Chair's Annual Statement 2019
This is the chair of the Trustee Board’s annual governance statement for members, which includes the following key information.
Review of the Funds in which your money is invested
- A description of any review of the Funds in the last Scheme year and any resulting changes.
- If there was no review in the year, the statement indicates the date of the last review.
Pension Account Charges and Transaction Costs
- The level(s) of charges and transaction costs paid by members for all the Funds that members are able to select.
- A statement on any unavailable transaction costs and steps being taken to obtain that information in future.
- An illustration of the compounding effect of costs and charges on the value of benefits.
Value for Members
- The explanation of the Trustees’ assessment of why the scheme represents good value for members.
Statement of Investment Principles 2020
The Trustees’ investment objectives and the principles that the Trustees apply when making decisions about investments.
This is the most recent Statement of Investment Principles (SIP) for the Lifestyling Funds, which make up the default arrangement for members to invest in.
Most Recent Annual Review of the SIP (2020)
The principles in the SIP were reviewed by the Trustees in June 2020 as part of the Trustees' annual review of the DC Section investment strategy and performance against the Trustees’ investment targets. No changes were made to the underlying principles in the SIP as a result of the review.
However, the June 2020 review identified that changes to the underlying allocation of funds that made up Mixed Investment Funds A, B and C were necessary. See below for the Investment Newsletter that details these changes.
Previous Annual Review of the SIP (2019)
The principles in the SIP were reviewed by the Trustees in July 2019 as part of the Trustees' annual review of the DC Section investment strategy and performance against the Trustees’ investment targets. No changes were made to the underlying principles in the SIP as a result of the review.
However, the July 2019 review identified that changes to the underlying allocation of funds that made up Mixed Investment Funds A, B and C were necessary to take advantage of the Trustees’ view that markets are entering a more stable phase.
In particular the Trustees reduced the overall allocation to ‘safer’ assets such as gilts and increased exposure to ‘return-seeking’ assets such as equities. Whilst the strategy had performed well since the last review, the changes were designed to provide greater opportunities for growth.
The changes did not affect the Trustees’ long term growth targets for the Funds and are kept under review. The Trustees sought professional advice and believe the changes made were in the best interest of members. The changes were made in August 2019.
The newsletter issued to members in August 2019 shows these changes in detail, including the revised allocations, and the SIP was updated to reflect the new allocations.
Previous Annual Review of the SIP (2018)
The principles described in the SIP were previously reviewed by the Trustees in May 2018.
The Trustees investment consultants:
- Reviewed the Trustees’ strategy taking into account the length of time members had until their SRAs, the general size of pension accounts and how members’ had used their accounts at retirement.
The Trustees considered the results of this review and assessed that the investment strategy remained appropriate for the membership because of the general size of the accumulated pension accounts, the age profile of the membership and the actions members had taken at retirement.
- Reviewed the Trustees’ investment targets compared to the estimated long term rates of return available in the markets for the asset classes included in the Mixed Investment Funds.
The Trustees concluded that their investment return targets remained appropriate.
Changes to the Funds
However the May 2018 review did identify that changes to the underlying blends of funds (the asset allocations) that make up Mixed Investment Funds A, B and C were necessary to prepare for a potential market downturn.
Hence changes were made to the asset allocation to reflect the Trustees’ views on where assets could be protected from large losses; in particular to reduce the overall allocation to ‘high risk’ assets such as equity, infrastructure and high yield, and increase exposure to ‘safer’ assets such as gilts and cash. Within the equity allocation, there was also a reduction in the allocations to emerging markets, Japan and UK exposure and an introduction of a type of equity that tends to hold up well in difficult market conditions.
The newsletter issued to members in July 2018 shows these changes in detail, including the revised allocations.
Whilst the Trustees accepted that these changes would not immunise the Funds against a market downturn, they were designed to lessen the impact, while still providing opportunities for growth. The changes were made in June 2018.
Monitoring the Changes
The performance of the Funds during the year to 31 March 2019 was measured against the Trustees’ objectives and the results are shown in the following table.
The Trustees concluded from these results that the actual performance remained consistent with their long term objectives.
The Trustees also asked their advisors, River & Mercantile, to back-test whether these changes were beneficial to members. River & Mercantile drew the following conclusions:
The changes made during 2018 led to stronger performance whilst reducing volatility for all three blended funds when compared to not making the changes.
The result was c.£500,000 of total value added over the year compared to not making the changes.
Investment Newsletter 2020
The 2020 review of the Statement of Investment Principles identified that changes to the underlying allocation of funds that made up Mixed Investment Funds A, B and C were necessary.
The July 2020 newsletter shows these changes in detail, including the revised allocations.
Annual Report and Accounts 2019
The comprehensive report on the Scheme's activities and financial performance throughout the year.