Braemar Pension Scheme Chair Statement, Statement of Investment Principles & Implementation Statement
Braemar Pension Scheme
Chair Statement for Scheme Year Ending 31st December 2023
Introduction
The trustees of defined contribution pension schemes such as this Scheme must produce an annual report, signed by their Chair (the Chair’s Statement). This is that statement and summarises matters relating to investment, administration and charges for the Scheme that impact on the members and their benefits.
This Scheme operates under a Trust Deed and Rules. The latest version of these were signed on 5th December 2018. The Trustee operates the Scheme in accordance with the Rules and the Statutory Regulations that are in force from time to time. The Trustee of the Scheme is Winterbourne Trustee Services Limited.
The Trustee retains the services of an independent financial adviser from whom they receive advice on both the structure of the investment offering to members of the Scheme and additionally the detail of the individual investment funds offered and the underlying investment managers used by the Trustee. The Trustee has an advice contract in place with Professional Pensions and Investments Ltd. They are a Chartered firm and are regulated and authorised by the Financial Conduct Authority.
The Trustee also has a contract for administration and consultancy services with Winterbourne Trustee Services Ltd (WTS) which provides the Trustee with specialist pension administration services and Consultancy Advice on the legislation and regulation around Trust based Defined Contribution Pension Schemes in the UK. The Trustee considers that each of these retained service providers are persons of appropriate knowledge and experience to assist the Trustee in discharging their responsibilities under the Trust for the benefit of the membership.
The Scheme year end is 31st December 2023 and there is a statutory requirement to include an Annual Governance Statement within the Report and Accounts: The Chair’s Statement.
This is such a statement and as the Chair’s annual governance statement it has been prepared in accordance with the regulation 23 of the Occupational Pension Schemes Regulations 1996. In preparing this statement and the information contained herein the Trustee and their adviser have taken account of the appropriate statutory guidance.
The Trustee is engaging with the Principal Employer about the future of the Scheme. This includes consideration around the use of a Master Trust as an alternative means of providing pension benefits for members. The Trustee is actively engaging with a number of Master Trust providers.
This Chair Statement should be read in conjunction with the Trustee’s Statement of Investment Principles (SIP) and the Value for Members statement. The SIP is dated September 2019and has been reviewed regularly since that date, at Trustee meetings. The SIP has been deliberately designed to be a stable document with appendices addressing regular fund adjustments.
Investment Arrangements
The Scheme’s latest Statement of Investment Principles (SIP) governs the Trustee decision about investments and the Scheme’s default arrangement. The SIP covers the investment risk, return, aims and how social, environmental and ethical factors are considered.
The Scheme is set up with a Lifestyle Investment Strategy. This is what many members will use and is made available by the Trustee to assist those members who do not wish to make a more specific investment decision themselves. Such an investment strategy is often referred to as the default investment fund.
The Scheme is available for use as a qualifying scheme for automatic enrolment purposes by the Employer. The Trustee considers that the terms offered under the auto enrolment qualifying status would amount to good practice. Those terms include maximum costs that relate to investment funds offered to members. The Scheme makes use of investment funds that are less expensive than the automatic enrolment maxima.
During the 2022-2023 Scheme year the Trustee reviewed the appropriateness of the default arrangement on an ongoing basis and deemed it satisfactory and in the best interests of the members.
In 2023 the matter was further considered and the process of a move to Master Trust re-energised in conjunction with the Principal Employer.
Aims, Objectives and Policies to the Lifestyle Investment Strategy
Members who are more than 11 years to their retirement age and have not made an active investment decision are placed in the Braemar Lifestyle Growth Fund. The Lifestyle Investment Strategy involves a ten year investment glide into retirement. Contributions and the fund value are gradually and automatically switched into the Braemar Lifestyle Growth Fund and the Braemar Pre-Retirement Fund. Five years before retirement the members fund value will consist of an equal amount in both funds. From the 5th year to retirement, contributions and the fund value are gradually and automatically switched to the Braemar Pre-Retirement Fund and the Braemar Cash Fund. At retirement the members fund will consist of 75% in the Braemar Pre-Retirement Fund and 25% in the Braemar Cash Fund. Most members at retirement take 25% of their fund as tax free cash and the Lifestyle Investment Strategy reflects this.
Financial Transactions
The core financial transactions include (but are not limited to):
- Transfer of members’ assets into and out of the Scheme.
- Transfers of members’ assets between different investment options available in the
Scheme. - Payments from the Scheme to, or in respect of, members.
The Trustee ensured that during the year the core financial transactions of the Scheme were processed promptly and accurately by:
- Having an agreement with their administration service provider.
- The Trustee receiving appropriate administration reports from their service provider. This means that the Trustee is aware of activity on the Scheme and provides information to the Trustee on how transactions and member enquiries are dealt with.
- Our delegated administrator, WTS, reports to the Trustee at regular Trustee meetings. This facilitates a two-way understanding of the management of the Scheme and allows the Trustee to exercise its governance function effectively.
- WTS report to the Trustee on their own controls and this assists the Trustee in the confidence that it requires to address their governance responsibility. If any complaint arises from the
membership the Trustee does review the matter. There were no unresolved member complaints recorded within the review period. - At Trustee meetings the Trustee hears from its Investment Adviser, Professional Pensions and Investments Ltd. The Investment Adviser comments on t h e market background that
relates to the Lifestyle Investment Strategy (the default investment). This facilitates the Trustee’s consideration of the suitability of the investment fund offered to members as the default investment. - At Trustee meetings the Trustee receives investment reports from their Investment Manager, Mobius Life. The Investment Adviser supplies additional information to include, from the
underlying managers, information on governance, specifically how the manager exercises the responsibilities associated with shareholders effectively on behalf of the membership, via the
mechanism of the pension trust. - The combination of this level of reporting and discussion at Trustee meetings enables the Trustee to form a view on the exercise of their governance responsibilities.
Examples of typical turnaround times from the Trustee’s delegated administrator, given that all the required documentation from the member has been provided, would be:
- Payment of DC transfer value to alternative arrangement: 10 days
- Payment of DC cash commuted lump sum on retirement: 10 days
- Payment of DC death lump sum: 5 days
- Payment of fund to annuity provider: 10 days
Considering all of the foregoing the Trustee is of the opinion that core financial transactions were processed promptly and accurately on behalf of members of the Scheme during the year and that elements of the Trustee governance function are exercised with diligence in an appropriate manner. The administration staff provide considerable assistance to members to aid their considerations of the complexities of pensions generally which may not be well understood by laypersons.
Charges and Transaction Costs
In preparing this statement and the information contained herein the Trustee and their adviser have taken account of the appropriate statutory guidance.
The following table outlines the annual management charge and transaction costs as a percentage of the fund value as provided to the Trustee for the investment funds used by members. The Braemar Lifestyle Growth Fund is used in the Lifestyle Investment Strategy, along with the Braemar Pre-Retirement Fund and the Braemar Cash Fund. These are therefore the Default Funds.
| Fund | Transaction Costs % pa |
Management Costs % pa |
Total Ongoing Charges % pa |
| Braemar Lifestyle Growth | 0.008 | 0.465 | 0.473 |
| Braemar Pre-Retirement | 0.006 | 0.44 | 0.446 |
| Braemar Cash | 0.00 | 0.35 | 0.35 |
| Braemar UK Equity Index | 0.00 | 0.35 | 0.35 |
| Braemar Global Growth | 0.001 | 0.65 | 0.65 |
| Braemar Global Bond | 0.04 | 0.45 | 0.49 |
| Braemar Ethical Equity | 0.00 | 0.55 | 0.55 |
| Braemar Balanced Growth | 0.005 | 0.65 | 0.655 |
| Braemar Global Equity Index | 0.00 | 0.35 | 0.35 |
| Braemar Diversified Growth | 0.01 | 0.75 | 0.76 |
| Braemar Strategic Diversified Growth | 0.012 | 0.45 | 0.462 |
The total ongoing charge includes all fees and expenses. This covers costs such as custody, fund audit, fund administration charges and similar. These charges are expected to be incurred by members in relation to their investments in the noted fund. Such charges are within the unit price and therefore not explicit.
The transaction cost figure includes an element of implicit cost which is the difference between the mid-market price at the time the trade is sent to the market and the eventual price of the trade. It is possible for such a cost to be negative; for example when buying an asset the value price might be higher than the actual price paid.
These total ongoing charges are slightly different from the annual management charge quoted for each fund. The difference arises on a number of fronts, including, but not limited to such matters as rounding in the calculation. In effect these total ongoing charges give the look through costs to members of investing in the Scheme. If we take the Braemar Lifestyle Growth Fund as an example, the total ongoing charge is 0.473%. This means 0.473% is an annual cost of investing. This is often referred to as 47.3 basis points.
Using the 0.473% total ongoing charge on the Braemar Lifestyle Growth Fund we can consider that for a member with £10,000 invested in that fund the cost of investment management in one year would be £47.30. Put another way, if there was exactly no investment growth at all, the value of the £10,000 invested would fall to £9,952.70 over a year due to the costs of the fund.
The Braemar Lifestyle Growth Fund is the default growth fund for the Scheme. The Trustee therefore considers very carefully the charging structure of this fund and what it is that the
managers are seeking to achieve for the Trustee when they are using this fund. The objective of the fund is broadly to limit volatility and yet provide real returns linked to the equity markets. It is therefore reasonable in the view of the Trustee that this fund has costs at the level shown. In practice the Trustee is advised (by the Investment Adviser) that for a fund of this nature these total ongoing charge costs are both reasonable and competitive and therefore offer good value. For the services provided these costs are also considered to be sustainable and not excessive.
Value for Members Assessment
There is no legal definition of “good value”, good value is subjective.
The Trustee, in conjunction with their advisers, consider value for member assessment at each Trustee meeting. The assessment follows the Pension Regulator Defined Contribution code of practice and guidance. Outcomes are documented with areas of improvement noted in the Trustee remit for the year ahead.
The review concluded that the Scheme’s overall benefits represent very good value for the costs and charges, for the following reasons:
- Charges for the Scheme default investment strategy is below the charge cap of 0.75% per annum. The Trustee continues to monitor the charges.
- Members have access to a range of investment options.
- All Trustee meetings are supported by their advisers.
Members may like to consider that many of the costs of managing the Scheme are met by the Employer. These include, but are not limited to:
- The costs of running the Trustee company.
- The costs of the technical advice to the Trustee, including Pension Consultancy.
- The costs of Investment Advice to the Trustee.
Value for Money Assessment
There is no legal definition of “good value”, good value is subjective.
The Trustee, in conjunction with their advisers, consider value for member assessment at each Trustee meeting. The assessment follows the Pension Regulator Defined Contribution code of practice and guidance. Outcomes are documented with areas of improvement noted in the Trustee remit for the year ahead.
The review concluded that the Scheme’s overall benefits represent good value for the costs and charges, for the following reasons:
- Charges for the Scheme default investment strategy is below the charge cap of 0.75% per annum. The Trustee continues to monitor the charges.
- Members have access to a range of investment options.
- All Trustee meetings are supported by their advisers.
Members may like to consider that many of the costs of managing the Scheme are met by the Employer. These include, but are not limited to:
- The costs of running the Trustee company.
- The costs of the technical advice to the Trustee, including Pension Consultancy.
- The costs of Investment Advice to the Trustee.
Net Investment Returns
The Occupational Pension Schemes (Administration, Investment, Charges and Governance Amendment) Regulations 2021 require the Trustee to calculate and state the investment return, net
of transaction costs and charges. In preparing this statement and the information contained herein the Trustee and their adviser has taken account of the appropriate statutory guidance.
Default Lifestyle Investment Strategy Funds
The Trustee calculates the investment return on investments, as far as they are able to. The net investment returns for members within the default Lifestyle Investment Strategy funds are as follows:
| Default Strategy | Investment returns % | |
| 1 Year to 31/12/2023 | 5 Years to 31/12/2023 p.a. | |
| Braemar Lifestyle Growth Fund | 9.3 | 5.9 |
| Braemar Pre-Retirement Fund | 7.1 | -0.2 |
| Braemar Cash Fund | 4.3 | 1.0 |
Self-select Funds
The net investment returns for members within the self-select funds are as follows:
| Self-Select Funds | Investment returns % | |
| 1 Year to 31/12/2023 | 5 Years to 31/12/2023 p.a. | |
| Braemar Global Growth Fund | 13 | 9.7 |
| Braemar Global Equity Index Fund | 11 | 8.8 |
| Braemar UK Equity Fund | 7 | 6.3 |
| Braemar Balanced Growth Fund | 11.3 | 8.1 |
| Braemar Ethical Equity Fund | 8.5 | 6.0 |
| Braemar Diversified Growth Fund | 8.3 | 4.4 |
| Braemar Strategic Diversified Growth Fund | 7.2 | 1.7 |
| Braemar Global Bond | 5.4 | 3.1 |
The Trustee is required to show the investment performance of Master Trust providers that they might engage with. In doing so the regulations make provisions for differences in the volatility or investment risk taken by providers generally, or the long term sustainability of the costs that they quote. The table appended to the end of this document provides performance information of alternate providers and is shown for information only.
Note the Trustee is actively pursuing the introduction of a Master Trust in conjunction with the Principal Employer and expects such a change to be agreed and in place by 31st December 2024
Projections to Assist Members Allowing for Costs / Expenses.
Costs are those paid by a Scheme member from their member pot. They include total ongoing charges which are paid by the member rather than by the Employer. The Employer meets other running costs of the Scheme. Figures shown are not guaranteed.
Growth Rates Assumed
| Braemar Lifestyle Growth Fund (the default fund) | 3% above inflation |
| Braemar Pre Retirement Fund | inflation |
| Braemar Cash Fund | 1% below inflation |
| Braemar UK Equity Index Fund | 4% above inflation |
| Braemar Global Growth Fund | 4% above inflation |
| Braemar Global Bond Fund | 1% above inflation |
| Braemar Ethical Equity Fund | 4% above inflation |
| Braemar Balanced Growth Fund | 3% above inflation |
| Braemar Global Equity Index Fund | 4% above inflation |
| Braemar Diversified Growth Fund | 3% above inflation |
| Braemar Strategic Diversified Growth Fund | 3% above inflation |
Default Lifestyle Investment Strategy
Most members are in the default Lifestyle Investment Strategy. The table below sets out how a member could see their pension pots grow, with and without charges. These are illustration examples only and are not guaranteed.
Costs may change at the point of switching into the Pre-Retirement Fund and Cash Fund during the lifestyle investment phase. It is not possible to know what these costs will be in advance and
they may be zero. On this basis and until there is a recognised method of understanding such costs the Trustee presents the costs as shown.
|
Lifestyle Investment Strategy |
||||||
| Years | Age now: 25 Active Member Starting value £10,000Monthly contributions £200 | Age now: 45 Deferred Member Starting value £136,000Nil contributions | Age now: 45 Active Member Starting value £136,000Monthly contributions £500 | |||
| Charges £ | Charges £ | Charges £ | ||||
| Before | After | Before | After | Before | After | |
| 0 | 10,000 | 10,000 | 136,000 | 136,000 | 136,000 | 136,000 |
| 1 | 12,698 | 12,698 | 139,980 | 139,320 | 145,994 | 145,320 |
| 3 | 18,333 | 18,127 | 148,294 | 146,205 | 166,867 | 164,650 |
| 5 | 24,303 | 23,881 | 157,102 | 153,431 | 188,980 | 184,935 |
| 10 | 40,825 | 39,541 | 181,478 | 173,096 | 250,181 | 240,144 |
| 15 | 59,911 | 57,210 | 209,637 | 195,282 | 320,878 | 302,432 |
| 20 | 81,958 | 77,144 | 242,165 | 220,311 | 402,544 | 372,708 |
| 25 | 107,426 | 99,634 | ||||
| 30 | 136,404 | 125,008 | ||||
| 35 | 170,830 | 153,635 | ||||
| 40 | 210,088 | 185,934 | ||||
Notes
- Projected pension pot values are shown in today’s terms.
- Retirement is assumed to be age 65.
- Inflation assumed to be 2.5% per annum.
- Values are estimates and not guaranteed.
- Contributions escalate by inflation each year.
Self-Select Individual Funds
The table below sets out how a member could see their pots grow, with and without charges, investing solely in one of the funds below. These are illustration examples only and are not guaranteed.
In preparing these estimates the Investment Adviser to the Trustee has referenced the DWP Reporting of Costs Charges and other Information: Guidance for Trustees and Managers of Occupational Schemes, October 2022.
| Active Member – 25 year old – Pension pot accrued £10,000 Contributions £200 per month, escalating by inflation each year | ||||||||
| Years | Lifestyle Growth Fund | Pre- Retirement Fund | Cash Fund (lowest charging) | Diversified Growth Fund (highest charging) | ||||
| Charges £ | Charges £ | Charges £ | Charges £ | |||||
| Before | After | Before | After | Before | After | Before | After | |
| 0 | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 |
| 1 | 12,698 | 12,698 | 12,371 | 12,321 | 12,261 | 12,223 | 12,698 | 12,611 |
| 3 | 18,333 | 18,127 | 17,112 | 14,632 | 16,718 | 16,581 | 18,333 | 18,003 |
| 5 | 24,303 | 23,881 | 21,853 | 21,502 | 21,089 | 20,824 | 24,303 | 23,630 |
| 10 | 40,825 | 39,541 | 33,706 | 32,751 | 31,647 | 30,952 | 40,825 | 38,789 |
| 15 | 59,911 | 57,210 | 45,559 | 43,752 | 41,700 | 40,428 | 59,911 | 55,650 |
| 20 | 81,958 | 77,144 | 57,412 | 54,512 | 51,272 | 49,295 | 81,958 | 74,404 |
| 30 | 136,846 | 125,008 | 81,118 | 75,325 | 69,064 | 65,354 | 136,846 | 118,463 |
| 40 | 210,088 | 185,934 | 104,824 | 95,233 | 85,195 | 79,413 | 210,088 | 172,968 |
| Deferred Member – 45 year old – Pension pot accrued £136,000 Nil contribution | ||||||||
| Years | Lifestyle Growth Fund | Pre- Retirement Fund | Cash Fund (lowest charging) | Diversified Growth Fund
(highest charging) |
||||
| Charges £ | Charges £ | Charges £ | Charges £ | |||||
| Before | After | Before | After | Before | After | Before | After | |
| 0 | 136,000 | 136,000 | 136,000 | 136,000 | 136,000 | 136,000 | 136,000 | 136,000 |
| 1 | 139,980 | 139,320 | 136,000 | 135,393 | 134,673 | 134,203 | 139,980 | 138,925 |
| 3 | 148,294 | 146,205 | 136,000 | 134,188 | 132,058 | 130,681 | 148,294 | 144,964 |
| 5 | 157,102 | 153,431 | 136,000 | 132,994 | 129,494 | 127,251 | 157,102 | 151,266 |
| 10 | 181,478 | 173,096 | 136,000 | 130,055 | 123,299 | 119,066 | 181,478 | 168,245 |
| 15 | 209,637 | 195,282 | 136,000 | 127,180 | 117,401 | 111,407 | 209,637 | 187,131 |
| 20 | 242,165 | 220,311 | 136,000 | 124,369 | 111,785 | 104,240 | 242,165 | 208,136 |
| 25 | 279,739 | 248,549 | 136,000 | 121,620 | 106,437 | 97,535 | 279,739 | 231,499 |
| Active Member – 45 year old – Pension pot accrued £136,000 Contributions £500 per month, escalating by inflation each year | ||||||||
| Years | Lifestyle Growth Fund | Pre- Retirement Fund | Cash Fund (lowest charging) | Diversified Growth Fund (highest charging) | ||||
| Charges £ | Charges £ | Charges £ | Charges £ | |||||
| Before | After | Before | After | Before | After | Before | After | |
| 0 | 136,000 | 136,000 | 136,000 | 136,000 | 136,000 | 136,000 | 136,000 | 136,000 |
| 1 | 145,994 | 145,320 | 141,927 | 141,307 | 140,571 | 140,091 | 145,994 | 144,915 |
| 3 | 166,867 | 164,650 | 153,780 | 151,849 | 149,579 | 148,110 | 166,867 | 163,324 |
| 5 | 188,980 | 184,935 | 165,633 | 162,298 | 158,412 | 155,920 | 188,980 | 182,534 |
| 10 | 250,181 | 240,144 | 195,265 | 188,014 | 179,751 | 174,558 | 250,181 | 234,290 |
| 15 | 320,878 | 302,432 | 224,898 | 213,213 | 200,070 | 191,997 | 320,878 | 291,857 |
| 20 | 402,544 | 372,708 | 254,531 | 237,827 | 219,416 | 208,315 | 402,544 | 355,885 |
| 25 | 496,882 | 451,995 | 284,163 | 261,898 | 237,837 | 223,583 | 496,882 | 427,101 |
This approach clearly shows the differing cost implications of investment fund choices in each year of membership, so providing clarity of costs.
Such assumptions as inflation and the implicit charges change over time.
The Trustee will keep this aspect under review and consider inclusion in future years. Members also receive a Statutory Money Purchase Illustration (SMPI) of their own benefit annually.
In considering value for money offered to members the Trustee has conducted an assessment of what it believes constitutes ‘Value for Money’ for members of the Scheme. This assessment addresses the costs and charges including transaction charges that are passed onto members.
The Trustee considers that based on the information available to them from their Investment Adviser, the charges and transaction costs overall that the members meet are comparable with those applied to similar quality defined contribution pension schemes and based on comments from their appointed Investment Adviser, are better than many own trust offerings. The Scheme therefore represents good overall value for the benefit and service provided to members. This is confirmed by the Trustee’s Investment Adviser and is the view of the Trustee. The view is formed taking account of the Investment Adviser’s experience of other arrangements and how the Scheme compares in terms of size, quality, cost and services. The Trustee is actively pursuing a move of the Scheme, in conjunction with the Principal Employer who has to agree to any changes under the Deed, to a Master Trust. In doing so the Trustee notes the costs of the Master Trusts may not fully reflect the personal level of service that has been provided to members and indeed that the Employer may have a greater involvement in all matters concerned with employee pension provision following the installation of a Master Trust.
In the interests of assisting Members the regulations require that the asset allocation of the Lifestyle, default, investment funds is clearly shown In practice the way these funds are set up is communicated in the Statement of Investment Principles and its attached Fund Specifications at the end of December 2023. These appear in the Trustee Report and Accounts and can be read in conjunction with this Chair Statement and the Value for Member Analysis that is also enclosed in the Trustee Report and Accounts.
The detail of the Asset Allocation at 31 December 2023 for the Default Investment is also shown here:
Growth Phase, up to 11 years before Selected / Target Retirement Date:
| UK Equities (Listed) | 31.77% |
| Overseas Equities (Listed) | 36.31% |
| Unquoted Private Equities (Unlisted) | 3.20% |
| Corporate Bonds Investment Grade | 1.47% |
| Private Debt /sub Invest Grade Bonds | 4.90% |
| Fixed Interest UK Gilts | 4.17% |
| Index Linked Securities | 6.40% |
| Property | 1.20% |
| Cash, current assets and infrastructure | 10.58% |
Pre Retirement Phase at 6 years before Selected / Target Retirement Date
| UK Equities (Listed) | 16.13% |
| Overseas Equities (Listed) | 23.15% |
| Unquoted Private Equities (Unlisted) | 4.10% |
| Corporate Bonds Investment Grade | 11.16% |
| Private Debt /sub Invest Grade Bonds | 2.45% |
| Fixed Interest UK Gilts | 11.33% |
| Index Linked Securities | 12.59% |
| Property | 0.60% |
| Cash, current assets and infrastructure | 18.49% |
At Selected / Target Retirement Date
| UK Equities (Listed) | 0.57% |
| Overseas Equities (Listed) | 7.50% |
| Unquoted Private Equities (Unlisted) | 3.75% |
| Corporate Bonds Investment Grade | 15.43% |
| Private Debt /sub Invest Grade Bonds | 0.00% |
| Fixed Interest UK Gilts | 13.87% |
| Index Linked Securities | 14.08% |
| Property | 0.00% |
| Cash, current assets and infrastructure | 44.80% |
Note that all asset allocations are necessarily approximated, are based on available data at the time of production and include rounding adjustments and at times a subjective views on asset type. These are look through positions on a range of funds that the Trustee uses to achieve market exposure and appropriate management. They will not be a static allocation.
Value Assessment
When assessing good value, it is not just the direct and indirect costs that are reviewed but all the factors which make up each members experience. Currently, there is no legislation setting out how ‘good value’ should be assessed and what criteria should be reviewed as part of the assessment. The Trustee has undertaken a ‘value for members’ assessment focusing on member charges and the features of the Scheme.
The main categories that the Trustee considered and their views are:
| Member costs and charges | Good | Other costs and charges | Good |
| Performance of Investments | Good | Member Communications | Good |
| Administration | Good | Trustee overall Governance | Good |
Knowledge and Understanding of the Trustee
The Scheme is administered by the Trustee and the Scheme year end, 31st December 2023 is noted above.
Sections 247 and 248 of the Pensions Act 2004 set out the requirement for the Trustee to have an appropriate knowledge and understanding of the law relating to pensions and trusts, the funding of occupational pension schemes, investment of scheme assets and other matters to enable them to exercise their functions as a Trustee properly. This requirement is underpinned by guidance in the Pension Regulator’s Codes of Practice 07 and 13 which the Trustee adheres to and is described below.
The Trustee has in place arrangements for ensuring that they take responsibility for keeping up to date with relevant developments and carry out analysis of training needs on an ongoing basis. The Trustee is Winterbourne Trustee Services Ltd. As an Independent Professional Trustee appointed to the Scheme, Winterbourne provide an experienced representative to deal with matters in the Scheme. The Team at Winterbourne includes experienced professionals who are well versed in the operation and practices of occupational pension schemes. The wider team hold qualifications and have professional experience appropriate to all aspects of managing an occupational trust based pension scheme. Each member of that team undertakes continuous professional development appropriate to their specific discipline. The team expertise extends to Scheme Administration, Scheme Governance, Legal Documentation and Regulation, Investment and Actuarial matters. Each of their team maintains adequate professional knowledge by undertaking more than 25 hours of professional training annually in their chosen speciality and has undertaken the Pensions Regulator Trustee toolkit training. On the appointment the Trustee receives a copy of the Trust Deed, the Scheme Rules, the Scheme Accounts, the current SIP, copies of the recent Trustee Minutes and all other relevant Scheme documentation. This initial process includes some time discussing the Scheme with the Scheme administrator, thereby ensuring a level of appropriate knowledge at outset as to the specifics of the Scheme and matters that are in hand at the time. This is in effect an appropriate induction session. This ensures the role as Trustee can be exercised appropriately.
During the year the specific areas of training that the Trustee focussed on included:
- Trustee meeting in March 2023 at which the Investment Report was considered. This includes market information, matters relating to Pension Freedoms, Lifestyle Investments, the
Competition Markets Authority and Governance. - Trustee meeting in October 2023 at which the Trustee considered the value of the funds invested and key market background information. At this same Trustee meeting a legislation
and regulation update was provided.
It is the view of the Trustee that sufficient time and resources are made available throughout the year in order to manage and operate the Scheme effectively. In making this statement the Trustee and as myself as Chair, consider and take the view that the assistance of our professional advisers is essential. It is our role to manage the relationship with our advisers and we consider that we have done so, in the interests of the membership and good governance of their pension savings assets and done so appropriately.
The Trustee maintains a watch on compliance and overall risk and the Trustee minutes provide, where appropriate, an action plan, with follow up points considered at the next appropriate Trustee meeting. In this way the Governance function of the Scheme is executed on a rolling, iterative basis thereby ensuring that matters are maintained in an up-to-date condition, relevant to the needs of the membership and yet proportionate to the size of the overall Scheme, the value of its assets and above all the interests of the members. The Trustee does this bearing in mind the importance of the member’s pension savings to each individual member
The Purpose of this Chair Statement
This Statement is for your information only and you do not need to take any action.
If a member should have any questions on the operation of the Scheme, or their benefits they should in the first instance contact the administrator who may be able to assist. The contact information is at the front of this Trustee Report and Accounts.
As Chair of the Trustee Board I am always pleased to hear from any member of the Scheme and will assist in answering any matters that may arise.
This Chair Statement is signed by the Chair on behalf of the Trustee.
Jon A Collins ACII, Prof PMI, PTPMI (Accred)
Chair
For Winterbourne Trustee Services Ltd as Trustee.
Appendix
FIVE YEARS OF PERFORMANCE SUMMARY FOR MASTER TRUSTS GROWTH PHASE
Note: This table has no reference to risk or volatility and appears for information purposes only.
| Fund | 2023 (%) | 2022 (%) | 2021 (%) | 2020 (%) | 2019 (%) |
| Aviva Stewardship Growth | 11.4 | -12.4 | 14.4 | 16.2 | n/a |
| L&G Growth | 7 | -7.9 | 11.5 | -2.8 | 17.2 |
| Smart Growth | 13.2 | -7.7 | 16.2 | 2.3 | 18.5 |
| Standard Life SMA Growth | 12.9 | -10 | 16.1 | 10 | 19.8 |
| TPP Growth | 11.4 | -11.5 | 14 | 5.5 | 18.4 |
FIVE YEARS OF PERFORMANCE SUMMARY FOR MASTER TRUSTS – PRE-RETIREMENT PHASE
Note: This table has no reference to risk or volatility and appears for information purposes only.
| Fund | 2023 (%) | 2022 (%) | 2021 (%) | 2020 (%) | 2019 (%) |
| Aviva Stewardship at Retirement | 9.7 | -15.2 | 4.1 | 12.2 | n/a |
| L&G Retirement | 5.8 | -8 | 4.1 | 1.5 | 11.7 |
| Smart At Retirement | 9.6 | -12.7 | 4.5 | 5.9 | 12.4 |
| Standard Life SMA At Retirement | 10.1 | -11.2 | 7.2 | 8.1 | 13.2 |
| TPP at Retirement | 7 | -11.1 | 1.4 | 5.2 | 8.6 |
Statement of Investment Principles
September 2019
1. Introduction
This is the Statement of Investment Principles, as at September 2019, which has been considered and adopted by the Trustee of the Braemar Pension Scheme (“the Trustee”) in accordance with section 35 of the Pensions Act 1995, section 244 of the Pensions Act 2004 and the Occupational Pension Schemes (Investment) Regulations 2005 and subsequent regulations.
In preparing this statement the Trustee has obtained and considered advice from their investment advisers, Professional Pensions and Investments Ltd. The Trustee will act in accordance with this advice until such time as it receives alternative advice.
The Trustee has consulted with the sponsoring employer. There are no restrictions (however expressed) on any power to make investments by reference to the consent of the employer.
2. Funding Objectives
The primary objective of the Braemar Pension Scheme (“the Scheme”) is to provide pension and lump sum benefits for members on their retirement or for their dependants on death before retirement, on a defined contribution basis as set out in the Trust Deed and Rules.
3. Investment Strategy
The Trustee policy is to seek professional advice on investment strategy. In developing their strategy, the Trustee has recognised the need to balance aversion to risk with the attainment of a satisfactory investment return. In particular they have taken into consideration that:
- members pension benefits are maximised by achieving maximum investment returns; and
- individual members financial profiles and attitudes to risk may vary.
The Trustee has adopted an investment strategy that allows adequate diversification and for members to select an investment vehicle for their contributions from a range of pooled unitised managed funds selected by the Trustee. The Trustee also recognises that some members may not want to take an active part in managing their pension investments. With this in mind, a programme of investment is offered that seeks to achieve real returns on members’ assets while controlling the risks arising from the potential volatility of such investments. This is described as ‘The Lifestyle Investment Strategy’ and will be utilised as a default structure unless members instruct the Trustee to the contrary.
The range currently available consists of the funds that have their fund specification appended. This range may be added to at any time by the Trustee. Funds may be withdrawn at any time by the Trustee and the underlying specification of the funds may be changed at any time by the Trustee or the underlying investment management firms. The benchmark for each fund gives an indication of the expected level of return for each fund although it is stressed that no guarantees on performance or absolute values are offered with any of the funds available.
Fund Information
The information in the fund specification documents attached is that provided by the fund manager and in agreement with the investment adviser to the Trustee. The Trustee draws attention to comments made by the fund managers:
▪ the value of investments and the income from them can fluctuate and is not guaranteed
▪ past performance is not necessarily a guide to the future performance of a fund.
The Trustee accepts no responsibility for the results of a member’s investment decisions or those of the fund managers. If members are in any doubt they should consult with an independent financial adviser and seek advice in writing on the suitability of a fund or investment to their circumstances.
The Lifestyle Investment Strategy
This is the investment strategy which will apply where no other more specific instruction is notified to the Trustee by a Scheme member.
4. Investment Choice
The Trustee, at the date of this statement, invests the Scheme’s assets in long term policies of insurance in the unit-linked funds operated by Mobius Life. There is also a policy held with Equitable Life.
No investment is permitted in any form of securities issued by or loans to Braemar Shipping Services Plc or any associated company, other than is commensurate with the investment strategy and coincidental to the operation of a fund by the manager concerned. Within the individual pooled funds selected, the Investment Managers have been given complete discretion to invest monies received from the Scheme in the manner they deem appropriate.
The Trustee has obtained confirmation that the current overall investment profile adopted and offered is suitable given the general liability profile and nature of the Scheme. The Trustee provides access to a suitable range of different asset classes and low cost reliable investment management. The overall cost of investments is important to member outcomes and therefore to the Trustee.
The Trustee has invested in the following unitised funds:
| Fund | Total ongoing charges % per annum |
| Braemar Lifestyle Growth – Default Fund | 0.427 |
| Braemar Pre-Retirement – Default Fund | 0.466 |
| Braemar Cash – Default Fund | 0.353 |
| Braemar UK Equity Index | 0.371 |
| Braemar Global Growth | 0.349 |
| Braemar Global Bond | 0.969 |
| Braemar Ethical Equity | 0.558 |
| Braemar Balanced Growth | 0.383 |
| Braemar Global Equity Index | 0.316 |
| Braemar Diversified Growth | 0.920 |
| Braemar Strategic Diversified Growth | 0.506 |
The Total ongoing charges covers costs such as custody, fund audit, fund administration charges and similar. These charges are expected to be incurred by members in relation to their investments in the noted fund. Such charges are within the unit price and therefore not explicit. In some instances the published annual management charge may be higher. This arises from negative transaction costs on the fund investments.
5. The Braemar Lifestyle Investment Strategy
The Braemar Lifestyle Investment Strategy is the default investment and comprises of the following three funds:
- The Braemar Lifestyle Growth Fund
This fund will hold exposure to UK and international equities. The investments of the fund may also include diversified assets designed to reduce the extremes of price volatility.
- The Braemar Pre-retirement Fund
This fund invests in a combination of diversified assets, long dated UK government bonds and long dated UK corporate bonds, together with occasional cash positions.
- The Braemar Cash Fund
This fund invests in financial institutions using available money market instruments.
6. Custody of Assets
The assets of the Scheme are completely separate from the Employer. Each manager or insurance company appoints their own custodian and sub custodian to assist with the operation of the investment funds concerned.
The Trustee also maintains working bank accounts under the Scheme to assist in the day to day management and cash-flow both into and out of the Scheme
7. Monitoring
The Investment Strategy and this Statement will be reviewed periodically.
It is the practice of the Trustee to meet periodically to review investment. At these meetings the Trustee considers the reports of the Investment Manager and suitability of the investments in an overall context.
8. AVCs
The Scheme enables members to pay Additional Voluntary Contributions (AVCS) to enhance the benefits at retirement. Members have the option of paying additional contributions to any of the range of investment funds described above although the Trustee notes that if the Lifestyle Investment Strategy is applied to a member then the member AVC asset must also be invested in that same strategy. AVCs paid are pooled with the other assets of the Scheme for investment purposes.
9. Expected Rates of Return
The default option is expected to provide an appropriate return on members investments, taking into consideration the Trustee understanding of the Scheme membership and the risk considerations. The Trustee believes that equity investments may provide above inflation returns and this may assist in maintaining the real value of the members savings over the long term.
The Trustee believes that diversified investments provide a real return that is likely to be both lower and more stable than equities over time. The Trustee considers that these investments may provide a broad match to pension outcome requirements and offer a diverse correlation in relation to the equity risk. Diversified investments may lower the return but smooth the journey to retirement for members using the Lifestyle Investment Strategy.
The Trustee believes that fixed interest investments may provide a return that is likely to be both lower and more stable than the other assets classes. Although a lower return is expected, fixed interest holding may reduce the level of overall volatility.
The expected rate of return for each fund is listed below. The unit price is not guaranteed and may fall as well as rise.
| Fund | Assumed Growth Rates |
| Braemar Lifestyle Growth – Default Fund | 2.5% above inflation |
| Braemar Pre-Retirement – Default Fund | inflation |
| Braemar Cash – Default Fund | Inflation or lower |
| Braemar UK Equity Index | 2.5% above inflation |
| Braemar Global Growth | 2.5% above inflation |
| Braemar Global Bond | 1.0% above inflation |
| Braemar Ethical Equity | 2.5% above inflation |
| Braemar Balanced Growth | 2.5% above inflation |
| Braemar Global Equity Index | 2.5% above inflation |
| Braemar Diversified Growth | 2.5% above inflation |
| Braemar Strategic Diversified Growth | 2.5% above inflation |
10. Investment Risk
The Trustee has considered investment risk from a number of perspectives. The risks are that:
- investment returns during the members lifetime may not keep pace with inflation and may not therefore provide a good outcome
- market movements in the period leading up to retirement may lead to a significant reduction in the anticipated pension benefits
- member borne costs and charges reduce the investment return achieved
- the default option may not be suitable for all members
To reduce the associated risks the Trustee reviews the default option and the full fund range offered at least every three years or immediately after a significant change in the Scheme investment policy.
11. Realisation of Investments
The Scheme investments are held in unitised funds with leading institutional investment managers. Accordingly, the Trustee is comfortable that due to the liquidity of these funds and their underlying investments, the units can be realised when required.
12. Ethical Investment
The Trustee has considered how social, environmental and ethical factors should be taken into account in the investment process. The Trustee considers that they should act in the financial interests of the beneficiaries and consider that this is achieved by investing in a range of pooled unitised managed funds. Against this background the Trustee considers that managers should be permitted to invest within each pooled fund as they deem appropriate.
The Trustee believes that companies with good stewardship and governance could help to build sustainable business models and are beneficial to society. The Trustee also appreciates sustainable investing extends to “inclusion and diversity”. The Trustee and their adviser will seek pooled fund managers that hold an ethical, social and governance culture without creating a prejudicial financial impact to the Scheme. The Trustee does review and will continue to review from time to time the policies operated by each fund manager in respect of corporate governance, environmental, social governance, ethical and diversity issues.
With specific regard to climate change impact the Trustee is monitoring the actions of their Investment Managers and may consider the suitability of their market capitalisation approach.
13. Corporate Governance
As the Trustee invests in unitised pooled funds the voting rights as such do not pass to the Trustee. The policy of the Trustee on the exercise of rights attaching to investments, including voting rights, is that these rights should be exercised by the Investment Managers on the behalf of the Trustee having regard to the financial interests of the beneficiaries. Where this consideration is not prejudiced, the Investment Managers should take account, where the Investment Managers believe appropriate, of social environmental and ethical factors in the exercise of such rights. The Trustee does not however seek to interfere with the Investment Manager decisions on selection of assets for any of the pooled funds.
14. Basis of Adoption
This Statement of Investment Principles is commended to the Trustee by Professional Pensions and Investments Ltd as the appointed Investment Adviser and being of suitable standing, experience and expertise.
The Statement is subject to periodic review and update at Trustee meetings or when circumstances suggest that to be appropriate.
Implementation Statement for the Braemar Pension Scheme
December 2023
1. Introduction
This is the Implementation Statement for the Braemar Pension Scheme (‘the Scheme’) and reflects the position as of 31st December 2023. This Implementation Statement should be read in conjunction with the Statement of Investment Principles (SIP) and is an integral part of the SIP. The Trustee of the Scheme is Winterbourne Trustee Services Limited.
The SIP is constantly reviewed and was last updated in September 2019. The document is designed to be a long-term evergreen summary and with fund changes appended as they update each quarter year. The SIP reflects the Trustee policies relating to responsible investment, including both financial and non-financial matters that the Trustee considered. This included Environmental, Social and Governance (ESG) considerations. Stewardship was also considered, i.e. voting and engagement, together with the ability of the Trustee to influence the actions of their investment managers.
The selection of investment managers is considered, including their objectives, fees and their basis of charging and how that aligns with the interests of the Scheme, ensuring there are no conflicts of interest. The duration of each manager appointment is also considered, together with the ability to terminate their appointment, and any conditions of that termination, should this prove necessary.
As a part of the investment review, the sponsoring Employer was consulted on the content of the 2019 SIP and the strategy.
2. Investment Objective
This is effectively outlined in the SIP and remains as stated with specifically the achievement for the default Lifestyle Investment Fund of a rate of return that is slightly smoothed, thereby avoiding the worst of market volatility and that is appropriate for most members accessing benefit at retirement under the flexible pension arrangements. Additionally, the Trustee seeks to provide a limited range of alternate funds for those members who wish to self-select and make their own investment decisions.
3. Investment Strategy
The Trustee continues to implement the strategy as outlined in the SIP and as updated from time to time.
4. Setting the Investment Arrangements
In managing the assets of the Scheme, the Trustee owns policies of assurance. As the Grantee of the policy, the Trustee has the benefit of the protection offered under the Financial Services Compensation Scheme (FSCS) and the terms of the specific policy of assurance.
Mobius Life
The Trustee holds a long-term insurance policy with Mobius Life as part of the Mobius Life long-term business fund. As Grantee under the policy, the Trustee may pay premium to Mobius Life who will allocate units to the policy. The allocation of units is notional and references to both units and funds are solely for the purpose of calculating benefits under the policy. Neither the Grantee (which is the Trustee) nor any other person has any right or interest in the Units, the funds, or any other specific assets or income of Mobius Life by virtue of the policy.
Utmost Life and Pensions
The Trustee owns a broadly similar policy to that outlined above (under the Mobius Life heading).
The wide range of asset classes available to the Trustee is considered as is the ease of access to institutional style investment management funds at an acceptable annual management charge. The Trustee has received information and advice on how to achieve their objectives and how to access appropriate investment funds in a secure way.
5. Implementation of the Investment Arrangements
The arrangements are assessed on an ongoing basis at Trustee meetings and by the Investment Adviser. This may in part be by face-to-face meetings where it is practical to do so.
The Trustee is aware of the need to consider the impact of costs and value for money on the long-term performance of the investments in the pooled funds. To reduce cost and the risks associated with ‘active’ fund management, the Trustee has invested some of the Scheme’s assets in passive or index funds.
In the main, the funds are accessed via the Mobius Life investment platform using a Trustee Investment Plan which is technically a policy of assurance. This route can benefit from aggregation discounts on annual management charges. Reporting is coordinated and this represents a significant benefit to the Scheme.
6. Realisation of Investments
Investments are reviewed on a regular basis in the light of cash flow requirements. The pooled funds may be accessed daily and the Trustee believes that this supplies adequate liquidity for the Scheme.
7. Investment Governance and Financially Material Considerations
The matter of investment and investment governance in a wider sense is taken seriously by those who manage the Scheme (The Trustee). To this end, the Scheme has a Statement of Investment Principles (SIP), which is considered and reviewed periodically as appropriate.
The current SIP was agreed in 2019 and that followed in-depth consideration of the environmental, social, and governance requirements, considering both financial and non-financial aspects, in respect to the asset types as required in the long term for the Scheme as it matures. The SIP was designed to be a long-term statement and is subject to variable appendices updated regularly. The Scheme is investing appropriately against this background and there has not been a need to make further amendments, although the Trustee has kept this position under review. The individual fund specifications are considered quarterly.
Those that manage the Scheme collectively have the necessary qualifications and experience appropriate to a Scheme of this size. They meet regularly as required by the business of the Scheme, including investment business. Investment matters are on the agenda for all Trustee regular meetings. The Scheme has access to professional advisers including, but not limited to, Professional Trustee, Investment Adviser, Actuary, and Lawyer.
8. Approach to Non-Financial Matters
The Scheme invests in pooled pension funds. This is appropriate to a Scheme of this size and brings added security in that the assets are covered by the Financial Services Compensation Scheme (FSCS).
The Scheme will always prefer an investment that is beneficial to society and the environment over one that is not. In making such a statement the managers of the Scheme are noting that by using pooled investment vehicles they are not the direct owners of the underlying assets. They do however have access (sometimes limited by availability of information) to a copy of the content of the underlying portfolios of the pooled investment managers.
9. Strategic Asset Allocation
During the past 12 months the Scheme has followed the allocation as outlined in the SIP and where there has been any variation this has been intentional. Those that manage the Scheme continue to consider that the asset allocation is appropriate and have considered this at their meetings in the year.
10. Mandate Parameters
The Scheme has selected pooled pension funds with specific objectives. Each of the pooled funds that the Scheme is invested in has its own specific objective and in selecting these funds the managers of the Scheme received investment advice from a financial adviser of appropriate standing and experience and working for an organisation registered with the Financial Conduct Authority.
When reviewing the investments during the year it was noted that the pooled funds were being managed to their objectives and that the results were as the Scheme expected. Further, the financial standing of the managers of the pooled funds has been considered and noted that it continues to be appropriate. The managers of the pooled funds that the Scheme participates in are required to report to the Prudential Regulatory Authority (PRA) who in turn supervise the solvency of these managers on behalf of the Bank of England.
The Scheme has considered this position during the year and remains comfortable with the approach in place, including the capital structure and financial standing of the investment managers that the Scheme invests with. Specifically, the Trustee takes considerable comfort in investing via a policy of assurance and the protection that brings.
11. Voting Rights and Description of Voting Behaviour During the Year
Participants in pooled investment funds do not generally acquire rights over the underlying holdings of the pool. There is no direct relationship between the Scheme and the companies whose shares are held within the pooled investment fund that we are using. In effect, this means that the manager of the pool exercises voting rights on our behalf (as a participant in the pool) but without any obligation to consult with us. The Scheme does not use a proxy voting service, in practice it does not have the right to exercise votes at the general meetings of companies held within the pooled investment funds. Generally, other than for matters of financial reconstruction, holders of gilts, bonds, physical property, and other alternative investments may not have voting rights.
Where the Scheme holds units of investment in pooled equity funds the Scheme can see how the manager has voted in the summary stewardship reports that the manager may produce for information. These matters are currently only reported at overall manager level and not in a specific way in respect to the funds that we invest in. This may change in the future and the Scheme is aware that there are many initiatives in the investment markets generally to improve access to information and reporting in this area.
Other than via our investment consultant, it is challenging for the Scheme to influence the manager of a pooled fund on matters of voting for individual companies. The Scheme does however take its responsibilities seriously in this area and notes that it always has the option to divest from the manager if, in the view of the Scheme, expressed by those who manage it, this was deemed appropriate. Set against this is an overall fiduciary responsibility of the Trustee to manage the Scheme as a whole.
In future years we are expecting managers to provide us with further summary stewardship reports that highlight key voting issues, particularly around matters of diversity and the environment as regards the underlying holdings in the relevant pooled fund portfolio. Such reports are available, for example, from Legal and General and BlackRock at a high level by accessing:
https://www.lgim.com/landg-assets/lgim/_document-library/capabilities/lgim-uk-corporate-governance-and-responsible-investment-policy.pdf https://www.blackrock.com/uk/individual/about-us/sustainability-resilience-research?siteEntryPassthrough=true&cid=ppc:apollo20:Google:brand:uk&gclid=EAIaIQobCh
Other managers that we may access have similar information published on the world wide web. The Trustee considers such information in making their decisions under the policy of assurance that they own.
12. The Trustee
At each of the Trustee meetings where their Investment Adviser is present, the Trustee has received an investment presentation on the strategy that they are pursuing and the pooled funds that they participate in. This has included some comment on ESG and where available the wider voting record of their investment manager.
The Trustee group includes experienced individuals with relevant qualifications and practical working experience of investment matters and governance. This method of operation facilitates an excellent understanding at Scheme level of the requirements when exercising ‘good governance’.
13. Trustee Knowledge and Understanding
The Trustee undertakes Trustee Knowledge and Understanding training including at Trustee meetings. The Trustee, Winterbourne Trustee Services, is a specialist professional independent trustee, and is the professional trustee appointed to the Scheme. As a firm of professional trustees, Winterbourne brings its long experience and specialist pensions and investment knowledge to what is now a very complex and increasingly legislated area.
14. Processes around Managing Scheme Investments
Having set a strategic parameter for the Lifestyle investment programme, this process has revolved mainly around managing cash flow during the year. In this respect, where funds have been required for additional cash flow, retirements or member transfers, the Trustee has taken appropriate advice and sold investments to provide the necessary liquidity. This is achieved by amending the unit holding for each member in an appropriate way.
15. Holding Advisers and Managers to Account
The Scheme is managed by the Trustee and in turn, advice is taken where required. Those that act as advisers to the Scheme have objectives to deliver service as required, and the Trustee group considers the success of this on an ongoing basis. The Investment Adviser has objectives in place that were reviewed in 2023.
No action has been necessary during this year in respect of shortcomings of advisers or service providers to the Scheme. The Trustee notes that the management of a Scheme such as this can be a challenging matter, and that budgets must be appropriate. These matters are regularly considered with assistance from the principal employer, and the Trustee considers that overall, the Scheme functions well, achieving good value from its service providers and good value for its members.
During the 2022-2023 period, member presentations and discussions were held. This included canvassing member views on retirement provision generally and an explanation of the investment structure of the Scheme. Feedback overall on this member interaction was positive.
16. Manager Selection, Review and Monitoring
The Scheme has made no change in its holding of pooled funds during the year, this is intentional. Change can be relatively expensive due to implicit dealing costs in the underlying assets and although not fully transparent such costs are apparent in wholesale rearrangement of assets. The Trustee seeks to avoid such costs.
17. Transparency
The assets held by the Scheme are transparent and it is anticipated that in future years all transaction costs on the underlying assets of the pooled funds that the Scheme owns assets in will be available for general publication. For monetary instruments such as gilts and fixed interest holdings, such costs are implicit in the purchase price of the underlying asset and so are unlikely to be available. More information on this subject is covered in the Chair of Trustee Governance report – “the Chair’s Statement.”
18. Conclusion
The Scheme has managed its assets successfully throughout the period under review. This Implementation Statement should be read in conjunction with the SIP and is supported by ESG and voting information as supplied to the Investment Adviser for the Scheme by the managers of the pooled funds that the Scheme participates in.
19. Further Information
Some examples of key investment manager decisions are attached as an appendix to this document. If further information is required on any of the matters covered, please contact the Trustee care of Winterbourne Trustee Services, or the Principal Employer.
December 2023
Appendix
Examples of significant votes
| BHP Group Limited | |
| ISIN | AU000000BHP4 |
| Market cap | £128 billion (source: Salesforce, as of 23 December 2022) |
| Sector | Metals and mining |
| Issue identified | Climate-policy advocacy and climate disclosure, both of which LGIM considers to be material to the net zero transition. LGIM considers shareholder proposals on an individual basis. |
| Summary of the resolution | Resolution 14: Approve Policy AdvocacyResolution15: Approve Climate Accounting and Audit. AGM date: 10 November 2022 |
| How LGIM voted | These were both shareholder-proposed resolutions and LGIM voted in favour of both (i.e. against management). |
| Rationale for the vote decision | Resolution 14 was a request that the company proactively advocate for Australian policy settings that are consistent with the Paris Agreement’s objective of limiting global warming to 1.5°C. A vote in favour of this proposal was applied as LGIM believes positive climate-related advocacy is in the best interest of the company and its shareholders. We also note that nothing in this resolution was designed to limit the board’s discretion to take decisions in the best interest of the company.Resolution 15 requested that, from 2023, the notes to the company’s audited financial statements include a climate sensitivity analysis which includes a scenario aligned with limiting global warming to 1.5°C, presents the quantitative estimates and judgements for all scenarios used, and covers all commodities. While we consider the company to be a leader with respect to its climate- related disclosure, a vote for this proposal was applied as LGIM believes that further quantitative disclosure in the company’s financial statements around the impact of climate change scenarios on BHP’s material commodity portfolio is important. |
| Outcome | These resolutions received 12.7% and 18.7% support, respectively, from shareholders. We continue to engage with BHP and, more broadly, to support proposals that are aligned with LGIM’s net zero aims and beliefs. |
| Why is this vote ‘significant’? | These votes were significant because of their importance within our climate change engagement. |
| Microsoft Corporation | |
| ISIN | US5949181045 |
| Market cap | £1,528 billion (source: Salesforce, 22 December 2022) |
| Sector | Technology |
| Issue identified | In 2021, without seeking prior shareholder approval, Microsoft took the decision to recombine the roles of chair and CEO, which had previously been separate for many years. |
| Summary of the resolution | Resolution 1.4: Elect Director Satya Nadella. AGM date: 13 December 2022 |
| How LGIM voted | We voted against the resolution (against management recommendation). |
| Rationale for the vote decision | LGIM expects companies to have a separate chair and CEO on account of risk management and oversight considerations, and also because the roles are substantially different and require different skills. Previously, in Microsoft’s 2021 AGM, we voted against both the re-election of the chair and of the board nomination committee chair/lead independent director, and we have conveyed our disappointment at this change. |
| Outcome | 94.8% shareholders voted for the resolution (for the re-election of Satya Nadella). Nevertheless, we maintain our belief in the importance of the separation of the chair and CEO roles, on account of the different skillsets and different responsibilities of these roles. We were disappointed that Microsoft took the decision to recombine these roles and will continue to engage with them on this and other topics. |
| Why is this vote ‘significant’? | LGIM believes that, within the broader topic of board effectiveness, the roles of chair and CEO should be separate. |
| AVEVA Group PLC | |
| ISIN | GB00BBG9VN75 |
| Market cap | £10 billion (Source: Salesforce, 14 December 2022) |
| Sector | Technology |
| Issue identified | The UK-listed software company, AVEVA Group plc, is 59% owned by Schneider Electric. In September, the AVEVA board recommended a takeover by Schneider Electric.LGIM and several other shareholders were not satisfied with the bid, as we believed it to significantly undervalue the company, particularly given that the AVEVA business was in a period of transition.The initial EGM (Extraordinary General Meeting) was set for 17 November; however, following shareholder concerns about the deal and a raised offer from Schneider Electric, the meeting was adjourned to 25 November. |
| Summary of the resolution | Resolution 1 – Approve matters relating to the recommended cash acquisition of AVEVA Group plc by Ascot Acquisition Holdings Limited. EGM date: 25 November 2022. |
| How LGIM voted | Against the proposal (and against management recommendation) |
| Rationale for the vote decision | LGIM joined the collaborative engagement established and led by the investor forum. Our Stewardship team also engaged internally with LGIM’s investment teams regarding this proposed deal.LGIM voted against the resolution as we considered the proposed acquisition to significantly undervalue the company. |
| Outcome | The bidder was forced to increase its offer by 4% in order to gain sufficient support, despite an AVEVA board recommendation.This case illustrates that potential takeover deals are not a foregone conclusion and that target boards are prepared to recommend a bid and then hand the decision over to their shareholders.It also illustrates the power of collaborative shareholder engagement, where the bidder increased their offer due to shareholder dissatisfaction.Given the acquirer, Schneider Electric, already controlled 60% of the AVEVA share capital, there was little chance of the deal not being approved. The deal was approved and the acquisition is expected to close in the first quarter of 2023. |
| Why is this vote ‘significant’? | Mergers and acquisitions – this vote demonstrates the power of collaborative shareholder engagement in a takeover situation where we believed the original offer undervalued the company significantly. |