FCA Pension Plan Pension... · FCA Pension Plan DC Governance Statement Page 2 of 42 Annual...

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FCA Pension Plan

DC Governance Statement2018/19 Plan Year

FCA Pension Plan DC Governance Statement

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Annual statement about the governance of the Money Purchase Section of the Plan for the year ended 31 March 2019 (The “Plan Year”). With effect from 6 April 2015 the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (the Administration Regulations) requires the Trustee to prepare an annual statement regarding governance of the FCA Pension Plan Money Purchase (defined contribution) Section, including items required under the Occupational Pension Schemes (Investment) Regulations 2005 (the Investment Regulations) in relation to the Plan’s default arrangements. The Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 (the Disclosure Regulations) require the Trustee to include this statement in its Annual Report.

Chapter 3 of Part V of the Administration Regulations set out certain additional governance and requirement in relation to the annual DC governance statement. These requirements do not apply to the Plan as it is not a "relevant multi-employer scheme" as defined in those Regulations.

The default arrangements Under the current default arrangement, contributions paid in respect of and by members are automatically invested in the Drawdown Strategy. This arrangement was introduced in 2017 for new members joining the Plan on or after 1 April 2017.

This lifestyle strategy invests members contributions in a way that is intended to be broadly appropriate for members planning to use their pension savings at their target retirement date to draw a flexible income via an income drawdown arrangement. It also assumes that such members will take 25% of their pension savings as a lump sum at their retirement date. The Plan does not offer an income drawdown option so if members wish to take advantage of such an option, they must transfer their pension savings pot to another pension arrangement that offers this option.

Most of the Plan’s members who have not made their own decisions about how to invest contributions, are in this

Drawdown Strategy.

However, some members have past contributions invested in other investment strategies, which are, or are considered to be, also default arrangements. These arrangements are:

The Annuity Strategy (previously known as the Pension Funding Programme)

The 50:50 Lifestyle Strategy

The 70:30 Lifestyle Strategy.

Unless otherwise specified, references in this document to default arrangements refer to the Drawdown Strategy as well as the arrangements listed above.

More information about these investment strategies is included in the SIP, which is appended to this Statement.

The statement of investment principles

The Trustee Board has agreed a statement of investment principles for the default arrangements. This is included within the Trustee’s Statement of Investment Principles for the Plan (“the SIP”). The SIP also covers non-default arrangements in the Plan's Money Purchase Section, as well as investments in the Plan's Final Salary Section.

The SIP has been prepared in accordance with the Occupational Pension Schemes (Investment) Regulations 2005 (“the Investment Regulations”).

The SIP is reviewed at least triennially (and without delay after any significant change in investment policy). It was reviewed and updated in 2018, and was signed on 24 August 2018. That document has subsequently been revised and updated to ensure compliance with new legislative requirements. Following consultation with the FCA, the Plan's Principal Employer, the current SIP was agreed and signed on 27 September 2019. A copy of the current SIP is included in this governance statement at Appendix A.


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The SIP describes, in relation to the investments made in default arrangements, the Trustee’s aims and objectives and the Trustee’s policies for:

ensuring compliance with the Trustee's legal duties with regards to investments,

the kinds of investments to be held,

the balance between different types of investments,

the risks associated with those investments (including the ways in which those risks are measured and

managed),

the expected returns on those investments,

the realisation of investments,

the extent to which financially material considerations (including, but not limited to, social, environmentaland ethical considerations) are taken into account over the appropriate time horizon of the investments,including how those considerations are taken into account in the selection, retention and realisation ofinvestments,

the extent to which non-financial matters are taken into account in the selection, retention andrealisation of investments,

the exercise of rights attaching to investments and engagement in respect of investments, and

the Trustee's arrangements with the Plan's asset managers.

A copy of the Statement of Investment Principles for the Plan, including the Final Salary Section and the Money Purchase Section, may also be downloaded from our website, www.thepensionplan.co.uk.

Monitoring and reviewing the default arrangements

The Trustee Board’s Investment & Financing Committee (the “IFC”) is responsible for monitoring and reviewing the suitability, effectiveness and performance of the investment strategies used in the default arrangements. If and when it concludes that the default arrangements should be changed it will make a recommendation to the Trustee Board for agreement. Once the Board has agreed that recommendation, the IFC is then responsible for overseeing the implementation of the agreed strategies and for putting in place appropriate controls to monitor them thereafter.

Reviewing the default arrangements and their performance

As required by Regulation 2A of the Investment Regulations, the IFC reviews the strategies (i.e. the aims, objectives and policies) and the performance (including the extent to which the return on investments is consistent with the Trustee’s aims and objectives) of the default arrangements at least triennially. A review is also carried out in any event following a material change in the membership profile of the Plan, a significant change in investment policy, or a change in legislation which is considered to have an impact on the investment needs of the Plan’s membership.

No review of the default arrangement was undertaken for the purpose of Regulation 2A of the Investment Regulations during the Plan year.

The current default arrangement, the Drawdown Strategy, was introduced on 1 April 2017, following a detailed review of the members investment needs under the default arrangements. That review considered members’ changing requirements following the change in the law relating to the alternative ways of taking benefits from money purchase pension schemes. The Trustee Board completed the review on 7 December 2016. It concluded that the investment strategy then applying under the default arrangement (the Pension Funding Programme), which assumed that members would use their pension savings to purchase an annuity, was no longer appropriate for typical members of this Plan taking into account the membership profile and current and projected pot values. The Trustee Board concluded that members were more likely to use at least some of their pension savings to provide a flexible income via a drawdown arrangement (effected with another pension provider).


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Following that decision, the IFC made the changes to the default arrangements. These changes were

the introduction of the Drawdown Strategy as the new default arrangement in place of the Pension Funding Programme (now known as the Annuity Strategy), and

the change to the asset allocation of the Plan Retirement Accumulation Fund, the fund used in during the growth phase of the Pension Funding Programme.

The Trustee also concluded that it would be appropriate to notify members who invested in the 70:30 and the 50:50 Lifestyle Programmes of the Trustee’s intention to close these strategies to all investment in 2020.

Members were contacted to tell them about the changes being made and to let them know what their choices were. All members who were invested in the Pension Funding Programme (now known as the Annuity Strategy) or the other lifestyle strategies (the 50:50 Lifestyle Programme and the 70:30 Lifestyle Programme), and who were more than three years from their target retirement date, were given the option to remain in their existing investment strategy. Those who made no election to remain were switched to the Drawdown Strategy during June 2017. Members who were three years or less from their target retirement date, or had passed that date, remained in their original strategy, with the option to switch at any time to the Drawdown Strategy or another strategy, if they wanted to do so. The next review of the strategies of the default arrangements, which also considers their performance, is under way and will be considered at the IFC’s meeting of 26 November 2019.

Monitoring the default arrangements investment strategies in relation to their risk and reward objectives

In addition to the triennial review conducted for the purposes of the Investment Regulations, the effectiveness of the default arrangements in meeting their respective investment objectives is assessed annually by the IFC.

During the Plan Year this assessment was carried out on 15 May 2018. In its assessment, the IFC considers the extent to which the strategies achieve the objective of managing risk in the context of the benefit decision the member is expected to make at retirement. The IFC considers the volatility of returns and the performance achieved by the strategies against that objective in order to assess whether it is operating effectively. The assessment undertaken in the Plan Year demonstrated that the strategies were operating as expected and no changes were implemented.

Monitoring the performance of the default arrangements’ underlying funds

The performance of the underlying funds is monitored on a regular basis by the IFC at its quarterly meetings, with advice and commentary from the Trustee Board’s investment adviser, LCP. Through this process the Trustee ensures that performance is in line with expectations. Where performance does not meet expectations, the IFC will carry out further investigations. These will include discussion with the investment manager and further analysis and advice from LCP. There were no issues requiring immediate action identified during the Plan Year and no changes were made as a result of those assessments.

Processing core Plan financial transactions

The Trustee is responsible for ensuring that core Plan financial transactions are processed promptly and accurately, in accordance with regulation 24 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996. This applies to Plan Money Purchase benefits.

Core financial transactions include:

Investment of contributions to the Plan Transfers of assets relating to members into and out of the Plan Transfers of assets relating to members between different investments with the Plan Payments from the Plan to, or in respect of, members.

The Trustee operates the Plan through its service providers and advisers. It is supported by the Pensions Manager and her team, all of whom are employees of the FCA, the Plan’s Principal Employer.

The processing of core financial transactions is managed on the Trustee’s behalf by Willis Towers Watson (the Plan Administrator). Contributions are invested via an investment only insurance policy with Scottish Equitable plc (the Life Assurer). Through that insurance policy members contributions are invested in funds managed by a number of different investment managers, including BlackRock. Scottish Equitable plc is authorised and regulated by the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”).


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Information about the funds used during the Plan Year and their charges is included in the Statement. Further information is available at www.thepensionplan.co.uk.

Systems and processes

The Trustee has taken steps to ensure that the systems and processes employed by the Plan Administrator and the Life Assurer are appropriate to support the efficient processing of core financial transactions to ensure that they are processed promptly and accurately. It considered these issues as part of its due diligence when selecting the providers and it keeps systems requirements under review on an ongoing basis.

The Trustee has agreed various processes and controls with the Plan Administrator, and the Employers (the FCA and the Financial Ombudsman Service), in order to ensure that:

the information required to process financial transactions promptly and accurately is received on time, and is correct,

clear expectations are set with service providers regarding timescales for completing the processing of transactions, and

workflow is managed effectively to avoid unnecessary delay in that processing.

The Plan Administrator’s controls include those governing the daily monitoring of the Trustee’s bank account, authorisation levels in relation to the payment of funds from the Trustee’s bank account, protocols for checking and peer review on member benefit calculations and correspondence, and an authorisation hierarchy governing the change of member details within the administration system. The Trustee reviews these controls periodically.

The Trustee has service level agreements (“SLAs”) with the Plan Administrator. These service levels are set out in the administration services contract. They define the acceptable timescales for processing transactions, as well as the Trustee's expectation that transactions should be processed with a high degree of accuracy. The Plan Administrator sends investment instructions and monies to and receives settlement information and funds from Scottish Equitable via Straight Through Processing.

Investment of contributions to the Plan

In order to ensure that contributions are invested promptly and accurately, the Trustee agrees a schedule each year with each of the Plan’s employers, the FCA and the Financial Ombudsman Service, for the provision of member data, contribution schedules and contribution payments to the Plan Administrator. The Plan Administrator is responsible for monitoring the receipt of this data and monies and escalating the matter to the Pensions Manager should there be a delay or issue in relation to the data / monies submitted. The Pensions Manager maintains oversight of this process and intervenes when issues arise. This ensures that members’ contributions are processed efficiently. On average over the period contributions were invested in four working days following completion of reconciliation work.

Transfers of assets relating to members into and out of the Plan

The Plan Administrator has established procedures to support the efficient processing of transfers into and out of the Plan.

There are agreed SLAs, set out in the administration services contract, that ensure that requests are processed efficiently (i.e. promptly and accurately), in accordance with the Trustee Board’s expectations.

Payments into and from the Plan are made electronically. Controls in place ensure that monies received into the Plan are identified and invested promptly. Members are able to view these transactions, once complete, via the member website.

Transfers of assets relating to members between different investments within the Plan

Transfers of assets relating to members between different investments within the Plan can take the form of individual members electing to switch their investments, automated switching of member assets in accordance with the Plan’s ready-made strategies (lifestyle strategies) or large bulk switches between funds as result of changes by the Trustee to the Plan’s investment strategies.

Members are able to instruct personal switches using the online facility at www.thepensionplan.co.uk. Using this facility enables members to input their instructions directly to the Plan Administrator’s system, enabling processing of the instruction at the next dealing window. Where members are unable to use the online facility, they are able to instruct the Plan Administrator in writing. The agreed service level for this manual process is 5 working days. During the Plan Year all manual instructions were processed within the agreed service standards.


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During the de-risking stage of ready-made (lifestyle) strategies, including the Drawdown Strategy, the investment mix changes automatically according to members’ proximity to their target retirement date. Switching is managed by the Plan Administrator on a bulk basis, each month. Once the transactions have been reconciled, the member is able to view them via the member website.

Bulk switches are managed explicitly and subject to terms agreed in relation to the bulk switch. There were no bulk switches during the Plan Year.

Payments from the Plan to, or in respect of, members

The types of payments include the payment of pension commencement lump sums, uncrystallised funds pension lump sums, and the purchase of annuities. Such payments are made electronically by default. Although cheque payments are possible they are rare and only used in exceptional circumstances. There are agreed SLAs, set out the administration services contract, that ensure that requests are processed efficiently, in accordance with the Trustee Board’s expectations. This approach supports the efficient processing of core transactions. During the Plan Year, no cheque payments were made.

Monitoring

The Trustee Board’s Audit Risk & Compliance Committee (“ARCC”) is responsible for monitoring the Plan Administrator’s performance overall and specifically in relation to key activities including the prompt and accurate processing of core financial transactions.

The Plan Administrator reports to ARCC on a quarterly basis. It prepares a quarterly administration report that includes performance information measured against the agreed service level standards and also in terms of member experience for key processes such as transfers and retirements. Representatives of the Plan Administrator attend ARCC meetings on a quarterly basis to discuss performance and explain any issues.

Exceptions are investigated by the ARCC to enable the committee to understand reasons for delays and to assess whether there are systemic issues which should be addressed to ensure improved efficiency in future.

The table below summarises their performance quarterly during the Plan Year.

Target QE 30/06/18 QE 30/09/18 QE 31/12/18 QE 31/03/19 TV in completion 15 days 92% 100% 100% 97% TV out completion 15 days 97% 100% 100% 100% Retirement settlements 12 days 89% 85% 100% 87% Investment decisions 10 days 100% 100% 100% 100% Contributions 5 days 100% 100% 100% 100%

Note : the target number of days reflects the total number of days agreed for the completion of all tasks in relation to each member transaction. Days are working days. The target is to complete all tasks within the agreed service level.

It should be noted that where the performance achieved is less than 100% (ie not all cases were completed within the agreed timescales set out in the contractual agreement with the Plan Administrator) the underperformance is due in part to technical misses (ie where completion was not logged until the day after SLA). In a small number of cases there were more significant issues that caused the underperformance.

The ARCC discussed all instances outside SLAs with the Plan Administrator and received relevant explanations at its quarterly meetings. Where there were significant failures ARCC took steps to understand what caused the delays and sought reassurance that appropriate controls were introduced to prevent their reoccurrence.

The ARCC also monitors the control environment through the monitoring of the Plan incident register. Errors and near misses relating to the Plan’s operation including those arising from the Plan Administrator are recorded on the Trustee’s incident register. This register is reviewed by ARCC at each quarterly meeting. It enables ARCC to properly understand the root cause of incidents and track them through to resolution. Through this process ARCC is able to challenge the Plan Administrator and other parties involved in the administration of the Plan to address systemic issues.

The ARCC also monitors the overall effectiveness of the Plan Administrators controls, including those in relation to the processing of core financial transactions, through review of the AAF 01/06 internal controls report annually. A review was last carried out by the ARCC on 19 February 2019.

The Chair of the ARCC reports to the Trustee Board each quarter on, amongst other things, the performance of the Plan Administrator. A copy of the Quarterly Administration Report is circulated with the Trustee Board papers.

The Trustee Board considers, based on the above assessments, that core financial transactions were processed promptly and accurately.


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Charges and transaction costs

Illustration of charges and transaction costs, covering the Plan Year

The Trustee is required to set out the on-going charges incurred by members in this Statement. The Trustee measures charges as the total expense ratio (“TER”). The TER comprises annual fixed fund management charges plus any additional variable fund expenses, such as custody costs, but excludes transaction costs. The TER is paid by the members and is reflected in the unit price of funds. The stated charges exclude administration costs since these are not met by the members. The additional variable fund expenses are set by the fund managers. These charges fluctuate over time.

The IFC considers the TERs annually and will seek, where it is possible to do so, to negotiate more competitive annual fixed fund management changes where those charges appear out of line with peer schemes. Following a review on 14 November 2017 reductions to the fixed fund management charges for some funds used in the current default arrangement were implemented (more information about how these charges have changed is included at Appendix B). In the Plan year the IFC decided to consider TERs as part of a wider review of the Plan’s platform provider.

The Trustee is also required to separately disclose transaction cost figures. In the context of this Statement, the transaction costs shown are those incurred when the Plan’s fund managers buy and sell assets within investment funds but are exclusive of any costs incurred when members invest in and switch between funds. As with the TER, the transaction costs are borne by members.

Information on charges and transaction costs has been supplied by Scottish Equitable plc trading as Aegon, the Plan’s platform provider, and the underlying investment managers. When preparing this section of the Statement the Trustee has taken account of the relevant statutory guidance. Due to the way in which transaction costs have been calculated it is possible for figures to be negative; since transaction costs are unlikely to be negative over the long term the Trustee has shown any negative figure as zero. Although for this Plan Year Aegon has provided information on transaction costs for all funds including those used in the default arrangements, they did not provide that information in relation to the preceding Plan Year, despite repeated requests made by the Trustee to Aegon and the underlying managers. The Trustee has engaged with Aegon on this point and will monitor it going forward, to seek to ensure that members are kept appropriately informed regarding applicable transaction costs.

Default arrangements

The default arrangement currently receiving contributions for new and existing members is the Drawdown Strategy. This default arrangement has been set up as a lifestyle approach, which means that members’ assets are automatically moved between different investment funds as they approach their target retirement date. This means that the level of charges and transaction costs will vary depending on how close members are to their target retirement age and in which fund they are invested.

For the Plan Year annualised charges (TER) and transaction costs are set out in the table below.

Drawdown strategy charges and transaction costs

Years to target retirement date TER (pa) Transaction costs

20 or more years to target retirement date 0.26% 0.08%

15 years to target retirement date 0.26% 0.08%



At target retirement date 0.25% 0.06%

5 years past target retirement date 0.19% 0.03%

10 years past target retirement date 0.13% 0.01%

Note: calculated using information provided by Aegon and investment managers as at 31 March 2019. As a result of changes to the level of the variable fund expenses, there was a change in the TER during the year. More information about how these charges changed is included at Appendix B.


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Legacy default arrangements

Whilst the legacy arrangements are closed to new members, some members are still invested in them. These are the 70:30 Lifestyle Programme and the 50:50 Lifestyle Programme. The Annuity Strategy was previously known as the Pension Funding Programme and is both a legacy arrangement and available to new members. As the Annuity Strategy is also used by members who have opted to use this arrangement, the charges associated with it are set out here as well as under the section on Alternative Investment Options below. The annual charges for these arrangements during the Plan Year are set out in the tables below.

70:30 Lifestyle Programme charges and transaction costs







Note: calculated using information provided by Aegon and investment managers as at 31 March 2019. The charges shown applied throughout the year.

50:50 Lifestyle Programme charges and transaction costs







Note: calculated using information provided by Aegon and investment managers as at 31 March 2019. As a result of changes to the level of the variable fund expenses, there was a change in the TER during the year. More information about how these charges changed is included at Appendix B.

Annuity Strategy charges and transaction costs







Note: calculated using information provided by Aegon and investment managers as at 31 March 2019. As a result of very small changes to the level of the variable fund expenses, there was a change in the TER during the year. More information about how these charges changed is included at Appendix B

Alternative investment options

Members also have the choice of alternative investment options.

There are two other ready-made (lifestyle) strategies, targeting lump sum cash withdrawal and annuity purchase respectively, and a freestyle investment option which enables member to create their own investment strategies using the range of funds available.


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The annual charges for these strategies during the period covered by this DC Governance Statement are set out in the tables below.

Lump Sum Cash Lifestyle Strategy charges and transaction costs







Note: calculated using information provided by Aegon and investment managers as at 31 March 2019. As a result of very small changes to the level of the variable fund expenses, there was a change in the TER during the year. More information about how these charges changed is included at Appendix B.

Annuity Lifestyle Strategy charges and transaction costs







Note: calculated using information provided by Aegon and investment managers as at 31 March 2019. As a result of very small changes to the level of the variable fund expenses, there was a change in the TER during the year. More information about how these charges changed is included at Appendix B.

Freestyle fund charges and transaction costs

The level of charges for each freestyle fund (including those funds used in the default arrangements) and the transaction costs during the Plan Year are set out in the following table. The TERs can change either because the Trustee is able to negotiate changes to the annual management charge or because there is a change to the variable fund expenses. The table shows the charges that applied at 31 March 2019. In most cases this applied throughout the year. However, during the year the TERs for a small number of funds (indicated with ♦ ) changed slightly as a result of changes made by the fund managers to the variable fund expenses. Full information about how fund charges have changed over time is included at Appendix B.

The underlying funds used within the current default arrangement are shown in bold.

Fund TER (%) Transaction costs

(%)

The Plan Retirement Accumulation Fund ♦ 0.26 0.08

Aegon BlackRock 50:50 Global Equity Index Fund* 0.14 0.01

Aegon BlackRock 70:30 Global Equity Index Fund* 0.14 0.03

Aegon BlackRock Emerging Markets Equity Index Fund ♦ 0.31 0.00 **

Aegon BlackRock European Equity Index Fund* 0.15 0.01

Aegon BlackRock Japanese Equity Index Fund ♦ * 0.14 0.08

Aegon BlackRock Pacific Rim Equity Index Fund* 0.15 0.00

Aegon BlackRock UK Equity Index Fund 0.11 0.07

Aegon BlackRock US Equity Index Fund* 0.14 0.00 **

Aegon BlackRock World (Ex-UK) Equity Index Fund* 0.14 0.00 **


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Fund TER (%) Transaction costs

(%)

Aegon BlackRock UK Smaller Companies Equity Index Fund* 0.27 0.19

Aegon LGIM Ethical Global Equity Index Fund 0.35 0.01

Aegon HSBC Islamic Global Equity Index Fund* 0.50 0.06

Aegon Property Fund ♦ * 0.98 0.12

Aegon BlackRock DC Diversified Growth Fund ♦ 0.63 0.32

The Plan Dynamic Bond Fund 0.56 0.12

Aegon BlackRock All Stocks UK Index Linked Gilt Fund 0.11 0.01

Aegon BlackRock Over 15 Year Gilt Index Fund ♦ 0.11 0.00 **

Aegon BlackRock All Stocks Corporate Bond Fund * 0.15 0.02

Aegon BlackRock Over 15 Year Corporate Bond Index Fund * 0.15 0.03

Aegon BlackRock Cash Fund 0.13 0.02

Source: Aegon and investment managers as at 31 March 2019.

*. Indicates funds where the Trustee has negotiated lower annual fixed fund management charges. However, as the funds are not white-labelled, moving to the lower cost share classes is an exercise that will involve the Plan’s administrator and will be incorporated as part of the platform provider review in 2019.

** Due to the way in which transaction costs have been calculated it is possible for figures to be negative; since transaction costs are unlikely to be negative over the long term any negative figures have been shown as zero.

Illustration of charges and transaction costs

The table below sets out an illustration of the impact of charges and transaction costs on the projection of an example member’s pension savings. This illustration has been produced taking into account applicable statutory guidance.

The “before costs” figures illustrate the savings projection assuming an investment return with no deduction of the member-borne TER or transaction costs. The “after costs” figures illustrate the savings projection using the same assumed investment return but after deducting member-borne fees (i.e. the TER) and an allowance for transaction costs.

The transaction cost figures used in the illustration are those provided by the managers over the Plan Year, subject to a floor of zero (i.e. the illustration does not assume a negative cost over the long term).

The illustration is shown for the default arrangement (the Drawdown Strategy) since this is the arrangement with the most members invested in it, as well as for four funds from the Plan’s freestyle fund range. The four freestyle funds shown in the illustration, which are included as a representative sample from the range of funds available to members, are:

the fund with the highest before costs expected return – this is the Aegon BlackRock Emerging MarketsEquity Index;

the fund with the lowest before costs expected return – this is the Aegon BlackRock Over 15 Year GiltIndex Fund;

the fund with highest annual member-borne costs – this is the Aegon BlackRock Property Fund; and the fund with lowest annual member-borne costs – this is the Aegon BlackRock All Stocks UK Index

Linked Gilt Fund.


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Notes

Projected pension pot values shown are estimates and are not guaranteed. The illustration does not indicate the likelyvariance and volatility in the possible outcomes from each fund.

Projected pension pot values are shown in today’s terms, and do not need to be reduced further for the effect of futureinflation.

Annual salary growth and inflation is assumed to be 2.5%. Salaries could be expected to increase above inflation toreflect members becoming more experienced and being promoted. However, the projections assume salaries increasein line with inflation to allow for prudence in the projected values.

The starting pot size used is £2,100, which is the median pot size for active employees aged 25 and under.

The projection is for 40 years, being the approximate duration that the youngest scheme member has until they reach thePlan’s Normal Pension Age.

The starting salary is assumed to be £27,600, which is the median salary for active members aged 25 and under.

Total contributions (employee plus employer) are assumed to be 8.0% of salary per year, which is the contribution rateapplicable to the median active member with within the member group aged 25 and under.

The projected (before costs) annual returns used are as follows:

Drawdown Strategy: 2.3% above inflation for the initial years, gradually reducing to a return of 0.3% aboveinflation at the ending point of the lifestyle.

Aegon BlackRock Property Fund – 1.5% above inflation Aegon BlackRock Over 15 Year Gilt Index Fund – 1.4% below inflation Aegon BlackRock Emerging Markets Equity Index – 3.3% above inflation Aegon BlackRock All Stocks UK Index Linked Gilt Fund – 1.4% below inflation

Value for members

The Trustee considers that, taking into account the low level of charges and transaction costs which members bear, the level of service delivered by the Plan’s administrators and the support provided by the Trustee (which is funded by the Sponsoring Employers), the Plan offers value for money for members. The Trustee monitors this conclusion on an ongoing basis. The Board and its committees review the performance of its service providers and advisers regularly to ensure that the service they provide meets the needs of the members. The Trustee seeks reductions in ongoing investment charges as and when the opportunity arises.

Drawdown Strategy Aegon BlackRock Emerging Markets

Equity Index

Aegon BlackRock All Stocks UK Index Linked Gilt Fund

Aegon BlackRock Property Fund

Aegon BlackRock Over 15 Year Gilt Index Fund

Years invested

Before costs

After costs

Before costs

After costs

Before costs

After costs

Before costs

After costs

Before costs

After costs

1 £4,400 £4,400 £4,400 £4,400 £4,300 £4,300 £4,400 £4,300 £4,300 £4,300

3 £9,100 £9,000 £9,300 £9,200 £8,500 £8,500 £9,000 £8,800 £8,500 £8,500

5 £14,000 £13,900 £14,500 £14,300 £12,600 £12,600 £13,700 £13,300 £12,600 £12,600

10 £27,400 £26,900 £29,000 £28,500 £22,400 £22,300 £26,200 £24,700 £22,400 £22,300

15 £42,300 £41,100 £46,100 £44,900 £31,600 £31,300 £39,700 £36,300 £31,600 £31,300

20 £59,000 £56,800 £66,300 £64,000 £40,100 £39,600 £54,100 £48,100 £40,100 £39,700

25 £77,600 £74,000 £90,000 £86,100 £48,100 £47,400 £69,700 £60,200 £48,100 £47,400

30 £98,500 £93,000 £117,900 £111,700 £55,500 £54,500 £86,500 £72,500 £55,500 £54,600

35 £120,600 £112,700 £150,700 £141,400 £62,400 £61,200 £104,600 £85,000 £62,400 £61,300

40 £136,800 £126,600 £189,300 £175,800 £68,800 £67,300 £124,000 £97,800 £68,800 £67,400


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The Trustee commissioned a review of value for members in the Plan Year from its investment adviser, LCP. In that review LCP considered, in addition to member charges, the four areas suggested by the Pensions Regulator – Governance, Investment, Administration and Communications – and also ‘plan design’ and ‘at retirement’support. Overall the report found the value for members in relation to each area was either good or very good.The Trustee is encouraged by this and has work in progress to maintain or improve that position over the comingyear.

Here is a summary of the results.

Areas considered Assessment LCP review comments / Trustee commentary

Costs and charges Good The Plan’s management fees are reasonable, although there may be some scope to further reduce fees

Members only bear investment costs and transaction charges. (excluding administration costs). Administration costs are met by the Sponsoring Employers. The Trustee has agreed cost reductions to be implemented. The Trustee will be carrying out a review of the investment arrangements later this Plan year and will look for opportunities to further reduce costs.

Administration Very Good The Plan Administrator has met agreed standards and processed transactions with the SLAs 98% of the time for 18 successive quarters.

The Trustee maintains close oversight of the Plan Administrator’s performance and monitors member experience to ensure the level of service remains strong. It monitors the quality of Plan data and takes action to improve it where necessary.

Governance Very Good The Trustee and its Committees all have clearly defined roles and responsibilities. Knowledge and understanding are of a high standard.

The Trustee takes steps to review its performance and refresh and revise training to maintain the current high standard. It is considering the addition of a professional trustee to further strengthen the Board.

Communications Good The Trustee uses a variety of media to provide members with pensions information. The communications project to further improve member engagement should further benefit members.

The Trustee believes the development of the member website is a key factor to helping members get the best from the Plan pension.

Default arrangements Very Good The current, and legacy, default arrangements are regularly reviewed to ensure they remain appropriate. The current default arrangement has delivered strong positive returns over the longer term.

The next review of the default arrangements strategy and performance is taking place on 26 November 2019. The Trustee has also recently completed a review of its investment beliefs including those on responsible investment.

Freestyle fund range Good The range of funds provides access to all major asset classes and some specialist ones although there is some supplication.

The Trustee reviewed the range of funds during the year and is considering steps to remove some duplication of funds.

At retirement Good The support and guidance offered to members is strong and the Trustee is looking at ways to improve the level of support offered to members.

The Trustee is developing the communications structure to help make sure members get information and guidance at the right time. It is also undertaking a review to identify a possible external drawdown provider.

Plan design Very Good The Plan design and contribution structure is very generous.

Plan design is primarily a matter for the sponsoring employers. The Trustee continues to work closely with the employers on pensions provision.


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Making sure the Trustee Directors are able to fulfil their role effectively

The Trustee company has six Directors. Currently three are appointed by the employer (including the Chair) and three elected by the members. Their professional background means they have accumulated extensive experience within the financial services industry and financial services regulation, making them well placed to deal with the challenges faced by pension scheme trustees. Collectively they have more than 24 years' experience of acting as trustee directors to the Plan and a broad skill set which includes extensive knowledge of financial markets including pensions.

The Directors are supported by a professionally qualified Pensions Manager and her team and a group of suitably qualified and experienced specialist advisers and service providers. Steps are taken to ensure that the Directors have the level of knowledge and understanding required to meet the requirements of Sections 247 and 248 of the Pensions Act 2004.

The Board has a well-established process for regularly assessing its skills, to identify areas where Directors may need to draw on specialist support from its advisers and/or where further training may be appropriate. The Board maintains a record of its skills assessment and the experience of individual Directors. This is particularly helpful to inform its view of risk in relation to Board succession. The Board reviews its effectiveness as a Board annually and uses the results of such reviews to identify areas for development. An external firm is engaged to facilitate this review triennially. In the intervening years the Trustee Board carries out the review by self-assessment. For example, the review during the Plan Year, which was facilitated by an external firm, identified the need to set broad rules for maximum length of service on the Trustee Board, to strengthen the Board’s investment expertise through the introduction of an investment special adviser to the Board or professional trustee and, in the light of increasing Trustee governance requirements, the Board identified a need to increase the level of expert support with respect to compliance with a more complex regulatory regime.

The Board assesses its training needs annually, using the Pensions Regulator’s Trustee learning assessment tools as a point of reference. That assessment is used to determine training needs for the coming year. Training sessions are held at three of the four quarterly Board meetings, with the fourth focused on risk appetite discussions. Additional training sessions are arranged for the Board’s committees with respect to specific issues and for individual Directors to support their ongoing development. Training during the Plan Year included refresher training on the LDI strategy and buy-ins transactions and on GMP equalisation. Training subjects in the prior year included General Data Protection regulations (GDPR); balance of powers and Trustee responsibilities; and legal training on current DC governance issues.

All Directors have a copy of the Plan’s trust documentation, as well as access to scheme policy documents and documents governing scheme investment and funding. When making decisions about Plan business the Directors refer to the relevant provisions within those documents and, where appropriate, obtain guidance from the Pensions Manager and specialist advisers.

Training on specific issues and the extent to which they interact with the provisions of the trust deed and rules is provided as appropriate to the business at hand; in this respect, a key focus during the year was on DC legislative change and regulatory compliance. The Pension Manager’s team maintains a log of the training Directors receive and any additional training they attend individually. This training is reviewed regularly, in particular against any knowledge or skill gaps identified within the trustee board and against any changes to pensions legislation or applicable guidance.

The Trustee maintains a record of the policies and procedures in place to support the administration of the Plan and the ARCC reviews these regularly, with relevant policies recommended to the Board for its agreement.

New Directors receive the support they need to meet the requirements for knowledge and understanding within the Pension Regulator’s specified time of six months. A bespoke training plan is agreed with each Director on appointment, taking account of their experience and knowledge. All new Directors are required to complete the Pensions Regulator’s Trustee Toolkit (an online training toolkit which the Regulator has developed for trustees of occupational pension schemes) or demonstrate a comparable level of training and expertise. They are provided with a comprehensive induction covering the Plan’s governing trust documentation, the policies and procedures that support the Plan’s administration, the statement of investment principles (the SIP) and the statement of funding principles, to ensure that the Trustee directors have an effective working knowledge of these documents. This training is revisited and revised from time to time when appropriate to ensure that this knowledge is maintained on an ongoing basis. One-to-one training is provided by the Trustee’s advisers on specialist areas including investment principles and other matters relating to investment and funding principles for occupational pension schemes and the law relating to pensions and trusts. New Directors are encouraged to attend the


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Appendix A: The Statement of Investment Principles


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Appendix B

FCA Pension Plan Money Purchase SectionFund charges history

Please note this table refers only to calendar quarters when a change was made. If there was no change to any charges in the quarter it is not shown in this table.

Calendar quarters

Fund name AMC Other TER AMC Other TER Date AMC Other TER Date AMC Other TER Date AMC Other TERThe Plan Retirement Accumulation Fund 0.28 0.02 0.30 n/c n/c n/c 0.23 0.02 0.25 01/01/2018 0.23 0.03 0.26 30/06/2018 0.23 0.03 0.26Aegon BlackRock 50:50 Global Equity Index Fund 0.13 0.01 0.14 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.13 0.01 0.14Aegon BlackRock 70:30 Global Equity Index Fund 0.13 0.01 0.14 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.13 0.01 0.14Aegon BlackRock Emerging Markets Equity Index Fund 0.25 0.07 0.32 n/c n/c n/c n/c n/c n/c 0.25 0.06 0.31 30/06/2018 0.25 0.06 0.31Aegon BlackRock European Equity Index Fund 0.13 0.02 0.15 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.13 0.02 0.15Aegon BlackRock Japanese Equity Index Fund 0.13 0.02 0.15 n/c n/c n/c n/c n/c n/c 0.13 0.01 0.14 30/06/2018 0.13 0.01 0.14Aegon BlackRock Pacific Rim Equity Index Fund 0.13 0.02 0.15 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.13 0.02 0.15Aegon BlackRock UK Equity Index Fund 0.10 0.01 0.11 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.10 0.01 0.11Aegon BlackRock US Equity Index Fund 0.13 0.01 0.14 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.13 0.01 0.14Aegon BlackRock World (Ex-UK) Equity Index Fund 0.13 0.01 0.14 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.13 0.01 0.14Aegon BlackRock UK Smaller Companies Equity Index Fund 0.25 0.02 0.27 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.25 0.02 0.27Aegon LGIM Ethical Global Equity Index Fund 0.35 0.00 0.35 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.35 0.00 0.35Aegon HSBC Islamic Global Equity Index Fund 0.50 0.00 0.50 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.50 0.00 0.50Aegon Property Fund 0.95 0.03 0.98 0.95 0.02 0.97 30/06/2017 n/c n/c n/c 0.95 0.03 0.98 30/06/2018 0.95 0.03 0.98Aegon BlackRock DC Diversified Growth Fund 0.65 0.06 0.71 0.58 0.06 0.64 20/06/2017 0.55 0.06 0.61 01/01/2018 0.55 0.08 0.63 30/06/2018 0.55 0.08 0.63The Plan Dynamic Bond Fund 0.53 0.06 0.59 n/c n/c n/c 0.50 0.06 0.56 01/01/2018 n/c n/c n/c 0.50 0.06 0.56Aegon BlackRock All Stocks UK Index Linked Gilt Fund 0.10 0.01 0.11 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.10 0.01 0.11Aegon BlackRock Over 15 Year Gilt Index Fund 0.10 0.01 0.11 0.10 0.02 0.12 30/06/2017 n/c n/c n/c 0.10 0.01 0.11 30/06/2018 0.10 0.01 0.11Aegon BlackRock All Stocks Corporate Bond Fund 0.13 0.02 0.15 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.13 0.02 0.15Aegon BlackRock Over 15 Year Corporate Bond Index Fund 0.13 0.02 0.15 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.13 0.02 0.15Aegon BlackRock Cash Fund 0.10 0.03 0.13 n/c n/c n/c n/c n/c n/c n/c n/c n/c 0.10 0.03 0.13

Key:n/c indicates no change Green font indicates a charge reduction Red font indicates a charge increase

Position at 31 March 2017

Changes made during the Plan year 01/04/2018 to 31/03/2019 Position at 31 March 2019

Q2/2017 Q1/2018 Q2/2018

Changes made during the Plan year 01/04/2017 to 31/03/2018

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