The People’s Pension has reshaped the £6bn pre-retirement component of its default fund, shifting away from cash and sovereign debt as part of a broader redesign driven by falling interest rates, market volatility and member-behaviour data.
The pre-retirement section of the default strategy covers almost 1.7 million members approaching retirement.
The provider said its fixed income allocation has undergone “significant” restructuring, with a marked reduction in cash holdings. It cited the diminishing competitiveness of cash as interest rates ease, and noted that the adoption of segregated mandates removes the previous need for a cash buffer.
Exposure to sovereign bonds – including Gilts and US Treasuries – has also been cut. The People’s Pension pointed to fiscal uncertainty and heightened volatility in term premia, which it said have eroded risk-adjusted returns from government debt.
Following these changes, the pre-retirement fund will be anchored around a global portfolio of high-quality, short-dated corporate bonds, actively managed by Invesco. The People’s Pension said that 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.
It added that the shorter duration of the corporate bonds it selected manages risk and gives the possibility of redeploying maturing assets into higher spread environments should that occur. It also explained that the global nature of the holdings is important to ensure sufficient diversification and liquidity, which is not available in the sterling market alone.
The strategy design was informed by People’s Pension’s unique proprietary dataset, 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.
The provider stated that development work continues on future retirement drawdown products for older savers.
This follows the move by People’s Pension earlier in the year to transition £28bn of assets into segregated mandates held by the fund’s custodian, Northern Trust, providing the pensions provider with greater control, transparency, and flexibility in its investment approach.
This saw Amundi appointed to manage £20bn in passive developed market equities, while Invesco was appointed to look after more than £8bn in active fixed income investments.
Dan Mikulskis, chief investment officer at People’s Partnership, said: “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, added: “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.”
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