The Default fund

Why invest your pension?

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  The chart above is based on expected returns for cash and the HL Growth Fund. We’ve assumed:

  • Starting at age 20 and investing for 45 years.
  • Contributing 8% of salary, starting at £25,000 and rising by 3% per year.
  • The values shown take account of inflation, so show you what your money could be worth in today’s terms.

  When you invest, you can get back less than you put in. But the likelihood of that is reduced dramatically if you invest for longer.

  Historically, if you invest for just one year, your chance of losing money is roughly 1 in 5. Invest for five years and it’s 1 in 10. Invest for ten years, and it’s just 1 in 100. Of course, there are no guarantees and past performance isn’t a guide to the future.

How is the HL Growth Fund invested?

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  The HL Growth Fund aims to generate the best return possible over long periods of time – 10 years or more – while controlling the overall level of risk.

  We do this by selecting a wide mix of investments – including some higher-risk options – giving you the best potential to grow your money, spread broadly across global stock markets for diversification.

  This includes investing in smaller companies, and companies based in emerging markets. Over time, these investments offer greater potential for growth, but they are higher risk.

  The fund invests mainly in developed markets like the UK, US and Japan.

  Spreading your money in this way helps to reduce the risk of any single country’s economy having a dominant impact on your overall returns.

  You can see how your money is spread out globally below:

  

  Country breakdown - How much is invested in each country?

  	United States	51.6%		United Kingdom	12.6%
  	Japan	5.6%		China	2.5%
  	Taiwan	2.1%		France	2.4%
  	Canada	2.4%		Germany	2%
  	Australia	2.1%		India	1.6%
  	Switzerland	1.6%		South Korea	1.1%
  	Netherlands	1.2%		Sweden	1%
  	Other countries	10.2%

  Country breakdown - How much is invested in each country?

  United States	51.6%
  United Kingdom	12.6%
  Japan	5.6%
  China	2.5%
  Taiwan	2.1%
  France	2.4%
  Canda	2.4%
  Germany	2%
  Australia	2.1%
  India	1.6%
  Switzerland	1.6%
  South Korea	1.1%
  Netherlands	1.2%
  Sweden	1%
  Other countries	10.2%

What are the risks?

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  On a scale of 1 to 10, and if you invested entirely in global shares, we’d give that a risk rating of 10. The HL Growth Fund has a risk rating of 8.5.

  Global stock market

  Risk rating (10/10)

  

  Compared to:

  HL Growth Fund (Default investment fund)

  Risk rating (8.5/10)

  

  We can get a sense of what we might expect by reviewing how different investments have performed in history during times of crisis.

  Since the turn of the century there have been several large crashes, like the 2008 global financial crisis or the recent inflation crisis in 2022. Using these examples and by considering the HL Growth Fund’s investment mix, you can see in the chart above how the fund is expected to have performed relative to the global stock market. Remember, past performance isn’t a reliable indicator of future performance.

  To understand the risks of investing, we model thousands of possible scenarios to generate forecasts for the fund’s expected returns over the next 10 years.

  Our forecasts suggest there is a 1 in 20 chance that the fund could lose 18.7% or more over the next decade – although it’s not a guarantee. Compared to global stock markets and under the same assumptions and scenarios, we think the global stock market could lose 22.5% in the same scenario. This means although losses can be large at times, we expect the HL Growth Fund to offer investors some protection from the worst of market falls.

  Although the HL Growth Fund is riskier than playing it “safe” by holding cash, it does offer greater opportunities for growth after considering the effects of inflation. We think that – for investors with a long time to invest – the risk of inflation is greater than the risk of stock market falls when it comes to reaching your goals in retirement.

  More on stock market drops and comebacks

How much does the HL Growth Fund cost?

Next steps

If you’re happy with the aims and objectives, charges and risks of the HL Growth Fund, just make sure you’re logging in to your pension account regularly to check its progress. We think every six months is sensible.

How to review your investments

If you’d like to make changes to your investments, or explore your options in more detail, we can help. Find out more information about the HL Starter Funds – the next step in your investment journey.