The Association of British Insurers (ABI) recently announced that it will be making changes to its classification system for life and pension funds. These changes don’t mean that the funds you invest in have changed. However, it may mean that the benchmark or index they may be compared to has changed. Don’t worry – these changes are designed to provide you with better, more meaningful fund information.
What is the ABI fund classification system?
The ABI system is there to allow comparisons between funds on a like-for-like basis. It does this by placing all life and pension funds into sectors. These sectors are based mainly on the types of assets funds invest in – such as equities (company shares), fixed interest (bonds issued by companies or governments) or cash – and their relative weighting within those funds. Other things such as geography and currency are also taken into account.
Why is the ABI making changes ?
The ABI recognises that the range of funds available in the market is increasing and so the need to be able to compare funds meaningfully is greater than ever. This review makes sure that sectors remain relevant both now and in the future. The changes come as a result of consultation with insurers (including us), fund managers and advisers as well as regulatory and consumer organisations.
What are the changes ?
A number of new sectors will be created, mainly for fixed interest and property funds. The criteria behind mixed asset sectors such as the four managed sectors will also change. Those managed sectors will be more clearly labelled to highlight their equity exposure.
What do I do now?
You don’t have to do anything as a result of these changes. Your fund’s investment objectives won’t change. The changes are designed to provide more clarity and transparency.
The changes will come into effect at the end of January 2008 and we’ll provide more detail as soon as we can. We expect a number of our funds to appear in new or differently named sectors.
If, after viewing that information, you have any questions about these changes, please get in touch with your financial adviser.
