
“Following a comprehensive selection process, we appointed Schroders because we were really impressed with the innovative design they developed, as well as their excellent reputation in managing multi-asset, outcome-focussed funds.”
Schroders head of DC investment Stephen Bowles says: “One of the key components of the default strategy is the automated switching between Zurich Mixed Investment and the Pre-Retirement strategies. We have undertaken extensive financial modelling to test various switching scenarios. Due to the innovative way in which the Mixed Investment fund is managed, the results indicated that it is possible to remain in the growth engine until five years from retirement whilst still protecting the portfolio from large capital losses.
“We have designed the pre-retirement fund to match the cash flow profile that a member gets when they purchase a fixed annuity, with the aim to maintain a members purchasing power. To achieve this we have built a bespoke benchmark made up of gilts, rather than relying on standard gilt or corporate bond indices, which is the approach that most pre-retirement funds take. “The fund manager also periodically considers the level of gilt yields and will adjust the profile accordingly to help reduce the risk of capital loss due to rising yields.  We believe this strategy will provide an investment advantage to our clients.”