The Association of British Insurers (ABI) recently announced that its classification system for life and pension funds will be changing from 25 January 2008 (backdated to 1 January 2008). You can find details of the changes and how they affect our funds here.
The main changes
The Stockmarket Managed sector
The Stockmarket Managed sector will now be known as the Flexible Managed sector. The sector criteria will also change.
Funds can now have a maximum of 100% in equities and must have a minimum of 20% in sterling-based equities. Previously a minimum of 50% in sterling-based assets was required.
To avoid confusion we won’t be changing the name of our current stockmarket managed funds. We’ll keep this under review.
Property
The current Property sector is to be divided into three separate sectors as follows:
| New sector | Description |
|---|---|
| UK Direct Property | Invests a minimum of 80% in direct UK property. |
| UK Property Securities | Invests at least 80% in property securities. |
| Global Property | Invests at least 80% in direct property or property securities and a minimum of 60% in non-UK assets. |
Our Property fund will now be in the UK Direct Property sector while our Scottish Equitable Schroder Global Property Securities fund will now sit in the Global Property sector.
Commodity/Energy
A new sector will be created to accommodate natural resources funds. Our Scottish Equitable Merrill Lynch Gold & General and Scottish Equitable JPMorgan Natural Resources funds will move to the new Commodity/Energy sector from the current Global Equities sector.
At least 80% of the assets of a fund must to be held in commodity- or energy-related securities.
Unclassified
The Unclassified sector is changing and will now be for funds that don’t provide sufficient data for the ABI to monitor their classification. All our funds that are currently in the Unclassified sector will be moved to a new sector called Specialist.
UK Fixed Interest
A new sector will be created called the Sterling Corporate Bond sector. Our UK Corporate Bond fund will move from the current UK Fixed Interest sector into this new sector.
High Yield Bonds
Another new sector will be the Sterling High Yield. Funds in this category must have a minimum of 50% invested in non-investment grade bonds, in other words, bonds with a Standard and Poor’s rating of BB+ and below.
This means that three of our funds will move from the Sterling Other Fixed Interest sector into the new Sterling High Yield sector. The funds affected are the High Yield Corporate Bond, the Scottish Equitable AEGON High Yield Bond and the Scottish Equitable Baillie Gifford High Yield Bond funds.
Other changes
Cautious Managed sector
The criteria for this sector will change. There must now be a minimum of 20% invested in equity while all funds in this sector must have 60% invested in sterling-based assets.
None of our funds in the Cautious Managed sector will be changing.
Balanced Managed sector
Funds in this sector will now have a minimum of 40% of their assets invested in equities. Previously there was no minimum equity requirement. The maximum of 85% of the fund in equity and 50% in sterling-based remains unchanged.
None of our funds in the Balanced Managed sector will be changing.
Distribution sector
Here, the criterion relating to the net of tax yield figure will reduce from 125% to 110% of the FTSE All-Share Yield.
None of our distribution funds is affected.
Other sectors
No other sectors are changing.
What do I do now?
You don’t have to do anything as a result of these changes – they’re just designed to provide more clarity and transparency.
Please note: it’s just the classifications that are changing – your fund’s investment objectives will stay the same.
If you have any more questions about these changes, please get in touch with your financial adviser.
The changes at a glance
| Fund name | Current ABI Sector (pre-25 January 2008) |
New ABI Sector (25 January 2008 onwards) |
|---|---|---|
| SE JPMorgan Natural Resources | Global Equities |
Commodity/Energy |
| SE Merrill Lynch Gold & General | Global Equities |
Commodity/Energy |
| Property | Property |
UK Direct Property |
| SE Schroder Global Property Securities | Property |
Global Property |
| High Yield Corporate Bond | Sterling Other Fixed Interest |
Sterling High Yield |
| SE AEGON High Yield Bond | Sterling Other Fixed Interest |
Sterling High Yield |
| SE Baillie Gifford High Yield Bond | Sterling Other Fixed Interest |
Sterling High Yield |
| SE Baillie Gifford Stockmarket Managed | Stockmarket Managed |
Flexible Managed |
| Dynamic Lifestyle (NRD 7yrs+) | Stockmarket Managed |
Flexible Managed |
| External Stockmarket Collection | Stockmarket Managed |
Flexible Managed |
| Global | Stockmarket Managed |
Flexible Managed |
| Global Equity Tracker | Stockmarket Managed |
Flexible Managed |
| Global Equity Tracker Lifestyle (NRD 7yrs+) | Stockmarket Managed |
Flexible Managed |
| SE Invesco Perpetual Stockmarket Managed | Stockmarket Managed |
Flexible Managed |
| SE Lazard Stockmarket Managed | Stockmarket Managed |
Flexible Managed |
| SE Newton Stockmarket Managed | Stockmarket Managed |
Flexible Managed |
| SE Northern Trust Stockmarket Manager of Managers | Stockmarket Managed |
Flexible Managed |
| SE SG Stockmarket Managed | Stockmarket Managed |
Flexible Managed |
| SE UBS Stockmarket Managed | Stockmarket Managed |
Flexible Managed |
| UK Corporate Bond | UK Fixed Interest |
Sterling Corporate Bonds |
| SE AEGON Core Plus | Unclassified |
Specialist |
| SE AEGON Enhanced Corporate Bond | Unclassified |
Specialist |
| SE AEGON Enhanced Long Corporate Bond | Unclassified |
Specialist |
| SE BGI 40/60 Global Equity Index | Unclassified |
Specialist |
| SE BGI 40/60 Global Equity Index Lifestyle (NRD 7yrs+) | Unclassified |
Specialist |
| SE BGI 50/50 Bond and Equity Index | Unclassified |
Specialist |
| SE BGI 50/50 Bond and Equity Index Lifestyle (NRD 7yrs+) | Unclassified |
Specialist |
| SE BGI 50/50 Global Equity Index | Unclassified |
Specialist |
| SE BGI 50/50 Global Equity Index Lifestyle (NRD 7yrs+) | Unclassified |
Specialist |
| SE BGI Consensus | Unclassified |
Specialist |
| SE BGI Consensus Lifestyle (NRD 7yrs+) | Unclassified |
Specialist |
| SE BGI European Equity Index | Unclassified |
Specialist |
| SE BGI Japanese Equity Index | Unclassified |
Specialist |
| SE BGI Over 5 Years UK Index-Linked Gilt Index | Unclassified |
Specialist |
| SE BGI Over 15 Years Corporate Bond Index | Unclassified |
Specialist |
| SE BGI Over 15 Years UK Gilt Index | Unclassified |
Specialist |
| SE BGI Pacific Rim Equity Index | Unclassified |
Specialist |
| SE BGI UK Equity Index | Unclassified |
Specialist |
| SE BGI US Equity Index | Unclassified |
Specialist |
| SE BGI World (ex-UK) Equity Index | Unclassified |
Specialist |
