Why are you closing the Future World Plan?
We are closing the Future World Plan for a number of reasons.
After the pandemic, our customers’ views on engagement with oil companies have changed.
A recent survey told us that Future World customers do not think engagement with fossil fuel companies has worked sufficiently well. We have seen an increase in oil production with promises that an uncountable number of trees will be planted somewhere to “offset” the damage. Our customers do not always believe this and want to send a stronger message.
Since 2017 newer products have come on the market that are more sophisticated in their index approach. This enables you to invest more of your money in companies that are better prepared for the climate transition, whilst still getting all the benefits of a diversified passive index strategy. We want to offer customers the most modern investment technology that is available now on the market.
Newer products, like the Fossil Fuel Free Plan, also come with increased efficiencies on price, which we want to pass on to our customers.
Finally, the Future World Plan cannot be screened for violators of the UN Global Compact, which our customers believe is a baseline screen and hygiene factor.
Why did you select the Fossil Fuel Free Plan as an alternative?
The Fossil Fuel Free Plan is our newest responsible plan and brings with it many positive benefits to customers.
First, the Fossil Fuel Free Plan is newer in construction and tracks a modern Paris-aligned index, the FTSE TPI Climate Transition Index Series. This index technology was not available when the Future World Plan was created back in 2017 and is much more sophisticated in its approach. The index over and underweights companies according to their carbon emissions, green revenues, management quality and carbon performance. FTSE, in collaboration with the Transition Pathway Initiative, uses key climate data inputs to assess companies.
Second, in August 2021 we surveyed customers in the Future World Plan. We found that customer attitudes have changed since our 2020 survey. More than half (56%) of respondents now want to remove oil from their pensions at the outset, compared to 34% last year, whilst 29% want to remove other high carbon emitters compared to 19% in 2020. Only 27% currently believe that the Future World Plan’s ‘engagement with consequences’ strategy has been effective, down from 48% last year. This data tells us that the approach of the Fossil Fuel Free Plan is more aligned with the changing views and expectations of customers in the Future World Plan.
Additionally, in the same 2021 survey, Future World Plan customers told us they felt very strongly about other aspects of company behaviour, such as their respect for workers’ rights. Most respondents (90%) want to exclude companies that violate the United Nations Global Compact (UNGC), a set of principles to encourage sustainable and socially responsible practices amongst businesses across the world. We approached Legal & General, who told us that they are unable to remove violators of the UN Global Compact from the Future World Plan.
There is also a cost saving for customers, from 0.95% to 0.75%.
How do the fees compare for the Fossil Fuel Free Plan?
The Future World Plan costs 0.95% and the Fossil Fuel Free Plan costs 0.75% annually.
By moving plans you will benefit from a cost saving of 0.20% annually.
Additionally, if you have >£100K in your pot, your fee will continue to halve on the portion above this.
How does performance compare in the Fossil Fuel Free Plan?
The Fossil Fuel Free Plan launched in December 2020. This means Legal & General, the plan’s managers are unable to yet share one full year’s performance on the plan factsheet.
The FTSE All-World TPI Transition ex FF ex Tobacco ex Controversies Index, the benchmark that the Fossil Fuel Free Plan seeks to replicate, launched in October 2020. FTSE Russell has produced a factsheet to reflect simulated historical performance before that time. Returns shown before the index launch date reflect simulated historical performance. Past performance is no guarantee of future results.
The Future World Plan tracks the FTSE All-World ex CW Climate Balanced Factor Index. You can compare the historical performance of the Future World Plan using the latest plan factsheet. Past performance is no guarantee of future results.
What are the costs of switching?
As Legal & General Investment Management manage both plans, they will conduct an in-specie transfer on their investment platform. This means they concurrently transfer underlying stocks where commonality exists between the funds, and place buy and sell orders where it doesn’t.
Legal & General estimate that the cost of this in-specie transfer will be 0.09%. So the average cost for customers, based on an average pension pot size of £20K, will be £18.
As customers will be switching to a cheaper plan, the fee saving in moving from a 0.95% to a 0.75% will be £40 in the first year, on a £20K pension pot.
What are the risks of switching?
Legal & General will seek to minimise risks of this switch by conducting it in-specie on their own platform, so your money will not be out of the market. This is different from a regular plan switch between two different managers, which involves the disinvestment and reinvestment of cash and can take up to 10 working days.
Legal & General conduct in-specie switches as a business as usual activity. In December 2020, when the Fossil Fuel Fuel Plan launched, we conducted a bulk switch of Future World Plan customers. So we have direct experience with this type of switch and last time the process was frictionless for our customers.
Whilst there is no out of market risk, the usual market fluctuations may impact your balance in the new fund.
What if I don’t want to be switched to the Fossil Fuel Free Plan. What are my options?
If you do not want to be automatically switched into the Fossil Fuel Free Plan, you have at least 30 working days to make an active decision to switch into one of our other plans. We have seven other plans available, ranging in fees from 0.50 - 0.95%
With PensionBee you can switch to any new plan of your choice at any time. This switch will take around 10 working days to complete.
Can I continue to make contributions?
All your regular and ad hoc contributions will continue to be paid into your Future World Plan until your switch begins. Once the switch begins your Beehive balance will be frozen until it completes. We estimate this will be for 5 working days.
We will give you a week’s notice before the switch begins, so you have advance warning to make contributions before or after this happens
What if I want to withdraw funds at this time?
Once the switch begins your Beehive balance will be frozen until it completes. We estimate this will be for 5 working days. You will not be able to withdraw funds at this time.
We will give you a week’s notice before the switch begins, so you have advance warning to make any necessary withdrawals.
What if the stock market is volatile in the next month, will you still switch me?
We are working in close partnership with Legal & General to optimise the switching process for customers. If there was extreme market turbulence (which we would define as the market moving >10% in one day) in the run up to the fund switch date we would review the timeline and notify customers of any changes.