Investment Guide V1

Investing for your future in the

Siemens Ireland
Defined
Contribution Pension
Plan

Contents Introduction

Introduction ������������������������������������������������������������������������������������ 03 When you join the Siemens Ireland Defined Contribution Pension Plan (‘the Plan’), an
Thinking about the future ��������������������������������������������������������04 individual Retirement Account is set up for you. Contributions are then paid into your
Different types of risk ����������������������������������������������������������������05 Retirement Account, by both you and the Company. Your Retirement Account is then
Different types of investment ������������������������������������������������06 invested so that it can grow in value over the years.
Your investment options �����������������������������������������������������������08
Making your decision ������������������������������������������������������������������14 When you retire, the money in your Retirement Account Court, Harcourt Road, Dublin 2, Ireland.
can be used to buy benefits. The more you have in your
Retirement Account when you retire, the higher these Taking advice
benefits will be. The amount you have in your Retirement
Account when you retire will depend on: If you feel you need advice about your personal finances,
such as your investment choices or your retirement
ƒƒ the contributions it has received; and options, you may want to consider talking to an
independent financial adviser.
ƒƒ the investment returns that were achieved on these
contributions. The Central Bank of Ireland has useful information
about finding financial advice, along with a list of
This means that the decisions you make about your authorised financial advisers. Visit their website at
investment choices throughout your working life are very www.centralbank.ie or phone on lo-call 1890 77 77 77.
important.
Before you take advice from anyone, you should check
The information in this guide will give you a broad that they are qualified and authorised to advise you.
understanding of what investing involves. It also explains You should also ask how much they will charge you for
the strategies you can choose from when you decide how their advice.
and where to invest your Retirement Account. The aim is
to help you make confident choices that are appropriate PLEASE NOTE: THIS BOOKLET IS ACCURATE AS 1
for your situation. JULY 2018. THE BOOKLET MAY NEED TO BE REVISED
FROM TIME TO TIME BECAUSE OF CHANGES TAKING
Finding out more PLACE IN THE LEGAL FRAMEWORK AND PRACTICE.
YOU SHOULD CHECK WITH THE HUMAN RESOURCES
If you have any questions about the Plan or your benefits, DEPARTMENT TO MAKE SURE YOU HAVE THE MOST
please contact the Human Resources department. Or, UP-TO-DATE VERSION.
write to the Plan consultants at Aon, Block D, Iveagh

23

Thinking about the future Different types of risk

Before you begin making choices for your Retirement Account, it’s useful to first consider You will probably recognise phrases like ‘past performance is not a guide to future
what eventual outcome you aim to achieve. This involves thinking about your current performance’ and ‘your investments may go down in value as well as up’. These statements
situation and your long-term plans. refer to capital risk – the risk that when you invest money, you may not get back all you put
in if the investments perform poorly.
Capital risk
This can be a particular danger if the value of your Retirement Account falls shortly before
you plan to use it to provide benefits.

Conversion risk When you reach retirement, you will have the option to use your Retirement Account to buy a
pension (or ‘annuity’). The risk you face at this time is that the price of annuities could rise just
before you retire, which reduces the amount of pension your Retirement Account can buy.

This is called ‘conversion risk’.

Inflation risk This is the risk that an investment may give returns that are lower than the rate of inflation.

So, although the money invested increases, it actually loses ‘real value’ compared with
prices.

What you might need recover from any fall. Instead, you may be more concerned Concentration If you concentrate the whole of your Retirement Account in a single type of investment and
about the level of growth your investments are likely to risk that investment performs badly, the whole of your Retirement Account will be affected.
In retirement, some living costs are higher, others are lower. achieve.
What you will need ultimately depends on your personal If you have no other savings or pension arrangements, you will have nothing to fall back on.
situation. Take some time to consider what you will need How you would like your investments to
your Retirement Account to provide. grow Currency risk You need to be aware that movements in foreign exchange rates can re
duce the value of your overseas investments if the euro rises against the other currency.
When you are likely to retire If you are aiming for a certain level of income after you
retire, your priority may be to maximise the returns on
Knowing when you hope to retire will allow you to set a your investments. Or, if other priorities (such as stability
timeframe for your investments. This in turn will help you or security) come higher up your list, you may decide that
formulate an investment approach that is appropriate for keeping up with price inflation is a suitable aim for your
your situation. investments.

For example, some types of investment can rise and fall The risks you need to manage
in value quite sharply. If you need to use your Retirement
Account to buy benefits in the next few years, the risk of a Investment, like life, is unpredictable and carries risks.
sudden fall may matter a great deal to you. You can learn about some of the main risks you need to
be aware of when deciding how to invest your Retirement
On the other hand, if you have many years until you plan Account, on the next page. Your personal attitude towards
to use your Retirement Account, you may be less concerned these risks is likely to change over time, and so should be
about this risk because your investments have longer to managed and reviewed regularly.

4 5

Different types of investment Different management styles

Once you have developed a clearer understanding of your own priorities, you are Investment fund managers measure their performance against a benchmark. Normally, they base the benchmark on a market
ready to find out how different types of investment can help you to achieve different index, for example the returns from a basket of companies in a particular country. However, it is also possible to use other
objectives and protect you against the different types of risk. indicators such as measures of price inflation, interest rates or absolute returns.

Different types of asset There are two main styles of managing investments, based on what the managers do in relation to the benchmark.

Assets can be types of investment, such as bonds and equities. Any particular asset will give a likely rate of return, while also Passive management
carrying a certain level of risk.
In passive management, the investment manager aims to achieve the same investment returns as a particular benchmark.
A good rule of thumb is that the higher the returns you can expect from an asset, the more variable the return will be and
the more risk it will carry of falling in value as well. Here is a summary of the main asset types that are used in the funds They arrange their investments to follow or ‘track’ the movements of the benchmark. Passive management minimises the
available for your Retirement Account. risk of achieving lower returns than the market, but it is not designed to achieve higher returns than the market. And, if the
market the investment manager is tracking falls, the passive fund’s values will also fall by the same amount.
Equities
Active management
Company shares – also called ‘equities’ – have tended in the past to give higher rates of return over long periods than most
other assets and also provide protection against inflation risk In active management, the investment manager uses their skill and judgement to select investments that they think will
perform better than other available investments.
However, their values can go up and down dramatically in the short-term. For this reason, equity-based funds are generally
regarded as being suited to younger members who have many years to go until retirement, as they are more likely to be able They actively avoid investments which they think will do worse than the market average. This approach aims to achieve
to weather such short-term volatility in the expectation of greater long-term returns. It is also suited to other members who higher investment returns than the market, but it carries the risk of achieving lower returns than the market.
are comfortable with the fluctuations of stock markets.
Annual management charges are higher than for passively managed funds.
If you invest in overseas shares you may also be investing in a currency other than euros. So, changes in the exchange rate
can also affect the value of your shares in euros.

Bonds

Government bonds are loans to governments, which the government pays back with interest. The interest can be fixed-rate,
or index-linked (moves in line with inflation and market rates of interest). Investors can buy and sell bonds, and whoever
holds the bond receives the interest. As a general rule, bonds are less volatile than equities. Their value is influenced by
external interest rates and will go up and down with changes in interest rates. Over the longer term, they have generally
produced lower investment growth than equities.

Cash

Cash funds invest in bank deposits and in short-term, low risk cash investments known as ‘financial instruments’ or ‘money
market instruments’. Although cash funds are less volatile than other types of investment, it is possible that they can lose value.
For example, they can lose value in ‘real terms’ over time, due to the effects of inflation, and in extreme situations can lose
value in absolute terms’ (which is where the value of cash investments can go down).

Multi-asset

The majority of existing funds invest in a single asset class, though you can choose to invest in any combination of funds to
diversify your investments. Multi-asset funds invest in a mix of assets (for example equities, bonds, property, cash or other
alternatives) and therefore provide a level of built-in diversification. The levels of risk and reward vary, depending on the mix
of assets.

67

Your investment options Multi-Asset Strategy

Now you know what type of investments to consider, it is time to look at the range of There are two investment options available under this strategy – Passive and Specialist.
options that are currently available for your Retirement Account. These include four
individual strategies and two ‘Lifestyle’ investment strategies. Options Passive Specialist

Your individual strategy choices These strategies are explained over the following six pages. What it invests in A mix of equities, bonds, cash, financial instruments and alternatives (including property).

The Trustees have worked closely with their officially Each of these strategies has an underlying fund (or funds) Equities will be the dominant investment, Uses financial instruments including
appointed investment advisors to choose an appropriate which is managed by a particular investment manager that typically 60-80%. derivatives and futures to maximise
range of strategies for the Plan. the Trustee has appointed. return and manage risk, and to exploit
Asset allocation is line with peer group of opportunities in the market to deliver
There are four strategies available to members at The Trustees and their advisors monitor the managers’ Irish pension investment managers. positive return.
1 July 2014: performance closely and may make changes to the
‘underlying funds’ from time to time, if they decide that Expected growth rate Underlying investment is in line with market
• Global Equity Strategy this is in members’ interests. However, this change would indices for each asset.
• Multi-Asset Strategy (Passive and Specialist) Target take place ‘behind the scenes’ and would not affect your
investment arrangements. Your Retirement Account would High/Medium
Annuity Strategy remain invested in the strategy (or strategies) you have
• Cash Strategy chosen and you would be advised of any changes in the Performance objective is to perform in line Performance objective is to deliver returns
underlying funds. with the Aon Hewitt Multi-Asset index. of cash +5% over rolling three-year periods.
In addition the Trustees have developed two Lifestyle
strategies in which the underlying funds vary with your age.

Main risk (see page 4) Capital risk

Global Equity Strategy Who might want to Somebody who is more than 10 years from retirement age.
consider
What it invests in A mix of equities in Irish and overseas companies this strategy Somebody who is willing to accept volatile investment returns in the medium term in an
effort to maximise the potential long term returns.

Expected growth rate The composition of the fund replicates the weighting that each stock represents within the Underlying fund Global Consensus (Currency Hedged Global Absolute Return Strategies Fund
relevant market index. Equity)
Current investment Fund Standard Life Investment Managers
High. manager Irish Life Investment Managers Active
Management style 0.7%
Main risk (see page 4) This strategy aims to achieve returns in line with the market average global index. Passive

Who might want to Capital risk Annual management charge 0.3%
consider
this strategy Somebody who is more than ten years from retirement age and does not depend on this
strategy exclusively for their retirement income.
Target Annuity Strategy
Somebody who is willing to ride out stock market volatility to maximise the potential long-
term returns from equities.

Underlying fund Somebody who is willing to take the risks associated with investments in equities. What it invests in AAA and AA Eurozone government bonds
Indexed World Equity Fund Expected growth rate Moderate/Low
Current investment Irish Life Investment Managers
manager The strategy aims to match movements in the purchase price of insurance
Management style Passive annuities.

Annual management charge 0.2% Main risk (see page 4) Inflation risk and Capital risk

8 9

Who might want to Somebody who is within a few years of retirement, and who is planning to use DOES THIS SOUND LIKE YOU? DOES THIS SOUND LIKE YOU?
consider
this strategy • Do you have less than ten years to retirement? • Do you have more than 10 years to go until retirement?
• Are you uncomfortable with a potential decrease in the • Are you comfortable taking some risks with your
Underlying fund The Passive >10yr AAA/AA EMU Gov Bond Fund
value or purchasing power of your investment, even on Retirement Account (for example, being willing ride
Current investment Irish Life Investment Managers a short-term basis? out stock market volatility in an effort to maximise
manager • When you reach retirement do you intend to use your the potential long-term returns from an equity-based
Retirement Account to buy an annuity? investment strategy)?
Management style Passive • If the answer is yes, you might want to consider an • Do you have other retirement savings?
investment portfolio which focuses on providing
Annual management charge 0.15% stability and annuity price matching rather than growth. If the answer is yes, there are two options you might
• In a typical conservative portfolio, the majority of your want to consider.
Cash Strategy Retirement Account would be invested in the Cash
Strategy and Target Annuity Strategy, with the balance If you want a balanced approach to investment and wish
What it invests in Cash deposits (fixed-interest securities and other cash instruments) in one of the Multi-Asset Strategy options. to spread some of the investment risk, you might want to
Expected growth rate Low consider a ‘moderate’ investment portfolio which focuses
on providing a balance between stability and growth. In a
This strategy aims to achieve returns in line with short-term interest rates on the financial typical moderate portfolio, your Retirement Account would
markets. be invested in one or more of the Multi-Asset Strategy
options and the Target Annuity
Inflation risk and Capital Risk Strategy.
Somebody who is approaching retirement and wishes to secure the value of the funds they
Main risk (see page 4) have built up in their Retirement Account. If you want to aim for a higher level of growth, you want
Who might want to to consider an ‘aggressive’ investment portfolio. In a
consider Somebody who has a particular need to avoid equity markets for a period of time, or who typical aggressive portfolio, the majority of your Retirement
this strategy wishes to secure a portion of the funds that have built up in their Retirement Account. Account would be invested in the Global Equity Strategy,
Capital protection is not guaranteed. with the balance invested in one of the Multi-Asset Strategy
Underlying fund options.
Current investment Pension Cash Fund
manager
Irish Life Investment Managers

Management style Active

Annual management charge 0.15%

Shaping the strategy that’s right for you

When deciding on an appropriate strategy (or strategies) for your situation, think about what you might need, when you are

likely to retire, how you would like your investments to grow and the risks you need to manage.

HOW CLOSE IS YOUR RETIREMENT?

IMMINENT DISTANT

CASH BONDS MULTI-ASSET EQUITY

10 11

The Lifestyle Annuity Strategy chosen and you would be advised of any changes in the IF YOU DO NOT CONFIRM YOUR INVESTMENT CHOICE WHEN YOU JOIN THE PLAN (USING PART B OF YOUR APPLICATION
underlying funds. FORM), IT WILL BE ASSUMED THAT YOU WISH YOUR FUTURE CONTRIBUTIONS TO BE INVESTED IN THE LIFESTYLE ANNUITY
A Lifestyle strategy invests your Retirement Account in a INVESTMENT STRATEGY.
mix of funds that automatically varies with your age. The mix As the chart below shows, things start to change when
of funds in the Lifestyle Annuity strategy has been designed you reach age 55 and the investment emphasis starts to Lifestyle Approved Retirement Fund strategy As the chart below shows, things start to change when
on the assumption that you will retire at age 65 (your switch from growth to lower volatility and annuity matching. you reach age 58 and the investment emphasis starts to
Normal Pension Date) and that you will use 75% of your A Lifestyle strategy invests your Retirement Account in a switch from equities to lower-volatility diversified growth
Retirement Account to buy an annuity. Between age 55 and your Normal Pension Date, the mix mix of funds that automatically varies with your age. The funds and cash.
of ‘accumulation’ funds will start to change as your mix of funds in the Lifestyle Approved Retirement Fund
In the early to middle stages of your career (the Retirement Account is moved gradually out of equity- based strategy has been designed on the assumption that you will Between age 58 and your Normal Pension Date, the mix
‘accumulation phase’), Lifestyle Annuity aims to help your investments and into the Target Annuity Strategy and Cash retire at age 65 (your Normal Pension Date) and appoint an of ‘accumulation’ funds will start to change as your
Retirement Account grow as strongly as possible for as long Strategy. These switches take place yearly. By the time you investment manager to operate an Approved Retirement Retirement Account is moved gradually out of mainly equity-
as possible. During this period, your Retirement Account reach Normal Pension Date around 75% of your Retirement Fund after age 65. based investments, increasing the exposure to diversified
is invested in a mix of equity-based funds and diversified Account will be invested in the Target Annuity Strategy and growth funds and then gradually partly into the Cash
growth funds (see below). 25% in the Cash Strategy. This Lifestyle strategy aims to help your Retirement Strategy. These switches take place yearly. By the time you
remain invested in the strategy (or strategies) you have Account grow as strongly as possible for as long as possible. reach Normal Pension Date around 75% of your Retirement
During this period (the ‘accumulation phase’), your Account will be invested in diversified growth funds and
The Lifestyle Annuity Strategy Retirement Account is invested in a mix of mainly equity- 25% in the Cash Strategy.
based funds and diversified growth funds (see below).

Lifestyle Approved Retirement Fund in action: How your investments move

Accumulation phase Target Annuity Cash Strategy
Strategy
50% invested in the Global Equity
Strategy and Accumulation phase Cash Strategy
50% invested in diversified growth
funds (split 50:50 between the Initially 50% invested in the Global Equity Strategy and
Standard Life Global Absolute 50% invested in diversified growth funds (split 50:50 between the
Return Strategies Fund and Standard Life Global Absolute Return Strategies Fund and BlackRock
BlackRock Dynamic Diversified Dynamic Diversified Growth Fund)
Growth Fund)

PLEASE NOTE: YOU CANNOT INVEST IN A LIFESTYLE STRATEGY AND IN INDIVIDUAL STRATEGIES AT THE SAME TIME. 13

LIFESTYLE CAN BE A USEFUL CHOICE IF YOU DO NOT WANT TO MAKE ONGOING INVESTMENT DECISIONS WHILE YOU
ARE A MEMBER. HOWEVER, PLEASE REMEMBER THAT CHOOSING TO INVEST IN LIFESTYLE IS A DECISION IN ITSELF. AND
BECAUSE IT HAS BEEN DESIGNED TO SUIT MOST PEOPLE, IT WILL NOT BE THE BEST CHOICE FOR EVERYONE. LIFESTYLE
HAS BEEN DESIGNED ASSUMING YOU WILL RETIRE AT AGE 65 (NORMAL PENSION DATE) AND THAT YOU WILL USE 75%
OF YOUR RETIREMENT ACCOUNT TO BUY AN ANNUITY. IF YOU ARE AT ALL UNCERTAIN ABOUT WHAT MIGHT BE BEST FOR
YOUR SITUATION, YOU MAY WANT TO CONSIDER TALKING TO AN INDEPENDENT FINANCIAL ADVISER.

12

Making your 15
Decision

If you are applying to join the Plan

You will need to confirm your investment choices on
your Application Form – Part B (Investment Choices).
If you do not confirm your investment choice on
this form, we will assume that you wish your future
contributions to be invested in the default option (the
Lifestyle Annuity investment strategy, which we explain
on page 10).

If you are already a member and
want to make changes

You can change the way you invest the assets that
have built up in your Retirement Account to date, the
contributions that your Retirement Account will receive
in future, or both.
If you want to change the way you invest your
Retirement Account, please fill in and return a Changing
Investments Form.
There is no charge for making a change to your
investment strategy.

Making your investment choices is not a ‘once and
forever’ decision. It is important that you review the
progress of your Retirement Account from
time to time and make changes that you think are
appropriate.

14

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