People’s Pension Reshapes £6bn Pre-Retirement Fund to Further Enhance Member Outcomes

People’s Pension¹ today announced significant strategic changes to the £6bn invested in the pre-retirement portion of its default fund, which invests on behalf of nearly 1.7 million of its members who are approaching retirement.

These changes are designed to deliver better long-term outcomes for its older members by improving real returns while continuing to manage drawdown risk carefully.

As part of the reshaping of the strategy, the fund’s fixed income allocation has been significantly restructured. The holding in cash has been reduced, reflecting the declining competitiveness of cash as a long-term strategic asset as interest rates fall. With People’s Pension now using segregated mandates², a cash buffer is also no longer essential.

The pre-retirement fund has also reduced its exposure to sovereign bonds, such as gilts and treasuries. Recent fiscal concerns have led to heightened volatility in term premiums, resulting in lower risk-adjusted returns from these instruments.

This means the pre-retirement fund will now be anchored around a global portfolio of high-quality, short-dated corporate bonds, actively managed by Invesco³. This portfolio spans investment-grade corporate bonds across the US, Europe, and the UK, as well as selective exposure to US and European high yield. Invesco’s fixed income teams in London, New York, and Atlanta will manage the mandates.

The shorter duration of the corporate bonds that have been selected manages risk and gives the possibility of redeploying maturing assets into higher spread environments should that occur. The global nature of the holdings is important to ensure sufficient diversification and liquidity which is not available in the sterling market alone.

The Investment Management Agreement (IMA) for the partnership between Invesco³ and People’s Pension embeds robust responsible investment expectations – from RI policy alignment to bespoke engagement. The increase in allocation to Invesco-managed bonds therefore means a greater proportion of the pre-retirement fund is now covered by the Scheme’s climate targets, exclusions policy, ESG reporting requirements and other RI objectives.

Active management in fixed income offers distinct advantages over passive approaches, particularly given inefficiencies in index construction and the structure of bond markets. Invesco’s expertise in primary market activity and credit selection is expected to add meaningful value for members.

The equity portion of the pre-retirement fund will continue to be passively managed by Amundi and listed infrastructure by State Street.

The strategy design was informed by People’s Pension’s unique proprietary dataset⁴, which includes insights from hundreds of thousands of member interactions in the lead-up to retirement representing a range of real-life member outcomes from cash out to ongoing drawdown. Development work continues on future retirement drawdown products for older savers.

Utilising the People’s Pension’s operational setup including segregated mandates at Northern Trust and an experienced in-house operations team these changes were implemented promptly and with a very high level of cost efficiency.

Dan Mikulskis, Chief Investment Officer at People’s Partnership, commented:

“These changes reflect both our asset ownership model which constantly evolves our investment strategy in line with market realities and member needs and the power of our partnership with Invesco. By focusing on high-quality corporate credit, we aim to deliver better real returns while managing risk responsibly.”

Chris Fagan, Chair of the Investment Committee for People’s Pension, said:

“Our driving focus is always to improve outcomes for our members. These changes are grounded in deep analysis and clearly defined investment beliefs, and we firmly believe they will help us to continue to deliver more stable and rewarding retirement journeys for millions of savers.”

Tony Wong, Senior Managing Director & Co-Head of Investments at Invesco, said:

“Invesco is delighted to have supported People’s Pension in the restructuring of its pre-retirement proposition and to play a bigger role through our active credit funds in creating positive outcomes for members at this critical stage in the retirement journey.”

ENDS