Pensions
BRIGGS PENSION SCHEME (2001) (THE “SCHEME”)
ANNUAL GOVERNANCE STATEMENT FOR THE SCHEME YEAR ENDED 5 APRIL 2021
1. BACKGROUND
1.1 This statement has been prepared in accordance with the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (as amended) (the “Regulations”).
1.2 A number of the requirements of the Regulations which are referred to in this statement relate only to a “default arrangement” (as defined in the Regulations). During the past scheme year, the Scheme’s default arrangement was for funds to be invested in the Diversified Fund to age 55 and then begin quarterly switches to the RIMA Fund and then at age 60 to the Cash Fund so that by age 65 twenty five percent of a Members pot is invested in Cash Fund and seventy five percent is in RIMA Fund.
2. STATEMENT OF INVESTMENT PRINCIPLES
2.1 The Trustee has prepared a Statement of Investment Principles (a “SIP”) governing decisions about investments for the purposes of the default arrangement. The SIP has been kept under quarterly review and was last amended in September 2020, in consultation with Broadstone Corporate Benefits Limited. The SIP reflects the new default arrangement that applied from 1 October 2019. A copy of the latest Statement of Investment Principles prepared in accordance with regulation 2A of the Occupational Pension Schemes (Investment) Regulations 2005 is attached at Appendix 1 of this statement.
2.2 The SIP covers the following key matters in relation to the default arrangement:
- the Trustee’s aims and objectives in relation to the investments held in the default arrangement;
- the Trustee’s policies on issues such as: the kinds of investments to be held; the balance between different kinds of investments; risks, including the ways in which risks are to be measured and managed; the expected return on investments; the realisation of investments; and the extent (if at all) to which social, environmental or ethical considerations are taken into account when selecting, retaining or realising investments;
- an explanation of how these aims, objectives and policies (which together form the Trustees’ “default strategy”) are intended to ensure that assets are invested in the best interests of Members whose benefits are invested in the default arrangement.
3. REVIEW OF DEFAULT STRATEGY AND DEFAULT ARRANGEMENT
3.1 The Trustee reviews the default strategy and performance of the default arrangement regularly and at least every three years.
3.2 Each regular review focusses, in particular, on the extent to which the return on investments relating to the default arrangement (after deduction of any costs and charges which are relevant to those investments) is consistent with the Trustee’s aims and objectives in respect of the default arrangement (as recorded in the SIP). The Trustee may also at times undertake reviews of specific aspects of the SIP and the performance of the default arrangement.
3.3 The most recent review was carried out on 9th October 2020. This was a regular review carried out by Broadstone Corporate Benefits Limited. They reviewed and reported to the Trustee Board on the suitability and appropriateness of the funds for the Members, the length of Lifestyling transition periods and other funds’ performance in the market.
3.4 Following the previous review, the Trustee had concluded that the investment strategy of the default arrangement needed to be modified to reflect the changing requirements of its Members based on the investment advice received in 2019. Consequently, the Trustee changed the default arrangement from 1 October 2019. There were no changes recommended to the current strategy in place following this most recent review. The Trustees have however decided to wind up the Scheme and move to a master trust arrangement with Legal and General. The assets of the Scheme are expected to be transferred into the new master trust arrangements during the final quarter of 2021.
3.5 There is a website which holds information about the Scheme, including the SIP. This can be found at www.briggsplc.com. The information on the website includes details of the Scheme’s default fund, information about charges and transaction costs and an illustrative example of the cumulative effect of charges and transactions.
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4. CORE FINANCIAL TRANSACTIONS
4.1 The Trustee needs to ensure that certain transactions (known as “core financial transactions”) relating to the Scheme are processed promptly and accurately.
- For these purposes, “core financial transactions” are (broadly):
- investment of contributions made to the Scheme by Members and the employer;
- transfers into and out of the Scheme of assets relating to Members;
- switches of Members’ investments between different funds within the Scheme; and
- payments from the Scheme to or in respect of Members (eg. payment of death benefits).
4.2 During the past Scheme year, the following arrangements have been in place to ensure that core financial transactions have been processed promptly and accurately:
a) The Scheme has a service level agreement in place with its Administrator, Charterhouse Consultancy Ltd, which includes relevant key performance indicators (KPIs) regarding the
accuracy of and timescales for processing core financial transactions;
b) the Administrator has processes in place to assist in meeting the requirements of the service level agreement which include a separate team dedicated to the processing of contributions and investment fund switches/transfers and two-person checking of all investment and banking transactions and monthly bank reconciliations;
c) the Employer works to ensure compliance with the Payment Schedule by paying contributions into the Scheme account by the stipulated date for investment;
d) checks are carried out by the Employer and by the Administrator by review of internal procedures;
e) the Administrator provides an annual report which sets out the Administrators performance against KPIs and reports on any errors identified in relation to the processing of core financial transactions, together with steps taken to rectify those errors, that it presents at the September quarterly meeting; and
f) No material issues regarding the processing of contributions and financial transactions made in respect of the Scheme were identified during the scheme year. This was despite the impact of the COVID-19 virus towards the end of the year under review. The Trustee Directors received assurances from the Employer that contributions would continue to be deducted from members’ earnings within usual timescales, and the Administrator had contingency plans that meant that the investment of contributions, and other financial transactions, where performed in line with usual expectations.
4.3 The Trustee believes that transactions were processed promptly and accurately during the Scheme year.
5. CHARGES AND TRANSACTION COSTS
5.1 Each year, the Trustee gathers information on charges and member-borne transaction costs relating to the Scheme. In this context, “charges” means (subject to some specific exceptions, such as charges relating to pension sharing orders) all administration charges other than transaction costs. “Transaction costs” are costs incurred as a result of the buying, selling, lending or borrowing of investments.
5.2 The Employer pays all costs in relation to the general running of the Scheme. The Trustee Directors have been made fully aware of the level of these costs.
5.3 The table below sets out details of the levels of charges and transaction costs for each of the funds in which members’ benefits have been invested during the past Scheme year which are payable by members. All funds are managed by Legal & General.
5.4 The Transaction costs include those incurred by the fund when assets are bought and sold. The fund manager seeks to minimise any transaction costs resulting from the impact of cash flows into and out of the fund by adding an ‘anti-dilution offset’. In some periods the magnitude of this offset can more than reduce these costs, giving a net gain to the fund.
| Fund *=currently part of the default arrangement *=previously part of the default arrangement | Administration Charges | Indirect fees (from sub-funds within the fund) | Transaction costs within the fund |
| Diversified Fund* | 0.30% pa | 0.02% | -0.05% |
| Pre-retirement Fund ** (Fixed Interest Fund) | 0.15% pa | 0.00% | -0.03% |
| Cash Fund* | 0.125% pa | 0.00% | 0.00% |
| Retirement Income – Multi Asset Fund * | 0.35% pa | 0.03% | 0.03% |
This information was provided directly from Legal and General Investment Manager (“LGIM”) and these indirect transaction costs have been calculated assuming a static fund structure as at 31 March 2021.
6 “GOOD VALUE” ASSESSMENT OF CHARGES AND TRANSACTION COSTS
6.1 Each year, the Trustee Directors also assess the extent to which the charges and transactions costs described above represent “good value” for Members.
6.2 Whether something represents “good value” is not capable of being precisely defined, but for these purposes the Trustee Directors consider that charges and transaction costs may be viewed as representing “good value” for Members where the combination of costs and the quality of what is provided in return of those costs is appropriate for the Scheme membership as a whole, when compared to other options available in the market.
6.3 In particular, “good value” is not purely about achieving the lowest possible costs. The Trustee Directors’ assessment therefore also takes into consideration non-financial and indirect benefits to Members such as: the quality of the customer service and support provided to Members; the extent to which Member communications are user-friendly, accessible and clear, with information being available on the Employer’s website; the efficiency of the Scheme’s administration services; the quality of fund management and fund performance as against the Trustee Directors’ investment objectives; and the robustness of the Scheme’s governance structures and processes.
6.4 Against that background, in order to assess whether the charges and transaction costs under the Scheme represent “good value”, the Trustee has:
- ensured that charges borne by the Member are below the charges cap of 0.75% with the largest fund charge being the 0.35% on the Retirement Income Multi-Asset Fund;
- obtained benchmarking data from Broadstone Pensions and Investment Ltd and Legal and General Investment Management Ltd regarding the performance of the various investment funds currently offered by the Scheme;
- reviewed the suitability of the scheme to meet current and future member needs, resulting in the actions as described in section 6.6. below.
6.5 caDuring the annual review in of the third quarter of each year, the Trustee Directors have concluded that overall, the charges and transaction costs under the Scheme continue to represent good value for Members when compared with the other options available in the market. In reaching this conclusion, the following factors were considered:
- a) That, although the costs of the new default strategy is marginally more expensive than the previous strategy (due to the higher cost of the Retirement Income Multi-Asset Fund compare to the Pre-Retirement Income Fund), the Trustee Directors believe that the new strategy is more closely aligned to how Members actually access their pensions savings, and the additional cost is justified in terms of outcomes.
- b) That the costs borne by the Employer for the Scheme as a whole are relatively high when compared to benchmarks provided by Regulator of schemes of a similar size, but the Trustee Directors are satisfied that they are appropriate for the membership. In this judgement it is recognised that the costs borne by the Members are particularly low and, taken together with the Employer costs, are appropriate.
- c) The Employer covers the general running costs and so no deductions are made from Members’ accounts other than the investment charges from LGIM, noted in paragraph 3.1.
- d) These charges are low relative to other schemes.
- e) Members at the age of 65 and 70 receive pension counselling from an IFA paid for by the Employer.
- f) The Trustee Directors remain vigilant in respect of the administration costs borne by the Employer. They seek opportunities to contain these costs (if the opportunity arises) without significant diminution to the quality of the Scheme.
6.6 The members of the Scheme have indicated that they would appreciate an online facility to view their funds and to access modelling tools to help plan their retirement. The Trustee Directors recognise that this would enhance the value for members, but this facility is not available under the current arrangement.
6.7 The Trustee Directors have explored the alternative models that can provide this kind of functionality and concluded that a move to a Master Trust with a leading pension provider would achieve this objective. In consultation with the Employer, and assisted by an experienced benefit consultancy, the Trustee Directors have conducted an exercise to identify a suitable Master Trust.
6.8 Following a formal consultation exercise with the employees the decision has been made to cease contributions to the Scheme with effect from August 2021 and to enrol current employees into the Legal & General Worksave Master Trust (“The Briggs Group Pension Plan”). In due course the funds under the current Scheme will be transferred to the The Briggs Group Pension Plan and the existing Scheme will be wound up.
6.9 The Trustee Directors are convinced that this will result in an enhancement to the value for money for the membership.
7. ILLUSTRATIVE EXAMPLES OF CUMULATIVE COSTS AND CHARGES
One important factor considered by the Trustee Directors when assessing whether charges and transaction costs under the Scheme represent “good value” is the cumulative impact on Members’ benefits from those charges and costs.
Whilst the circumstances of each individual Member will vary, to help Members understand the effect of costs and charges on their benefits, the Trustee Directors have produced an illustrative example of that cumulative impact for a representative range of the funds in which Members’ benefits have been invested in the past Scheme year.
The tables below set out some illustrative examples, and explains the assumptions on which those examples have been based (for example, as to future levels of inflation and investment growth). When preparing this table, the Trustee has taken into account specific guidance from the Department for Work & Pensions, and have followed the approach set out in that guidance.
8. TRUSTEE KNOWLEDGE AND UNDERSTANDING
- 1 In order to be able properly to exercise their functions, the Trustee directors of the Scheme need to have a working knowledge of the following documents relating to the Scheme:
- the Scheme’s trust deed and rules;
- the SIP; and
- any other documents recording policy for the time being adopted by the Trustee relating to the administration of the Scheme generally.
They also need to have an appropriate level of knowledge and understanding of matters such as the law relating to pensions and trust, and the principles relating to investment of pension scheme assets. The combined knowledge and understanding together with available advice enables the Trustee Directors to properly exercise their functions.
- To ensure the Trustee Directors have the necessary level of knowledge and understanding, the following steps have been undertaken during the past Scheme year:
- The Trustee Directors review on a quarterly basis the training which has been undertaken to identify their specific training needs and any gaps in their knowledge;
- the Trustee Directors and their relevant advisers have prepared trustee training programme;
- There is a bespoke training plan available for new Trustee Directors who are also required to complete relevant modules of the Pensions Regulator’s “Trustee Toolkit” online training programme, there have been no new Trustee Directors in the year;
- The Trustee Directors are involved in updating the Deed & Rules for the Scheme,. along with other documents which help them understand and provide them with knowledge of the Scheme;
- The Trustee Directors have attended events relating to the impact of COVID-19 and alternatives structures that enable members to optimise their retirement savings, such as master trusts;
- The Trustee Directors have updated the SIP in both September 2019 and September 2020.
- External advisors attend quarterly meetings as requested to provide information to the Trustee Directors or give recommendations as necessary. In July 2021, Eversheds Sutherland (International) LLP, legal advisors to the Scheme, attended the meeting to provide an overview of Master Trust information and documentation; and
- The Trustee Directors review an annual evaluation of the entire Trustee Board’s knowledge in order to ascertain further training that might be required in the future.
8.2 In addition the Trustee Directors have obtained legal, accounting, investment and consulting advice as and when required during the past Scheme year, including but not limited to:
- Seeking legal advice from Eversheds Sutherland (International) LLP;
- Taking investment advice from Broadstone Corporate Benefits Limited;
- Considering administration information from the Scheme’s Administrators Charterhouse Consultancy Limited, including an annual administration report;
- Use of the Pension Regulators website and its Codes of Practice; and
- Reviewing performance information from LGIM.
8.3 During the Scheme year, the Trustee Directors have also undertaken an evaluation of the skills-set and experience of the Trustee Board as a whole by taking account of the training undertaken during the past scheme year and the results of the self-assessment process.
8.4 The presence of an experienced, accredited, independent trustee on the Trustee board helps to raise the overall level of relevant pensions knowledge. The Trustee Director is able to share relevant experience from other cases and to share new knowledge and understanding of current developments in pensions legislation and governance practice
9. COVID-19
9.1 The Trustee Directors have reviewed the impact of COVID-19 on the Scheme. Broadstone, its investment advisor, provided the Trustee Directors with information to share with Members regarding COVID-19. This is shared in paragraph 9.2.
9.2 The COVID-19 pandemic caused financial markets to fall substantially in the first quarter of 2020. Since then financial markets have recovered substantially.
The Default Lifestyle Strategy that targets the draw of retirement income in retirement is designed to smooth out the volatility of market returns for members who are 10 years or less from retirement.
The old Lifestyle Strategy that targets the purchase of an annuity in retirement is designed to smooth out the volatility of market returns for members who are 10 years or less from retirement.
9.3 The Scheme Administrator Charterhouse continued its services during the period from 23rd March 2020 onwards with no known interference with any of the services provided. Most work was carried out remotely with a skeleton staff in the office to attend to post.
10. CONSTITUTION OF THE BOARD
10.1 The requirement under section 241 to 243 of the Pensions Act 2004 and the Pension Regulator’s Code of Practice 8 has been met. The Board remains properly constituted. The Trustee Directors ensure:
(a) That arrangements are in place, and implemented, which provide for at least one-third of Directors of the Trustee Company, to be Member-nominated; and
(b) The Trustee Directors review on a quarterly basis if the Board remains appropriate;
(c) A succession plan is in place.
Illustrative examples of the cumulative impact of costs and charges
This table shows in today’s money the projected pot over time for a member invested in each of the specified funds. Values shown are estimates only and are not guaranteed.
Member 1
| Annuity Lifestyle Strategy. 10 year matrix. Pre-retirement fund | Freedom Lifesyle Strategy. 10 year matrix. RIMA Fund. (current default strategy) | |||
|---|---|---|---|---|
| Years invested | Before charges | After charges | Before charges | After charges |
| 1 | £12,600 | £12,500 | £12,600 | £12,500 |
| 3 | £18,000 | £17,900 | £18,000 | £17,900 |
| 5 | £23,900 | £23,600 | £23,900 | £23,600 |
| 10 | £40,300 | £39,500 | £40,300 | £39,500 |
| 15 | £60,900 | £59,100 | £60,900 | £59,100 |
| 20 | £87,600 | £84,100 | £87,600 | £84,100 |
| 25 | £119,000 | £113,000 | £119,000 | £113,000 |
| 30 | £156,000 | £147,000 | £157,000 | £147,000 |
| 35 | £190,000 | £178,000 | £199,000 | £185,000 |
| 38 (SRD is age 65) | £202,000 | £189,000 | £220,000 | £204,000 |
Notes to assist in interpreting the figures
The examples given above have been prepared on the following assumptions:
1. Projected pension pot values are shown in today’s terms, and do not need to be reduced further for the effect of future inflation.
2. The example member is age 27, a Selected Retirement Date of their 65th birthday, a starting fund of £10,000, a salary of £25,000 and is paying minimum contributions.
3. Inflation is assumed to be 2.5% each year.
4. Contributions are assumed to increase in line with assumed earnings inflation of 2.5% each year.
5. Growth rates assumed are:
5.1 Long-term growth portfolio – 6.0% each year
5.2 RIMA fund – 5.0% each year
5.3 Pre-retirement fund – 2.9% each year
5.4 Cash – 0.5% each year
The growth rates shown in the table are for illustrative purposes only and are not guaranteed. Where transaction costs in the year to 31 March 2019 are negative they have been assumed to be nil in future.
Member 2
| Annuity Lifestyle Strategy. 10 year matrix. Pre-retirement Fund. (default fund) | Freedom Lifesyle Strategy. 10 year matrix. RIMA Fund |
|---|
| Years invested | Before charges | After charges | Before charges | After charges |
| 1 | £55,700 | £55,500 | £55,700 | £55,500 |
| 3 | £67,800 | £67,200 | £67,800 | £67,200 |
| 5 | £80,700 | £79,600 | £80,700 | £79,600 |
| 10 | £117,000 | £114,000 | £120,000 | £117,000 |
| 15 (SRD is age 65) | £146,000 | £142,000 | £158,000 | £152,000 |
Showing 1 to 6 of 6 entries
Notes to assist in interpreting the figures
The examples given above have been prepared on the following assumptions:
1. Projected pension pot values are shown in today’s terms, and do not need to be reduced further for the effect of future inflation.
2. The example member is age 50, a Selected Retirement Date of their 65th birthday, a starting fund of £50,000, a salary of £35,000 and is paying minimum contributions.
3. Inflation is assumed to be 2.5% each year.
4. Contributions are assumed to increase in line with assumed earnings inflation of 2.5% each year.
5. Growth rates assumed are:
5.1 Long-term growth portfolio – 6.0% each year
5.2 RIMA fund – 5.0% each year
5.3 Pre-retirement fund – 2.9% each year
5.4 Cash – 0.5% each year
The growth rates shown in the table are for illustrative purposes only and are not guaranteed. Where transaction costs in the year to 31 March 2019 are negative they have been assumed to be nil in future.
Signed for and on behalf of Briggs Pension Trustees Limited
by Mr R. Buxton – September 2021
Briggs Pension Scheme (2001) – Statement of Investment Principles
We, the Trustee Directors of the Briggs Pension Scheme (2001), fulfil our obligations under Section 35(1) of the Pensions Act 1995 as follows:
1. We are responsible for the investment of the Scheme assets. We take some decisions ourselves and delegate others (either directly or indirectly) to external parties such as the investment consultant or investment manager.
2. Scheme assets are currently invested with Legal and General Investment Management (LGIM), one of the UK’s biggest asset managers. The Scheme entered into an agreement with LGIM in August 2001. All assets are held by a third party custodian appointed by the investment manager.
3. All day to day investment decisions for the assets of the Scheme are delegated to LGIM who are properly qualified and authorised investment managers of pooled pension fund portfolios. We review them annually, to ensure that the manner in which they make investments on our behalf is suitable for the Scheme, and appropriately diversified.
4. Appropriate written advice will always be taken from properly qualified and authorised investment consultants before the appointment or review of any such investment manager. The investment consultant will also advise on all aspects of the investment of the Scheme assets, provide any required training and advise on suitability of the benchmarks used.
5. We will select investment managers who will hold only the kinds of investments, which are deemed to be suitable for schemes such as ours. Our investment consultant advises us on this as appropriate.
6. We monitor regularly all investment decisions affecting the Scheme, and the overall investment performance of our investment managers, with the assistance of our investment consultants. LGIM will supply the investment consultants with sufficient information when requested in order to monitor financial and non-financial performance.
7. We believe that the consideration of financially material Environmental (including climate change), Social and Governance (ESG) factors in investment decision making can lead to better risk adjusted investment returns. We expect our investment manager, when exercising discretion in investment decision making, to take financially material ESG factors into account. On an ongoing basis we (delegating to the investment consultant where appropriate) assess the ESG integration capability of our investment manager.
8. Where ESG factors are non-financial (i.e. they do not pose a risk to the prospect of the financial success of the investment) we believe these should not drive investment decisions. We expect our investment manager, when exercising discretion in investment decision making, to consider non-financial factors only when all other financial factors have been considered and in such a circumstance the consideration of non-financial factors should not lead to a reduction in the efficiency of the investment. Members’ views are not sought on non-financial matters (including ESG and ethical views) in relation to the selection, retention and realisation of investments.
9. We believe that in order to protect and enhance the value of the investments, over the time horizon over which the benefits are paid, we must act as a responsible asset owner. We cannot exercise ownership responsibilities directly as we do not hold investments directly. We expect our investment manager, to exercise its voting rights at annual and extraordinary general meetings of companies. We have seen the policy objectives of our investment manager regarding voting and engagement and believe that they are compatible with our own policy. We expect our investment manager to report to us on the implementation of, and any changes to, their policies on voting and engagement.
10. We expect our investment manager, to exercise ownership rights attracted to investments, including voting and engagement rights, in order to safeguard sustainable returns over this time frame. On an ongoing basis we will assess the stewardship and engagement activity our investment manager (delegating to the investment consultant where appropriate). This will be done by reviewing the investment manager’s voting and engagement policy, summary reports detailing the engagement and voting activity undertaken by the investment manager, and asking questions directly to the investment manager.
11. Responsibility for monitoring the makeup and development of the capital structure of investee companies is delegated to the investment manager. We expect the extent to which the investment manager monitors capital structure to be appropriate to the nature of the mandate.
12. We expect the investment manager to change underlying holdings only to an extent required to meet their investment objectives. The reasonableness of such turnover will vary by fund and change according to market conditions. We therefore does not set a specific portfolio turnover target for their strategy or the underlying funds. LGIM when requested by the investment consultants shall provide information on portfolio turnover and associated costs so that this can be monitored, as appropriate.
13. We maintain a separate conflicts of interest policy and register. Subject to reasonable levels of materiality, these documents record any actual or potential conflicts of interest in relation to investee companies or the investment manager, while also setting out a process for their management.
14. The investment manager is primarily remunerated based on an agreed fixed annual percentage of the asset value for each underlying fund. We do not directly incentivise the investment manager to align the approach they adopt for a particular fund with our policies and objectives. Instead, the investment manager and the funds are selected so that, in aggregate, the returns produced are expected to meet our objectives.
Neither do we directly incentivise the investment manager to make decisions about the medium to long-term performance of an issuer of debt or equity, or to engage with those issues to improve their performance. We expect such assessment of performance and engagement to be undertaken as appropriate and necessary to meet the investment objectives of the funds used by the Scheme
15. The appropriateness of the investment manager’s remuneration will be assessed relative to market costs for similar strategies, the skill and resources required to manage the strategy, and the success or otherwise the manager has had in meeting its objectives, both financial and non-financial.
16. We recognise that members have different investment needs and that these change during the course of their working lives. We also recognise that members have different attitudes to risk. Our objective therefore is to make available a range of investment options that, whilst avoiding complexity, assists the members in achieving their objectives.
17. We believe that the three main investment risks are:
• That investment returns do not keep pace with inflation
• That investment conditions just prior to retirement increase the cost of turning members’ fund values into retirement benefits
• Falls in fund values prior to retirement lead to a reduction in retirement benefits.
We also consider other risks members may face, including operational, liquidity and manager risks.
18. Our investment modelling assumes a target retirement age for members of 65. Unless members exercise their right to vary it, a default lifestyle approach (referred to as the Freedom Lifestyle Strategy) will apply. After taking advice from our investment consultant, within this lifestyle strategy the LGIM Diversified Fund will be used until 10 years before age 65, before being progressively switched to the LGIM Retirement Income Multi-Asset Fund and the LGIM Cash Fund over the period between age 55 and 65, and the resulting mix will remain until actual retirement age if over 65.
Members may elect for the lifestyle switching to commence at a different age other than age 55 years. Those members who have reached age 55 at 1 January 2014 will remain invested in the LGIM Diversified Fund until 5 years before age 65 before being progressively switched to LGIM Retirement Income Multi-Asset Fund and the LGIM Cash Fund over the period between age 60 and 65.
19. The default Freedom Lifestyle Strategy is designed to provide a long-term real return for younger, middle-aged and older pensioner members. The objective of the Retirement Income Multi-Asset Fund is to provide long-term investment growth up to and during retirement, and to facilitate the drawdown of retirement income. The objective for the Cash Fund is to provide for the payment of a lump sum on retirement.
20. Assets in the default option are invested in the best interests of members and beneficiaries, taking into account the profile of members. In particular, we have considered high level analysis of the retirement options selected and intended by members in order to inform decisions regarding the default investment option. Based on this understanding of the membership, a default investment option that targets drawdown in retirement is considered appropriate.
We will continue to review the default investment strategy over time.
21. Members may exercise their right to choose the annuity lifestyle approach (referred to as the Annuity Lifestyle Strategy). Within this lifestyle strategy the LGIM Diversified Fund will be used until 10 years before age 65, before being progressively switched to the LGIM Pre-Retirement Fund and the LGIM Cash Fund over the period between age 55 and 65, and the resulting mix will remain until actual retirement age if over 65.
22. Members may elect for the lifestyle switching to commence at a different age other than age 55 years.
23. The Annuity Lifestyle Strategy is designed to manage the volatility of annuity pricing for older members.
24. Members may choose to allocate contributions between the individual funds, in which case lifestyle switching will not be applied.
25. Our investment managers have discretion to vary the balance of investments within the Diversified Fund and the Retirement Income Multi-Asset Fund within agreed ranges, which are monitored. Advice is taken from our investment consultant to ensure that this approach remains suitable.
26. The investment policies of our selected managers are and will be suitably diversified, to spread the risks of investing in any one investment market, currency or asset. This is monitored by us at our regular meetings with our investment managers.
27. Our agreed investment policies have the aim of achieving a real return on assets. Specific investment objectives may be agreed with our investment managers after consultation with our investment consultant.
28. We may realise investments from our portfolios in order to make payments of benefits and costs under the Scheme. The selection of investments to be so realised is at the discretion of our investment managers. They also have discretion to realise investments within the portfolios for the purpose of making new investments, subject of course to reporting to us.
29. We have taken appropriate written advice from our advisors, Broadstone Corporate Benefits Limited, in preparing this statement, as required by the Pensions Act.
30. Also as required by the Pensions Act, we have consulted the employer during the preparation of this statement.
31. We will keep this statement under review to ensure that these principles remain appropriate to the Scheme, and to ensure that the reviews mentioned in the statement are carried out. It will be an agenda item at least annually, and we will revise this statement when appropriate. Our investment advisers have been retained to conduct a formal review every three years.
The Trustees of the Briggs Pension Scheme (2001) Date: 28 September 2021
Statement of Investment Principles – Implementation Statement
The purpose of this Statement is to provide information, which is required to be disclosed in accordance with the Occupational Pension Schemes (Investment and Disclosure) (Amendment) 2019 Regulations. In particular, it confirms how the investment principles, objectives and policies of the Trustees’ Statement of Investment Principles (SIP) dated September 2020 have been implemented. The SIP provides further background details on the investment arrangements.
This Statement covers the period 6 April 2020 to 5 April 2021.
Investment manager and funds in use
The investment funds used for the Scheme are set out in the table below:
| Asset Class | Manager | Fund | |
| Multi-asset | LGIM | Diversified Fund | |
| LGIM | Retirement Income Multi-Asset Fund | ||
| Multi-asset bonds | LGIM | Pre-Retirement Fund | |
| Cash | LGIM | Cash |
Default Investment Strategy
The default investment strategy, the Freedom Lifestyle Strategy, is designed to target drawdown at retirement. At the time of retirement, 75% of the assets will be invested in the LGIM Retirement Income Multi-Asset Fund and 25% in the LGIM Cash Fund. The strategy is set out below:
| Period prior to member’s normal retirement age | Investment Default Approach |
| Up to 10 years prior to normal retirement age | The approach invests wholly in the LGIM Diversified Fund |
| From 10 years before normal retirement age | Phased switches are made between the funds to achieve an allocation of 75% in the LGIM Retirement Income Multi-Asset Fund and 25% in the LGIM Cash Fund by normal retirement age. |
Members may elect for the lifestyle switching to commence at a different age other than age 55 years. Those members who have reached age 55 at 1 January 2014 will remain invested in the LGIM Diversified Fund until 5 years before age 65 before being progressively switched to LGIM Retirement Income Multi-Asset Fund and the LGIM Cash Fund over the period between age 60 and 65.
Strategy Review
The Trustees periodically review the investment arrangements of the Scheme, with the last review completed in October 2020. There were no changes recommended to the current strategy in place following this most recent review. The Trustees have however decided to wind up the Scheme and move to a master trust arrangement with Legal and General. The assets of the Scheme are expected to be transferred into the new master trust arrangements during the final quarter of 2021.
Scheme Governance
Governance arrangements, in terms of the constitution of the trustee board, service level agreements with providers, processing of core financial transactions, costs and charges and investment arrangements, are detailed in the Trustees’ Chair’s Statement.
The Trustees are responsible for making investment decisions, and seeks advice from Broadstone Corporate Benefits Limited, as the Trustees’ investment consultant.
The Trustees do not actively obtain views of the membership of the Scheme to help form their policies set out in the SIP.
During the year under review there were no changes to the objectives put in place for Broadstone Corporate Benefits Limited, which were last reviewed in December 2019.
There were also no changes to the investment management agreements with LGIM during the year.
Trustee Knowledge and Understanding
The Trustee board has the appropriate knowledge and understanding to ensure its policies on financially and non-financially material considerations, as well as engagement and voting activities, are and remain appropriate for the Scheme. The Trustees have developed their knowledge and understanding over the year, and further details are set out in the Chair’s Statement.
Statement of Investment Principles
The Trustees last reviewed the Statement of Investment Principles (SIP) in September 2020, which was updated to ensure compliance with 1 October 2020 legislative requirements.
The Trustees have a policy on financially material considerations relating to Environmental, Social and Governance (ESG) issues, including the risk associated with the impact of climate change. In addition, the Trustees have a policy on the exercise of rights and engagement activities, and a policy on non-financial considerations. These policies are set out below and are detailed in the Trustees’ SIP.
There were no departures from the policies set out in the SIP, including the Trustees’ policies on financially and non-financially material considerations, during the year.
Policy for taking into account financially material ESG considerations
| Trustees’ Policy: | We believe that the consideration of financially material Environmental (including climate change), Social and Governance (ESG) factors in investment decision making can lead to better risk adjusted investment returns. We expect our investment manager, when exercising discretion in investment decision making, to take financially material ESG factors into account. On an ongoing basis we (delegating to the investment consultant where appropriate) assess the ESG integration capability of our investment manager. |
There have been no changes to the Trustees’ policy, nor any departures from their policy, during the year.
The Trustees note that the manner by which financially material ESG factors will be taken into account in an investment strategy or pooled fund offering will depend on the underlying asset classes within the pooled fund offering and the management style (e.g. active or passive).
The Trustees are satisfied that the funds currently invested in by the Scheme are managed in accordance with their views on financially material considerations, as set out below, and in particular with regards to the selection, retention, and realisation of the underlying investments held.
This position is monitored periodically. As part of the monitoring process, the Trustees have access to updates on governance and engagement activities by the investment manager and input from their investment advisors on ESG matters. These views are also taken into account when appointing and reviewing investment managers.
The Trustees acknowledge that they are delegating the consideration of financially material factors in relation to determining the underlying holdings to their investment manager given they are investing in pooled funds.
A summary of the Trustees’ views for each asset class in which the Scheme invests is outlined below.
| Asset Class | Actively or Passively Managed? | Comments |
| Multi-asset | Active | The Trustees expect the investment manager to take financially material ESG factors into account, given the active management style of the fund and the ability of the manager to use its discretion to generate higher risk adjusted returns. The Trustees also expect its investment manager, to engage with the underlying investee companies, where possible, although it appreciates that fixed income assets within the portfolio do not typically attract voting rights. |
| Multi-asset bonds | Active | The Trustees expect the investment manager to take financially material ESG factors into account, given the active management style of the fund and the ability of the manager to use its discretion to generate higher risk adjusted returns. The Trustees also expect its investment manager, to engage with investee companies, where possible, although they appreciate that fixed income assets do not typically attract voting rights. |
| Cash | Active | The Trustees believe there is less scope for the consideration of ESG issues to improve risk-adjusted returns in this asset class because of the nature of the investment. |
Policy for taking into account non-financial ESG considerations
| Trustees’ Policy: | Where ESG factors are non-financial (i.e. they do not pose a risk to the prospect of the financial success of the investment) we believe these should not drive investment decisions. We expect our investment manager, when exercising discretion in investment decision making, to consider non-financial factors only when all other financial factors have been considered and in such a circumstance the consideration of non-financial factors should not lead to a reduction in the efficiency of the investment. Members’ views are not sought on non-financial matters (including ESG and ethical views) in relation to the selection, retention and realisation of investments. |
There have been no changes to the Trustees’ policy, nor any departures from their policy, during the year.
Policy on the exercise of voting rights and engagement activities
| Trustees’ Policy: | We believe that in order to protect and enhance the value of the investments, over the time horizon over which the benefits are paid, we must act as a responsible asset owner. We cannot exercise ownership responsibilities directly as we do not hold investments directly. We expect our investment manager, to exercise its voting rights at annual and extraordinary general meetings of companies. We have seen the policy objectives of our investment manager regarding voting and engagement and believe that they are compatible with our own policy. We expect our investment manager to report to us on the implementation of, and any changes to, their policies on voting and engagement.We expect our investment manager, to exercise ownership rights attracted to investments, including voting and engagement rights, in order to safeguard sustainable returns over this time frame. On an ongoing basis we will assess the stewardship and engagement activity our investment manager (delegating to the investment consultant where appropriate). This will be done by reviewing the investment manager’s voting and engagement policy, summary reports detailing the engagement and voting activity undertaken by the investment manager, and asking questions directly to the investment manager. |
There have been no changes to the Trustees’ policy, nor any departures from their policy, during the year. In particular, all voting activities have been delegated to the investment manager, as the Trustees do not have the administrative mechanism to cast votes on the underlying holdings, given the pooled nature of the Scheme’s investments.
The Trustees currently invest in pooled investment funds with the investment manager, and they acknowledge that this limits their ability to directly influence the investment manager.
The Trustees have employed Broadstone to assist them in monitoring the voting and engagement activity of their investment manager. The Trustees, with the assistance of Broadstone, have concluded that the voting and engagement activity of their investment manager is in line with their policy on voting and engagement.
Within the current investment arrangements, the multi-asset funds with LGIM contain equity holdings, and therefore have voting rights attached to these underlying equities.
LGIM uses the services of a third party proxy voter when exercising voting rights and will often engage with investee companies directly. The third party proxy voter used is confirmed in the table below.
The Trustees have delegated engagement activities to their investment manager, and the investment manager reports to the Trustees on how they have voted on behalf of the Trustees for the underlying holdings.
A summary of the votes made by LGIM on behalf of the Trustees (where the investment owns equities) is provided in the table below from 1 April 2020 to 31 March 2021, based on the latest information available.
| Manager uses own voting policy? | Resolutions Voted: | |||||||
| Manager | Pooled or Segregated? | Third Party Proxy Voter | Resolutions Voted On | For | Against | Abstained | ||
| LGIM | Pooled | ISS | Yes | 77,062 | 81% | 18% | 1% | |
The votes above are at the company level, rather than being scheme or fund specific. The Trustees will work with their investment manager to obtain this information in future years.
LGIM provided examples of significant votes cast:
- LGIM voted against a resolution to ratify the compensation for AmerisourceBergen Corporation’s CEO. The company recorded a $6.6 billion charge related to opioid lawsuits and made an operating loss of $5.1 billion. By excluding the settlement costs relating to the lawsuits, the Compensation Committee ensured executive pay was not impacted by the operating loss and as a result its CEO’s total proposed compensation was approximately 25% higher than the previous year. The resolution encountered a significant amount of opposing votes from shareholders, with 48.36% voting against the resolution and 51.63% supporting the proposal. LGIM continues to engage with US companies on their pay structures and has published specific pay principles for US companies.
- LGIM voted against a number of resolutions in relation to electing Directors at Samsung Electronics. In January 2021, Lee Jae-yong, the vice chairman of Samsung Electronics and only son of the former company chairman, was sentenced to two years and six months in prison for bribery, embezzlement and concealment of criminal proceeds. LGIM engaged with the company ahead of the vote and were not satisfied with the independence of the company board and whether the independent directors are really able to challenge management. LGIM voted against the resolutions as the directors, who should provide independent oversight, have collectively failed to remove criminally convicted directors from the board. LGIM stated the inaction is indicative of a material failure of governance and oversight at the company.
A notable engagement activity of LGIM is provided below:
- LGIM engaged with Amazon after they were made aware Amazon had been interfering with its workforce’s efforts to unionise, ahead of a workforce vote on unionisation. LGIM, along with 70 other investors with a total AUM of $6.4trillion, signed a letter to Amazon emphasising that they should meet the expectations set out in the UN Guiding Principles on Business & Human Rights, and that workers should be free to exercise their freedom of association and right to collective bargaining. This action resulted in Amazon launching its first Global Human Rights Principles and also commissioning a human rights impact assessment by an external consultant. Despite the moves, LGIM still retain concerns on how they will meet these commitments and will continue to engage with the company on the matter.
The Trustees are comfortable with the investment manager’s approach for exercising rights and conducting engagement activities, and specifically that they attempt to maximise shareholder value as a long-term investor.
The Trustees also consider the investment managers’ policies on stewardship and engagement when selecting and reviewing investment managers.
Monitoring of Investment Arrangements
In addition to any review of investment managers or approaches, and direct engagement with investment managers (as detailed above), the Trustees receive performance reports to ensure the investment objectives set out in their SIP are being met.