The Butlers Farmhouse Cheeses Limited Company Pension Scheme
Statement Of Investment Principles September 2021
The law requires the Trustees to produce formal “Statement of Investment Principles” for the Plan’s default arrangement and its other investment options. These Statements set out what the Trustees aim to achieve with the investment options and their investment policies which guide how members’ money is invested.
This document is a compendium of the Statements of Investment Principles for the Butlers Farmhouse Cheeses Limited Company Pension Scheme (the “Plan”). These Statements must cover a number of technical points to comply with legislation as well as meet the expectations of the Pensions Regulator.
The Scheme's assets are held in trust by the Trustees whose powers in investment are set out in the Trust Deed and Rules dated 27th June 1997.
The Act allows the Trustees to rely on advice from qualified third parties and in drawing up this Statement, the Trustees have obtained such advice from:
- Aviva Life Services UK Ltd (“Aviva”) - as the Trustee’s appointed Investment Manager
As required by the Act, the Trustees have also consulted Butlers Farmhouse Cheeses Limited, as sponsoring employer (“Employer”) of the Scheme.
Statements of Investment Principles
The Trustee’s Statements of Investment Principles contained in this document include the:
Statement of the aims and objectives for the default arrangement;
Statement of the aims and objectives for investment options outside the default arrangement; and
Statement of investment beliefs, risks and policies.
- Investment implementation for the default arrangement;
1 Statement of the aims and objectives for the default arrangement
Reasons for the Default Arrangement
The Trustee’s have decided that the Plan should have a default investment arrangement because:
- It should be easy to become a member of the Plan and start building retirement benefits without the need to make any investment decisions; and
- A majority of the Plan’s members are expected to have broadly similar investment needs.
Choosing the default arrangement
The Trustees believe that understanding the Plan’s membership is essential to designing and maintaining a default arrangement which meets the needs of the majority of members.
- The Trustees have taken into account a number of aspects of the Plan’s membership including:
- The members’ age and salary profiles;
- The likely sizes of pension accounts at retirement;
- The level of income in retirement that members are likely to need; and
- Members’ likely benefit choices at and into retirement.
Aims and objectives for the default arrangement
The main objective of the default arrangement is to provide good member outcomes at retirement. The Trustees believe that it is in the best interests of the majority of members to offer a default which aims to:
- Manage the principal investment risks members face during their membership of the Plan;
- Maximise investment returns relative to inflation while taking an appropriate level of risk during membership of the Plan for the majority of members who do not make investment choices; and
- Reflect members’ likely benefit choices at retirement.
The default arrangement
The default arrangement is therefore a lifestyle strategy which:
- Gradually moves investments between different funds to manage the levels of investment returns and principal investment risks at each stage of membership of the Plan; and
- Targets members who are expected to use Flexible Access Income Drawdown during their retirement.
The expected levels of investment returns (after the deduction of charges) and risks for the funds used are consistent with the Trustee’s objectives for the default arrangement. The expected investment returns and approach to managing investment risks including financially material considerations such as climate change are described in Section 3.
2 Statement of the aims and objectives for investment options outside the default arrangement
Reasons for the investment options
In addition to the default arrangement, the Plan offers members a choice of investment options because:
- While the default arrangement is intended to meet the needs of a majority of the Plan’s members, it may not meet the needs of a wider cross-section of members;
- Attitudes to investment risks and the need for investment returns will vary from member to member and will also vary for each member over time and, in particular, as they approach retirement;
- Members have differing investment needs and these needs change during their working lives; and
- Some members will want to be more closely involved in choosing where their contributions are invested.
Choosing the investment options
The Trustees believe that understanding the Plan’s membership is important to maintaining an appropriate range of investment options and have taken into account a number of aspects including:
- The members’ age and salary profiles;
- The likely sizes of members’ pension accounts at retirement;
- Members’ retirement dates and likely range of benefit choices at retirement;
- The levels of investment risk and return members may be willing to take;The degree to which members are likely to take an interest in where their contributions are invested; and
- The number of members who are likely to want responsible, ethical or faith-based investment.
Costs of investment options
The ongoing investment charges and costs are borne by members and so a balance needs to be struck between choice and costs.
Objectives for the investment options
The Plan offers members a choice of investment options as an alternative to the default arrangement. These are called self-select funds.
The objectives of the self-select fund range are to:
- Provide a choice of individual funds for members who want to be more closely involved in choosing where their pension accounts are invested;
- Complement the objectives of the default option;
- Provide a broader choice of levels of investment risk and return;
- Provide a broader choice of investment approaches;
- Help members more closely tailor how their pension account is invested to their personal needs and attitude to risk
- Help members more closely tailor how their pension account is invested to reflect the benefits they intend to take at retirement.
Nevertheless, the self-select fund range cannot be expected to cover all the investment needs of all members.
Risk and return
The expected levels of investment returns (after the deduction of charges) and risks for the funds used are consistent with the Trustee’s objectives for these investment options. The expected investment returns and approach to managing investment risks including financially material considerations such as climate change are described in Section 3.
3 Statement of investment beliefs, risks and policies
This Statement sets out the investment beliefs and policies which guide the Trustee’s decision making.
Principal investment risks
The Trustees believe that the three principal investment risks most members will face are:
1) Inflation risk – investment returns over members’ working lives may not keep pace with inflation and, as a result, do not produce adequate retirement benefits.
Further from retirement, this risk should be countered by funds investing in equities and other growth orientated assets which are expected to produce returns well in excess of inflation over the longer term. Approaching retirement, the impact of this risk needs to be balanced against the other main risks members face.
2) Benefit conversion risk – investment conditions just prior to retirement may increase the cost of turning members’ fund values into retirement benefits.
For members taking cash at retirement, funds investing in cash deposits and other short-term interest-bearing investments provide a high degree of (but not complete) capital security. Funds investing in a mix of different assets are expected to be broadly suitable for members planning income drawdown during retirement. For members buying an annuity at retirement, the value of funds investing in longer-dated bonds may be expected to broadly follow changes in annuity rates caused by long-term interest rates.
3) Volatility/Market risk – falls in fund values prior to retirement lead to a reduction in retirement benefits.
Funds investing in bonds or a mix of assets or investment techniques intended to manage short-term risks may be expected to be subject to lower levels of short-term fluctuations in values - although there may be occasions when this does not hold good.
Other investment risks
The Trustees believe that other investment risks members may face include:
Active management risk – a fund manager’s selection of holdings may not lead to investment returns in line with the fund’s objectives and investment markets generally.
Currency risk – changes in exchange rates will impact the values of investments outside the UK when they are being bought or sold.
Interest rate risk – the value of funds which invest in bonds will be affected by changes in interest rates.
Default risk – for bond funds (where money is lent in return for the payment of interest), the company or government borrowing money fails to pay the interest due or repay the loan.
Liquidity risk – funds which invest in assets which cannot be easily bought or sold (such as property) may at times not be able to accept new investments or disinvestments of existing holdings.
Counterparty risk – the financial institutions holding a fund’s assets may get into financial difficulties leading to a reduction in a fund’s value.
Market risks - Shifts in market sentiment (for example, in response to economic news or geopolitical events) or momentum in general market trading can lead to widespread changes and/or volatility in asset values over the short-term.
This can include short-term changes in the normally expected correlations of the behaviour of risks and returns seen between different asset classes, when standard approaches to mitigating risks such as diversification are temporarily ineffective.
Factor based investing – equity investments may show several factors (supported by academic research) that may be expected to deliver stronger returns over the longer-term, but which may show increased risks (including timing) in the shorter-term.
Environmental, Social and Governance (ESG) risks – the extent to which ESG issues are not reflected in asset prices and/or not considered in investment decision making leading to underperformance relative to expectations.
Climate risk - The extent to which climate change causes a material deterioration in asset values as a
consequence of factors including, but not limited to: policy change, physical impacts and the expected transition to a low-carbon economy.
Legislative/Regulatory - Changes in government policy or taxation may have a long-term positive or negative impact on certain sectors of a country’s economy or one country relative to its neighbours over the medium to longer-term. Changes in Regulations can also affect the operational costs, tax efficiency and security of one investment vehicle relative to other vehicles over the shorter-term.
Measuring and managing risks
The Trustees have developed and maintains a framework for assessing the impact of all investment risks on longterm investment returns. As part of this, the Trustee monitors the age profile of the Scheme’s membership to arrive at an appropriate timescale.
Principal investment risks
The lifestyle option manages the three main investment risks as members grow older by automatically switching from funds which are expected to give long-term growth relative to inflation into funds whose values should fluctuate less in the short-term relative to the benefits members are expected to take at retirement.
The self-select fund range provides members with a choice of funds with differing risk and return characteristics which are expected to meet the investment needs of a majority of members.
Ability to invest/disinvest promptly
The Trustees recognise that it is important that members’ contributions can be invested promptly in selected investment funds, and that these can be sold promptly for example when members wish to change where they are invested, transfer to another arrangement or if they wish to draw on their pension pot. The Trustees manages this risk by selecting pooled investment funds which can be dealt on a daily basis. The fund managers are expected to notify the Trustees if a situation develops whereby there is any restriction on the ability for members to invest and disinvest promptly. For example, this situation could occur in the event of significant economic uncertainty impacting on the ability for fund managers to value the underlying assets.
Other investment risks
The Trustees manage the other investment risks as part of the process for selecting and ongoing monitoring of the funds used by the Plan.
The funds used give a good spread of investments which will help manage risks associated with market conditions, fund manager actions and default.
Financially material considerations
The Trustees recognise that:
- The consideration of financially material considerations, including ESG factors and climate risk, over the appropriate time horizon are relevant at different stages of the investment of members’ defined contribution benefits; and
- The financial materiality of any factor, including ESG factors and climate risk, may be relevant to different degrees according to the asset class or classes in which a fund invests.
In future reviews and decisions, the Trustees will consider financially material considerations, including ESG factors and climate risk in the development and implementation of the Plan’s investment arrangements for the purposes of determining the selection, retention and realisation of investments where there is sufficient data or evidence to allow them to systematically do so. The Trustees will seek to engage with the investment managers to ensure they take such considerations into account within their decision making, and challenge where appropriate.
The Trustees have explicitly acknowledged the relevance of ESG factors including climate change in framing their investment beliefs set out below and the broader implementation of these beliefs.
The Plan uses standard pooled funds offered by investment platform providers and fund managers. This gives access to a range of funds while keeping down costs to members, but this means that the Trustees cannot adopt an approach to managing financially material considerations specific to the Plan. The Trustees nevertheless seek to manage financially material considerations to protect long-term returns by:
- Choosing fund managers who have clearly articulated policies for managing financially material considerations;
- Considering and understanding the extent to which ESG issues including climate risk, where relevant, are integrated into the fund managers’ investment processes and are satisfied that the fund managers follow an approach which takes account of financially material factors
- For actively managed funds (where the fund manager decides where to invest), the Trustees expect the fund managers to take financially material considerations into account when selecting which companies, securities and markets to invest in;
- For passively managed funds, the Trustees recognise that the choice of benchmark dictates the assets held by each fund and that the investment manager has minimal freedom to take account of factors that may be deemed to be financially material. The Trustees accept that the role of the passive manager is to deliver returns in line with the benchmark index (which may or may not include ESG factors) and which the Trustees believe will deliver appropriate risk adjusted returns in line with their current investment strategy. The Trustees will review periodically the choice of fund and index benchmarks used;
- For all funds, the Trustees expect fund managers to engage with companies, where relevant, in which the fund invests to encourage business strategies which should improve or protect the value of those investments; and
- Preferring fund managers who are signatories to the Financial Reporting Council’s Stewardship Code in the UK and the United Nations supported Principles for Responsible Investment.
Expected returns on investments
The Trustees believe that it is important to balance investment risks with the likely long-term returns from different types of assets used in funds (taking the funds’ costs and charges into account).
|Expected long-term investment returns relative to inflation
|Expected shorter-term volatility in fund values
|Equities (ie. company shares)
|Strong return relative to inflation
|Most volatile in the short-term
|Property (eg. offices, shops and warehouses
|Positive but lower equities
|Lower than equities
|Corporate Bonds (i.e loan stocks issued by companies
|Positive, but lower than equities and property
|Lower than equities or property
|Fixed Interest Government Bonds (e.g. Uk Gifts
|Return may not keep pace with inflation
|Lower than equities, property or corporate bonds
|Index-Linked Government Bonds (e.g. UK Index-Linked Gifts
|Return may not keep pace with inflation
|Lower than equities, property or corporate bonds
|Cash (and other short-term intereset-bearing investments)
|Return may not keep pace with inflation
|Minimal with high degree (but not complete) of capital security
Multi-asset funds (i.e. investing in a varying mix of asset classes) - should deliver positive returns relative to inflation over the longer-term, with lower short-term volatility than equities.
Responsible Investment (i.e. funds selecting assets to mitigate ESG and/or climate change risks) – the strategy of these funds is expected to give a better risk adjusted return over the long-term than the broader market for the type of assets involved (e.g. equities).
Statement of Investment beliefs
Risk & Return
The Trustees believe that taking investment risk (for example by investing in equities) is usually rewarded in the long term, but there is no guarantee of this
The Trustees believe that members far from retirement are able to accept a high level of investment risk in order to generate strong returns against inflation but in the run up to retirement, members are less willing to accept a high level of investment risk. The Trustee notes that this will depend on the member’s circumstances.
The Trustees believe that the default investment arrangement should automatically move the investment mix of a member's pot throughout their career to meet their differing needs.
The Trustees believe that currently the majority of members within the Plan are expected to drawdown their pension pot over time in retirement.
The Trustees recognise it should support members who wish to select their own investments by providing a self-select fund range which should contain both passively and actively managed funds (depending on the asset class).
The Trustees believe that managers with the appropriate skill can add value through active stock picking.
The Trustees believe that offering too many self-select fund options may result in members not making a decision.
Statement of ESG Investment beliefs
The Trustees believe that climate change is a key long term financial risk to sustainability and achieving sustainable member outcomes.
The Trustee recognises the need to make certain funds available to members to reflect non-financial considerations (e.g. members’ ethical and/or religious views) within the Plan’s self-select fund range.
The Trustees believe that the Plan’s investment managers should embed the consideration of both financial and non-financial (including ESG) factors into their investment process and decision making (financial factors should carry more weight than non-financial factors).
The Trustees believe that financial considerations should carry more weight than non-financial considerations when determining the investment options for DC members
The Trustees believe that companies that demonstrate better ESG characteristics are expected to outperform other companies over the longer term; all else being equal.
The Trustees believe that company engagement and collaboration with other investors on specific ESG risks (such as but not limited to climate change and executive pay), rather than disinvestment, is a more effective way of supporting shareholder value
Types of funds used/kinds of investments held
Structure of the investment arrangements
The Plan invests contributions for members through the fund manager’s investment platform which buy units in the funds where investments are pooled with other investors. This enables the Plan to invest in a range of funds giving a good spread of investments in a cost-effective manner.
Delegation of investment decisions
The Plan uses funds provided by a selection of fund managers where investments are pooled with other investors. This enables the Plan to invest in a range of funds giving a good spread of investments in a cost effective manner. It does mean that the Trustees have delegated day to day investment decisions including the management of financially material considerations to the fund managers.
Selection of funds
The objectives of the funds and the policies of the investment managers will be evaluated by the Trustees to ensure that they are appropriate for the needs of the Plan and consistent with the principles set out in this document.
The Trustees will periodically review the choice of fund managers.
The basis of remuneration of the investment managers may be subject to commercial confidentiality, however, the Trustees will seek transparency of all costs and charges borne by members. Nevertheless, the Trustees expect that it will be in the interests of the investment managers to produce growth in asset values in line with the funds’ investment objectives and to manage funds in line with their stated policies. For passively managed funds this should be within an acceptable margin of the index the fund tracks. For actively managed funds the investment return should be commensurate with the level of investment risk implied by the fund’s objectives.
When selecting funds, the Trustees will ask their investment advisor to consider the investment managers’ remuneration strategies and appropriateness of each fund’s investment guidelines to ensure that there is no inducement or scope to take an undue level of risk and that the investment managers will act in line with the interests of the Plan’s members and, as far as possible, the principles set out in this document (recognising that it may not always be the case that the position is fully aligned).
In accordance with the 2015 Regulations, the Trustees conduct an annual Value for Members assessment and will take action should the Plan be found to be giving poor value. In addition, in accordance with guidance from the Pensions Regulator, the Trustees will periodically review the Plan’s choice of fund managers to ensure their charges and services remain competitive. The Trustees believe that these steps are the most effective way of their managers to deliver Value for Members, of which investment management charges and investment performance are key considerations.
The Trustees also undertake a review at least every three years of the appropriateness of the investment options at which time the suitability of the Plan’s investment management arrangements are also considered.
The Trustees monitor the investment managers against a series of metrics on a periodic basis over a long-term time horizon including:
- Performance of their funds’ respective benchmarks or performance targets;
- Relative tracking error where appropriate;
- The exercise of stewardship responsibilities (including engagement with issuers); and
- The management of risks.
The investment managers are expected to provide explanations for any significant divergence from a fund’s objectives. A material deviation from performance and risk targets or approach to portfolio management is likely to result in the fund being formally reviewed.
The Trustees do not expect investment managers to take excessive short-term risk and will monitor the investment manager’s performance against the benchmarks and objectives on a short, medium and long term basis.
For passively managed funds the turnover of holdings is driven by changes in the index a fund seeks to track and hence is outside the control of the investment manager. Excessive turnover will eventually result in higher transaction costs and significant deviation from the index return after fees, which are monitored by the Trustees.
When selecting actively managed funds, the Trustees will consider, with the help of their investment advisers, the expected level of turnover commensurate with a fund’s investment objectives, the investment manager’s investment processes and the nature of the fund’s assets.
Whilst the Trustees expect performance to be delivered net of costs, including the costs of trading within the portfolio, the Trustees will ask the investment managers to report on at least an annual basis on the underlying assets held within fund with details of any transactions and turnover costs incurred over the Plan’s reporting year.
Where a fund has significantly under or outperformed its benchmark, the Trustees will seek to ascertain where necessary whether higher or lower than normal turnover has been a contributory factor. The Trustee will challenge the investment managers if there is a sudden change in portfolio turnover or if the level of turnover seems excessive.
The Trustees recognise the long-term nature of defined contribution pension investments and chooses funds which are expected to deliver sustainable returns over the Plan members’ investment horizons. The Trusteed will carry out necessary due diligence on the underlying investment decision making process, to ensure the manager makes investment decisions over an appropriate time horizon aligned with the objectives for the related investment option.
The Trustees expect that each fund will be used for at least three years, this being the period over which performance of the fund can be appropriately evaluated and the costs of change amortised, although all funds are subject to ongoing review against various financial and non-financial metrics in addition to their continued appropriateness within the investment strategy.
Security of assets
The funds used by the Plan are accessed through unit purchase agreements. The underlying assets with both fund managers are ring-fenced from other business risk as much as possible.
Realisation of investments
The Trustees expect that the fund managers will normally be able to sell the funds within a reasonable timescale. There may, however, be occasions where the fund managers need to impose restrictions on the timing of sales and purchases of funds (most notably for funds investing in property) in some market conditions to protect the interests of all investors in that fund.
Nevertheless, the Trustees recognise that most members’ pension accounts have a long investment timeframe, during which assets which are less easily traded (such as property or infrastructure) can be managed to deliver good long-term returns while avoiding the impact of liquidity issues at retirement
Balance of investments
Overall, the Trustees believe that the Plan’s investment options:
- Provide a balance of investments; and
- Are appropriate for managing the risks typically faced by members.
The Trustees recognises that stewardship encompasses the exercise of voting rights, engagement by and with fund managers and the monitoring of compliance with agreed policies.
Members’ financial interests
The Trustees expect that the fund managers will have the members’ financial interests as their first priority when choosing investments.
Conflicts of interest
When appointing fund managers, the Trustees will seek to establish that the investment manager has an appropriate conflicts of interest policy in place.
When given notice the Trustees will consider the impact of any conflicts of interest arising in the management of the funds used by the Plan.
Responsibility for investment decisions has been delegated to the investment managers which includes consideration of the capital structure of investments and the appropriateness of any investment made. Where managers are investing in new issuance, the Trustee expects the investment manager to engage with the issuer about the terms on which capital is issued and the potential impact on the rights of new and existing investors.
The Trustees will consider any conflicts of interest arising in the management of the funds used by the Plan and will ensure that each investment manager has an appropriate conflicts of interest policy in place.
Voting and engagement
The Trustees believe that engagement with the companies in which the Plan invests through pooled investment funds, including the proactive use of shareholder voting rights, can improve the longer-term returns on the Plan’s investments.
Where relevant, the Trustees have reviewed the voting and engagement policies of the fund managers and determined that these policies are appropriate. On an annual basis, the Trustees will request that the investment fund managers provide details of any change in their house policy.
While the Trustees are not in a position to engage directly, the Trustees believe it is sometimes appropriate for the fund managers directly to engage with key stakeholders which may include corporate management, regulators and governance bodies, relating to their investments in order to improve corporate behaviours, improve performance and mitigate financial risks. The Trustees will request, where appropriate and practicable, that the investment managers notify the Trustees of any issue on which it may be beneficial for the Trustee to undertake further engagement. The Trustee will review engagement activity undertaken by the fund managers as part of its broader monitoring activity.
The Trustees monitor the fund managers voting activity on a periodic basis. The Trustees will also periodically review the fund managers' voting patterns and may also monitor voting on particular companies or issues affecting more than one company.
The Trustees recognise that some members will have strong personal views or religious convictions that influence where they believe their savings should, or should not, be invested.
The Plan offers a choice of funds for members that consider non-financial factors (e.g. ethical funds) – these may be appropriate for members who are likely to hold stronger views in these areas than the majority of members.
The Trustees note that non-financial factors can affect various investment risks which are borne by members and may under-perform other funds with broader-based investment approaches.
Fund managers are otherwise only expected to take non-financial factors into account when these do not conflict with the financial interests of members and the Plan’s investment objectives
Investment implementation for the default arrangement
The default arrangement is a lifestyle strategy which targets income drawdown at retirement.
Members are invested in funds expected to give higher returns relative to inflation up to 15 years before their selected retirement date.
Members are gradually switched into funds which are expected to give good returns relative to inflation while consolidating past investment gains between 15 and 7 years before their selected retirement date.
Finally, members are automatically switched into funds aligned to their expected benefit choices at retirement during the last 7 years up to their selected retirement date.
The fund managers’ charges for the investment options are borne by the members.
Transaction costs arise when the fund managers buy and sell the assets held by each fund. Costs may also be incurred when units in the funds are bought and sold. These costs are taken into account when calculating the funds’ unit prices and members’ fund values.
The present default arrangement was last formally reviewed on 30 September 2020.
The Butlers Farmhouse Cheeses Limited Company Pension Scheme
Annual statement regarding Defined Contribution Governance
Year ended 30 September 2021
I am pleased to provide the Trustees’ Governance Statement for the Defined Contribution Section of the
Scheme the year ended 30 September 2021.
This Statement reports on how the Trustees comply with the defined contribution (“DC”) governance standards that were introduced under The Occupational Pension Schemes (Charges and Governance) Regulations 2015 (the “Regulations”), The Occupational Pension Schemes (Scheme Administration) Regulations (“the Administration Regulations”) 1996 (as amended) and the Occupational Pension Schemes (Administration and Disclosure) (Amendment) Regulations 2018 “The 2018 Regulations”.
It describes how the Trustees have met the statutory governance standards in relation to:
- the default fund
- requirements for processing financial transactions
- assessment of charges and transaction costs
- disclosure of charges and transaction costs for default funds
- the requirement for trustee knowledge and understanding
- value for money for members
between 1 October 2020 and 30 September 2021 (“the Scheme Year”).
The Scheme invests in a pooled investment vehicle only. The Trustees disclose the name of the funds in which they were directly invested on behalf of the members during the year in this statement.
The Defined Contribution (“DC”) benefits in the Scheme relate to benefits previously made available to certain Scheme members. All contributions are invested in a single fund which is effectively the Scheme default fund.
The following is the Scheme’s investment vehicle for the purposes of the Regulations:
|Fund Name and ISIN
|Asset Management Charge
|Total Expense Ratio
|Aviva Pension Managed FP
|New Generation Money Purchase Plan
The Scheme is not used as a qualifying scheme for auto-enrolment purposes.
Review of investment strategy
The Trustees are currently reviewing their long-term investment strategy with their Investment Advisers. In due course they may be able to offer alternative funds to consider.
The Trustees reviewed the performance of the Scheme’s investment vehicle and noted that the default fund has achieved investment returns in line with other similar schemes.
Requirements for processing financial transactions
The principal employer provides services to undertake the core financial transactions for the Scheme.
“Core financial transactions” include (but are not limited to):
- investment of employee/employer contributions in the Scheme
- transfers of assets relating to members into and out of the Scheme
- payments from the Scheme to, or in respect of, members (refunds, Pension Commencement Lump Sums, Uncrystallised Funds Pension Lump Sums, purchase of annuities)
During the Scheme Year, the Trustees confirmed that “core financial transactions” were processed promptly and accurately by reviewing each transaction.
Trustees’ assessment of member-borne charges and transaction costs
Level of member-borne charges and transaction costs
In accordance with regulation 25(1)(a) of the Administration Regulations, and “the 2018 Regulations”
the Trustees assessed the “charges” and, so far as it was able to do so, the “transaction costs”, borne by
members of the Scheme for the Scheme year to 30 September 2021.
For these purposes,
- “charges” means “administration” charges other than:
- “transaction costs”
- where an order of the court provides for the recovery by the trustees or managers of costs incurred in
- complying with the order, the amount of those costs
- charges permitted by regulations made under section 24 or 41 (charges in respect of pension sharing
- costs) of the Welfare Reform and Pensions Act 1999
- “winding up costs”
- costs solely associated with the provision of death benefits.
“transaction costs” means the costs incurred as a result of the buying, selling, (switching), lending or
borrowing of investments”
“Winding up costs” means the costs of winding up a pension scheme including (but not limited to) the cost of:
- legal advice
- tracing, consulting and communicating with members
- advice on exiting investments
- selection of an alternative scheme or investments.
In accordance with regulation 25(1)(b) of the Administration Regulations, the Trustees assessed the extent to which the charges and transaction costs represent good value for members.
The Trustees’ assessment included reviewing the Scheme’s investment funds in the context of their investment charges, a review of the non-financial benefits of the Scheme and a comparison of the level of charges with the benefits delivered to members. On the basis of its assessment, the Trustees concluded that the charges and transaction costs remain good value for members. The return on investment for the scheme year net of charges is 14.25%
Trustees’ knowledge and understanding
The Trustees’ own knowledge and understanding, together with the advice which is available to them, enables them to properly exercise their functions as Trustees of the Scheme. In addition, the Trustees receive advice and recommendations on investment and legal and other issues from their professional advisers. The Trustees have a working knowledge of the Scheme’s Trust Deed and Rules and other Scheme documents and policies, as well as pensions law.
In particular, during the Scheme Year, the Trustees met the requirements of sections 247 and 248 of the 2004 Act (requirements for knowledge and understanding) by:
- making decisions on specific member benefits taking into account the Trust Deed and Rules and wider requirements.
- assessing the scheme against TPR’s DC Code of Practice, helping to maintain knowledge of the law in relation to DC pensions
- commissioning a review of the Scheme’s investments from the investment adviser
- having input into the Scheme’s annual report and accounts
The Trustees also kept up to date with developments in pensions through briefings from their professional advisers.
Professional CPD requirements are met.
The Trustees believe they have met the Pension Regulator’s trustee knowledge and understanding
requirements (as set out under Code of Practice No 7) during the Scheme Year.