Invensys adds DC fixed-interest gilt fund to improve choice

The software company's 200-member trust-based scheme has also introduced variable retirement to allow members more flexibility in accessing their savings.

The scheme's investment committee decided to introduce the options after a review with advisers P-Solve. The changes will be implemented from September 30.

Robin Claessens, chief investment officer, said: "You have to put yourself in the shoes of the DC member: 'What do I want, what do I need, what can I do?'"

As auto-enrolment approaches, DC fund options are likely to be higher on the list of schemes' priorities than ever before.

To improve performance by boosting member choice, schemes can offer access to funds on top of the default retirement option.

Flexible retirement dates can also minimise the risk of member dissatisfaction and help to engage members by encouraging them to take responsibility for their savings.

To avoid overwhelming members, schemes could consider limiting the number of funds available and profiling them according to risk. They can also ask members for their input before deciding which funds to add.

Invensys' DC change

The software company's scheme reviewed the investment options with its consultants at the end of 2011.

"We wanted to attract some ideas and try to allow more flexibility in what members can invest in or divest, and we would apply these," Claessens said.

Find the balance. Some members say too much choice is confusing

Ben Piggott, JLT

He said the aim was to provide more security and flexibility to members as the DC options had previously only included index-linked gilt funds.

The new fund will pay a fixed level of interest but is vulnerable to increases in inflation.

Introducing variable retirement ages were also introduced to improve the scheme’s flexibility.

To get a good idea of which funds to add, he said schemes should ask what the rest of the industry is doing and look for a benchmark.

Claessens added: "We wanted to see if there were any best-in-class [similarly sized] schemes out there and what they had and what they were doing."

Invensys' DC plan is trust-based, so the scheme has a responsibility to care for its members. But Claessens said as there were only 200 members the scheme did not consider it necessary to consult them.

"There was a unilateral decision not to consult," he said. "At the end of the day you can spend six months waiting for answers that will never come, and for those that come, the guys have no clue."

He stressed Invensys deemed itself an investment expert with enough knowledge to decide the best options for members.

How to improve your DC choice

Setting up trustee-led investment committees can be an efficient way of making decisions.

Ben Piggott, investment consultant at JLT, said schemes should opt for a range of asset classes that cater for different risk and reward profiles, with classifications of one to five, as in the retail industry.

Do not forget to factor in time and money

Stephen Bowles, Schroders

Piggott said: "Find the balance. Some members say too much choice is confusing, and they switch off, while others say they do not have enough choice."

He said any more than 12 funds would be overwhelming to members, and stressed communicating the change was vital.

Schemes can also use positive member opt-out where they say they will move the investments unless informed otherwise.

Stephen Bowles, head of DC at Schroders, said schemes were often in danger of placing too much emphasis on the importance of funds. 

He added: "Be realistic about the amount of time members will spend thinking about self-select funds.

"If you are putting in place a range of funds, do not forget to factor in the time and money."

He said it was important to make sure extra funds were sufficiently contrasting to complement the default fund and to not clash with each other.