Draft Statement of Investment Principles


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Draft Statement of Investment Principles

  1. 1. Draft Statement of Investment Principles NAME OF PENSION SCHEME Statement of Investment Principles 1. Introduction The Trustees of the SCHEME NAME (the ‘Scheme’) have drawn up this Statement of Investment Principles (the ‘Statement’) to comply with the requirements of the Pensions Act 1995 (the ‘Act’). The Trustees, in preparing this Statement, have also consulted NAME OF COMPANY (the ‘Company’), in particular, on the Trustees’ objectives. Overall investment policy falls into two parts. The strategic management of the asset is fundamentally the responsibility of the Trustees (acting on advice as they deem appropriate) and is driven by their investment objectives as set out in Section 2 below. The remaining elements of policy are part of the day- to-day management of the assets, which is delegated to a professional investment manager and described in Section 3. The Trustees decide in conjunction with a financial adviser that a wholly insured arrangement is the most appropriate for their scheme. 2. Investment objectives and risk 2.1 Investment objectives The Trustees’ objectives are: 1. to provide members with a range of investment options to enable them to tailor an investment strategy to their needs and risk tolerances, and to control the inherent risks by making available vehicles which aim to: • provide good long-term real rates of return (ie in excess of price and wage inflation) so that the value of members’ assets is maximised • provide protection for members’ accumulated assets against sudden (and sustained) reductions in capital values or in the amount of pension that can be purchased 2. to consider the cost and complexity of the Scheme’s investment options in terms of administration and communication 3. to encourage members to seek independent financial advice from an appropriate person in determining the profile of their own investments The Trustees recognise that members have differing investment needs and that these may change during the course of members’ working lives. They also recognise that members have different attitudes to risk. The Trustees believe that members should make their own investment decisions based on their individual circumstances. As a result, the Trustees regard their duty as making available a range of investment options sufficient to enable members to tailor, to their own needs, their investment strategy.
  2. 2. 2.2 Risk The Trustees have taken into consideration on behalf of the members the following aspects of risk: 1. that a low investment return over a member’s working life secures an inadequate pension 2. that relative market movements in the years just prior to retirement can lead to substantial reduction in the pensions which would otherwise be secured 3. that relative market movements in the years just prior to retirement can lead to a substantial reduction in the tax-free cash which would otherwise be secured 4. that the investment vehicle in which monies are invested underperforms the expectation of the Trustees. The Trustees recognise that the use of an active manager involves such a risk. However, they believe that this risk is outweighed by the potential gains from successful active management 3. Day-to-day management of assets 3.1 Main assets The Trustees have appointed AEGON Scottish Equitable to manage the Scheme’s arrangements. AEGON Scottish Equitable provides member administration, communication and investment options available to members, such fund options being set out in the Appendix. 3.2 Investment strategy Members are able to invest their assets through a Lifestyle investment strategy or through a range of asset class funds. For the management of the underlying asset class, the Trustees offer a range of actively managed funds. The Trustees believe that this range of options is suitable for meeting the investment objectives and risk considerations, as set out above. Lifestyle option While members are encouraged to tailor their fund choices to their own circumstances, the Trustees also make available a Lifestyle option for members who prefer to invest in a single ‘off-the-shelf’ vehicle whose asset allocation automatically varies over their working life. This option, the Balanced Lifestyle Fund, also acts as the default investment option for members not wishing to make their own investment decisions. The Balanced Lifestyle Fund invests in a variety of AEGON Scottish Equitable’s regional and specialist funds, which have greater growth potential, until seven years from members’ normal retirement dates when the account is automatically switched on a pre-determined basis. The switching will gradually move members’ accounts as members approach retirement from the funds with greater growth potential to lower risk investment funds comprising mainly gilts and/or cash to provide protection against fluctuations in annuity process and against capital loss in the run up to retirement.
  3. 3. 3.3 Fee structures AEGON Scottish Equitable charges an annual management charge of AMOUNT% which includes administration and investment costs. The Scheme also pays consultancy fees to BROKER NAME for the provision of a range of advisory services. Unless otherwise agreed in respect of any service, ADVISER NAME is remunerated by fees that are normally based on the time spent and cost incurred. 3.4 Additional Voluntary Contributions (AVCs) For members choosing to pay AVCs, members can select where these are invested from the same range of funds as for normal contributions. The funds that members choose for AVC investments can be different to those chosen for normal contributions. 3.5 Realisation of investments In general, the investment managers have discretion in the timing of realisations of investments and in considerations relating to the liquidity of those investments within the various funds. 3.6 Monitoring the investment arrangements The Trustees monitor the performance of the investment options on a regular basis. ADVISER NAME is retained as the Scheme’s consultant to advise the Trustees on relevant investment issues. The Trustees meet with AEGON Scottish Equitable as and when necessary to discuss performance, activity and other issues as relevant. The Trustees will review the suitability of the investment options offered to members on an annual basis. In addition, the Trustees will also consider specific member requests for the inclusion of certain funds. Requests will be considered on a case-by-case basis, following consideration of the merits and practical implications of introducing such funds. 4. Socially responsible investment and corporate governance As the assets of the Scheme are managed in pooled fund arrangements, the Trustees accept that the assets are subject to the investment manger’s policies on social, ethical or environmental considerations relating to the selection, retention and realisation of investments. The Trustees delegate the responsibility for exercising voting rights attached to the investments held in pooled funds to the investment mangers. 5. Review of and compliance with this Statement The Trustees will review this Statement in response to any material changes to aspects of the Scheme. This review will occur no less frequently than every three years. Any such review will be based on written, expert investment advice and will be in consultation with the Company.
  4. 4. For and on behalf of the SCHEME NAME ……………………………… ………………………………….. Trustee Trustee ……………………………… Date
  5. 5. Appendix The funds currently available to members of the Scheme are: Fund Active/Passive Benchmark Balanced Lifestyle Active N/A UK Equity Active FTSE All Share Overseas Tactical Active Median fund in the CAPS Overseas Equities Pension Sector