Scottish Mutual Assurance has widened investment choice for clients who have its individual pensions with the introduction of the protector fund.
This unit-linked fund invests mainly in UK government and corporate bonds. It will also invest in equity-linked deposits, which track the FTSE 100 index over a five-year term.
The fund aims to provide a return which mirrors movements in annuity rates. Annuity providers invest in long-term bonds to ensure they can meet their promises to make annuity payments to those who need income from them.
By investing in these bonds too, the protector fund can track annuity rates, but the returns are boosted by the inclusion of equity-linked deposits.
Investing in long-term bonds, including government bonds, make this fund lower risk than many of Scottish Mutual's existing unit-linked funds which invest in stocks and shares.
The fund would suit those who are looking for income during retirement, with some potential for capital growth and the timing may be right to capitalise on the cautious mood adopted by investors as stockmarkets continue to fall. But the returns from lower-risk bonds are matched by lower returns. Investors seeking a higher degree of income and growth potential would need to invest in riskier bonds with lower ratings to achieve higher returns.
According to Standard & Poor's, 9 out of 19 Scottish Mutual Assurance pension funds are top quartile and 9 are bottom quartile based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to September 3, 2001. There is no three-year past performance for the remaining fund, the SMA equity tracker fund.