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Annual Implementation Statement to 30 September 2020

Annual Implementation Statement to 30 September 2020 – DB Section and DC Section

Introduction

This statement sets out how, and the extent to which, the Statement of Investment Principles (‘SIP’) produced by the Trustees has been followed during the year to 30 September 2020. This statement has been produced in accordance with The Pension Protection Fund (Pensionable Service) and Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification) Regulations 2018 and the guidance published by the Pensions Regulator. The table later in the document sets out how, and the extent to which, the policies in both the DB Section and DC Section of the SIP have been followed.

Investment Objective of the Plan

The Trustees believe it is important to consider the asset managers’ policies in the context of the investment objectives the Trustees have set. The objectives of the Plan, included in the SIP, are as follows:

DB Section

The Trustees understand that taking some investment risk, with the support of the Sponsor, is necessary to improve the Plan’s ongoing and solvency funding positions. The Trustees recognise that growth asset investment will bring increased volatility of the funding level, but invest in the expectation of improvements in the Plan’s funding level through outperformance of the liabilities over the long term.

The Trustees’ primary objective is to act in the best interest of the members. The main objective of the Trustees is therefore to improve the funding position of the DB Section to firstly achieve 100% funding on the Technical Provisions assumptions and thereafter target being fully funded on actuarial assumptions for the liabilities which allow a relatively low risk investment strategy to be adopted.

The Trustees recognise this ultimately means investing in a portfolio of bonds but believe that at the current time some growth asset investment is justified to target enhanced return expectations and thereby target funding level improvements. The Trustees recognise that this introduces investment risk and have taken measures to manage and mitigate these risks as far as is appropriate (please refer to the Plan’s SIP for further detail).

DC Section and AVCs

The Trustees recognise that members have different investment goals and that these may change during the course of their working lives. They also recognise that members have different attitudes to risk. The Trustees’ objective is to make available to members a range of investment options which seek to allow members to set an investment strategy that meets their needs and risk tolerances. The Trustees also recognise that members may not believe themselves qualified to take investment decisions. As such, the Trustees make available a Default Lifestyle Option (in respect of the DC Section only).

Review of the SIP

During the year to 30 September 2020, the Trustees carried out a review of the Plan’s SIP and a revised version dated July 2020 was agreed (and made publicly available) in order to reflect new requirements under The Occupational Pension Scheme (Investment and Disclosure) (Amendment) Regulations 2019 relating to the following:

  • How the arrangement with the asset manager incentivises the asset manager to align its investment strategy and decisions with the Trustees’ policies in the SIP.
  • How that arrangement incentivises the asset manager to make decisions based on assessments about medium to long-term financial and non-financial performance of an issuer of debt or equity and to engage with issuers of debt or equity in order to improve their performance in the medium to long-term.
  • How the method (and time horizon) of the evaluation of the asset manager’s performance and the remuneration for asset management services are in line with the Trustees’ policies mentioned in the SIP.
  • How the Trustees monitor portfolio turnover costs incurred by the asset manager and how they define and monitor targeted portfolio turnover or turnover range.
  • The duration of the arrangement with the asset manager.

Assessment of how the policies in the SIP have been followed for the year to 30 September 2020

The information provided in this section highlights the work undertaken by the Trustees during the year, and longer term where relevant, and sets out how this work followed the Trustees’ policies in the SIP, relating to the Plan as a whole. The SIP is attached as an Appendix and sets out the policies referenced below.

Requirement
Policy
In the year to 30 September 2020
1
Securing compliance with the legal requirements about choosing investments

DB – Section 2 of SIP – Process for choosing investments

DC – Section 11 of SIP – Investment Objectives

DB Section

Trustees have appointed a Fiduciary Manager who provides expert advice and chooses investment vehicles that can fulfil the Plan’s investment objectives. In the Trustees’ opinion, this is consistent with the requirements of Section 36 of the Pensions Act 1995.

DC Section

In considering appropriate investments for the Plan, the Trustees have obtained and considered the written advice of their Investment Adviser, whom the Trustees believe to be suitably qualified to provide such advice. The advice received and arrangements implemented are, in the Trustees’ opinion, consistent with the requirements of Section 36 of the Pensions Act 1995.

DB

The Trustees’ appointed Fiduciary Manager (Mercer) had been delegated the authority to invest the Plan’s assets across various asset classes both with the aim of earning an investment return above the rate of growth in the Plan’s liabilities and managing the various risks to which the Plan is exposed.

The Plan’s assets are invested in multi-client collective investment schemes (“Mercer Funds”) managed by a management company (Mercer Global Investments Management Limited (“MGIM”)). MGIM has appointed Mercer Global Investments Europe Limited (“MGIE”)) as investment manager. In practice, MGIE delegates the discretionary investment management for the Mercer Funds to third party investment managers.

Investment performance and the actions taken by Mercer, MGIE and the sub-investment managers are reviewed by the Trustees on a monthly and quarterly basis.

DC

The Trustees have not made any changes to the DC investment options over the year to 30 September 2020 and have therefore not received any investment advice in relation to choosing investments.

2
Risks, including the ways in which risks are to be measured and managed

DB – Section 4 of SIP – Risk management and measurement

DC – Section 13 of SIP – Risk

DB Section

The Trustees recognise that there are various risks to which any pension scheme is exposed.

DC Section

The Trustees have considered risks from a number of perspectives.

As a member’s investment pot grows, investment risk will have a greater impact on member outcomes. Therefore, the default lifestyle investment strategies seek to reduce investment risk as the member approaches retirement. The default lifestyle strategies also aim to provide some protection against inflation erosion.

Risk is not considered in isolation, but in conjunction with expected investment returns and outcomes for members. In designing the default lifestyle options, the Trustee has explicitly considered the trade-off between risk and expected returns. The default options balance between different kinds of investments to ensure that the expected amount of risk (and commensurately the expected return) is appropriate given the age of the members and their expected retirement date.

DB

As detailed in Section 4 of the SIP, the Trustees consider both quantitative and qualitative measures for these risks when deciding investment policies and evaluating Mercer and MGIE’s actions relating to the strategic asset allocation, dynamic asset allocation and choice of sub-investment managers and asset classes.

The investment strategy report is reviewed by the Trustees on a quarterly basis – this includes the overall funding level risk and as appropriate comments on the other risks to which the Plan is exposed.

DC

The default investment option was subject to its formal triennial review on 4 September 2018. The next default investment review is planned for July 2021 and will include consideration of the trade-off between risk and expected returns.

The scheme maintains a risk register of the key risks, including the investment risks. This rates the impact and likelihood of the risks and summarises existing mitigations and additional actions.

3
Kinds of investments to be held

DB – Section 5 of SIP – Investment strategy and Statement of Investment Arrangements

DC – Section 11 of SIP – Investment Objectives

DB Section

A range of asset classes are included within the Plan’s investment portfolio including: global developed and emerging market equities, emerging market debt, high yield bonds, multi-asset credit, absolute return bonds, property, bonds (gilts and corporate bonds), as well as Liability Driven Investment (“LDI”) funds which invest in bond-like investments in order to provide interest rate and inflation exposure and reduce funding level risk.

DC Section

Members of the DC Section choose the funds in which to invest from a range of funds made available by the Trustees.

Members can combine the investment funds in any proportion in order to achieve the desired level of return and risk in line with their own attitude towards, and tolerance of risk.
Within the default option, the strategic asset allocation is set to achieve the expected return required to meet the objective of the default option.

DB

The Trustees have decided to delegate the implementation of the desired investment strategy to Mercer, with pre-agreed funding level de-risking triggers which prompt Mercer to transfer assets from the Plan’s growth assets to matching assets. The Trustees will consider the way in which investment risk should be reduced and have delegated the monitoring of the de-risking triggers to Mercer who review the funding level on a daily basis. MGIE constructs portfolios of investments that are expected to maximise the return (net of all costs) given the targeted level of risk and the investment objectives over the lifetime of the Plan.

The Trustees on behalf of the Plan hold shares in the Mercer Funds. In its capacity as investment manager to the Mercer Funds, MGIE, and the underlying third-party asset managers appointed by MGIE, within parameters stipulated in the relevant appointment documentation, have discretion in the timing of the realisation of investments and in considerations relating to the liquidity of those investments.

DC

The strategic asset allocations of the default investment options is reviewed on a triennial basis. The date of the last review was 4 September 2018. This confirmed that the strategic asset allocations were appropriate to meet the stated aims and objectives of the default options. Although this review was not undertaken during this year, it represents an important exercise for the Trustees that covers the majority of the investment policies the Trustees have in place. The next default investment review is planned for July 2021.

A review of self-select options also formed part of the triennial investment review – no changes were made to the self-select fund range. Member demand for self-select investments is monitored but there have been no strong drivers for changes during the year.

4
Expected return on investments

DB – Section 5 of SIP – Investment strategy

DC – Section 11 of SIP – Investment Objectives

DB Section

The Trustees expect to exceed this return over the longer term and have designed a de-risking framework with an objective to achieve full funding using a discount rate of 0.5% p.a. in excess of Gilts over the long term.

DC Section

The funds available are expected to provide an investment return commensurate with the level of risk being taken.

In designing the default, the Trustees have explicitly considered the trade-off between risk and expected returns. The investment strategy is designed to generate returns in excess of inflation during the growth phase and de-risk towards the retirement date, in order to provide members with greater certainty.

DB and DC

The investment strategy report is reviewed by the Trustees on a quarterly basis – this includes the risk and return characteristics of the Plan’s investment portfolio. In addition, quarterly reporting provided by LGIM is reviewed by the Trustees, covering both the DC and AVC fund ranges.

The investment performance report includes how each fund in which the Plan’s assets are invested is delivering against their specific mandates.

DB

Over the 3 years to 30 September 2020, the Plan has returned c.7.5% p.a. (net of fees) relative to a liability return of 8.3%. Over the period since inception of the fiduciary management arrangements with Mercer to 30 September 2020, the Plan’s assets returned 6.3% p.a. (net of fees) relative to a liability return of 6.4% p.a. The Trustees note that the deviation in performance against the rate of growth in the liabilities over the three-year period is primarily due to the market falls over Q1 2020 as a result of the COVID-19 crisis.

The investment strategy was reviewed by the Trustees, with advice and guidance provided by Mercer. However, no significant changes were made by the Trustees to the Plan’s headline investment strategy (i.e. the target allocation to return seeking assets and risk reducing assets).

5
Realisation of investments

DB – Section 6 of SIP – Realisation of investments

DC – Section 13 of SIP – Risk

DB and DC Sections

The Trustees’ administrators will request for disinvestments from the Plan’s invested assets following member requests on retirement or earlier where required.

Mercer and the underlying investment managers have discretion in the timing of realisation of investments and in considerations relating to the liquidity of those investments within parameters stipulated in the relevant appointment documentation.

DC Section

The Trustees consider the liquidity of the investment in the context of the likely needs of members.

DB

Where disinvestments were requested during the year the policies stipulated within the relevant appointment documentation have been followed.

DC

The Trustees receive an administration report on a quarterly basis to confirm whether core financial transactions are processed within SLAs and regulatory timelines. As confirmed in the Chair Statement, whilst overall performance against SLAs has improved compared to the previous Plan year, the periods of poor performance are considered to be unsatisfactory to the Trustees, and further actions are being taken to improve service levels. However, the Trustees confirm that no material issues arose over the year in relation to the Plan’s core financial transactions.

Benchmarking against the performance and cost of other administrators has been undertaken during the year and this confirms the Trustees’ view that current SLAs are unsatisfactory.

Improvements have been promised and a further review of the administrators will take place in 2021.

All funds are daily dealt pooled investment vehicles, accessed by an insurance contract.

6
Financially material considerations over the appropriate time horizon of the investments, including how those considerations are taken into account in the selection, retention and realisation of investments

DB – Section 4 of SIP

DC – Section 13 of SIP

DB and DC – Section 14 of SIP – ESG, Stewardship and Climate Change

DB and DC Sections

The Trustees consider financially material considerations in the selection, retention and realisation of investments.

DB Section

The Trustees’ consideration of such factors, including Environmental, Social and Governance (‘ESG’) factors, is delegated to Mercer who in turn delegate this to the appointed underlying investment managers.

Investment managers are expected to evaluate these factors, including climate change considerations, and exercise voting rights and stewardship obligations attached to the investments in line with their own corporate governance policies and current best practice.

DC Section

As the assets are invested in pooled funds, the Trustees have given the appointed investment managers full discretion in evaluating ESG factors, including climate change considerations, and exercising voting rights and stewardship obligations attached to the investments.

DB and DC

The Trustees review the investment strategy regularly and in accordance with relevant legislation. The Plan’s SIP details a number of financially material risks, which are considered by the Trustees in designing the investment strategy. Where appropriate, the Trustees will look to reduce the extent of these risks, whilst continuing to support the achievement of the respective objectives for the DB and DC Sections.

The Plan’s SIP includes the Trustees’ policy on Environmental, Social and Governance factors, stewardship and Climate Change. This policy sets out the Trustees’ beliefs on ESG and climate change and the processes followed by the Trustees in relation to voting rights and stewardship.

In order to establish these beliefs and produce this policy, the Trustees undertook investment training provided by their investment consultant on responsible investment which covered ESG factors, stewardship, climate change and ethical investing. This training was provided on 30 January 2020 and 3 June 2020.

The Trustees keep their policies under regular review with the SIP subject to review at least triennially.

DB

Where sub-investment managers may not be highly rated from an ESG perspective the Trustees continue to monitor Mercer’s efforts at working with the managers to improve their ESG rating, noting that when MGIE considers investing in a new sub-investment manager they would consider the ESG rating of the manager as part of the selection process.

The investment performance report includes how each investment manager is delivering against their specific mandates. This report is reviewed by the Trustees on a quarterly basis – this includes ratings (both general and specific ESG) for the underlying managers of the Mercer Funds.

DB and DC

The Trustees acknowledge that there is limited scope for engagement on ESG related matters in relation to the majority of the DC funds and the passively managed DB allocations within the Plan’s growth portfolio and that sub investment managers in fixed income do not have a high ESG rating assigned by the Mercer Research team due to the nature of the asset class where it is harder to engage with the issuer of debt.

7
The extent (if at all) to which non-financial matters are taken into account in the selection, retention and realisation of investments

DB and DC – Section 14 of SIP – ESG, Stewardship and Climate Change

DB and DC Sections

Member views are not taken into account in the selection, retention and realisation of investments.

In relation to the DB Section, the Trustees believe that the delegation of portfolio construction to Mercer will lead to ESG considerations that are in the best interests of the Plan as a whole.

As the DC Section’s assets are invested in pooled funds, the Trustees have given the appointed investment managers full discretion in evaluating ESG factors, including climate change considerations, and exercising voting rights and stewardship obligations attached to the investments.

No proof required.
8
The exercise of the rights (including voting rights) attaching to the investments

DB and DC – Section 14 of SIP – ESG, Stewardship and Climate Change

DB and DC Sections

Investment managers are expected to evaluate these factors, including climate change considerations, and exercise voting rights and stewardship obligations attached to the investments in line with their own corporate governance policies and current best practice.

DB

The Plan’s defined benefit assets are invested in pooled funds managed by MGIE who have delegated their voting rights (where applicable) to the underlying investment managers.
Investment managers are expected to provide voting summary reporting on a regular basis, at least annually. This reporting is presented to the Trustees within Mercer’s Stewardship Monitoring Review to ensure that they align with the Trustees’ policy.

Mercer’s Stewardship Monitoring Report (which was reviewed by the Trustees in January 2020) covering the period 1 July 2018 to 30 June 2019 concluded the following:

Vote execution:

Vote execution continues to be good overall (i.e. >90% of available votes). Where votes have not been cast the vast majority of managers provide a rationale (typically this relates to market-specific barriers or restrictions).

Vote disclosure:

The level of disclosure continues to vary considerably across managers. While in some cases managers have improved in not only disclosing voting rationale at a resolution level, but including summary reporting across categories (e.g. board-related, compensation-related, environmental etc.) there are managers who have not disclosed rationale across all resolutions. It is likely that managers do have this information but have not proactively disclosed it and we will follow-up with these managers to confirm.

Engagement:

The results on engagement activities has been relatively consistent, however, Mercer note an improvement in the quality of engagement disclosure from a number of managers.

Some managers continue to provide market leading engagement reporting – typically those with an established approach to engagement and internal resources dedicated to stewardship. Mercer will follow up with all managers where improvements are expected in future.

DC

As the Plan invests solely in pooled funds, the Trustees require their investment managers to engage with the investee companies on their behalf. The Trustees have requested more information on engagement activity from the platform provider, with whom there is a direct legal relationship. At the time of writing, key voting information was only available for the fund listed below. Reporting in this area is expected to evolve as information becomes more readily available, in line with regulations.

LGIM – UK Equity Index – Passive (an underlying component of the Welcome Break Blended Fund)

LGIM uses the services of ISS to vote on its behalf.

– The voting policy of the manager has been considered by the Trustees and the Trustees deem it to be consistent with their investment beliefs.

– Key votes undertaken over the prior year are summarised below:

  • Barclays – vote to approve Barclay’s Commitment in Tackling Climate Change in May 2020.
  • Pearson – voted against a motion to amend CEO remuneration policy in September 2020.
  • Plus 500 – LGIM voted against a special bonus payment to Plus 500’s CFO, Elad Even-Chen, in September 2020.
  • SIG PLC – voted against a one-off payment to Steve Francis resolution in July 2020 shareholder meeting.
  • International Consolidated Airlines Group voted against a resolution to approve Remuneration Report in September 2020.

 

– Over the prior 12 months, the Trustees have not actively challenged the manager on its voting activity. Going forwards, the Trustees will review voting activity annually and will be more active in challenging voting activity if required, particularly in respect of its beliefs on climate change.

9
Undertaking engagement activities in respect of the investments (including the methods by which, and the circumstances under which, trustees would monitor and engage with relevant persons about relevant matters)

DB and DC – Section 14 of SIP – ESG, Stewardship and Climate Change

DB and DC sections

Investment managers are expected to evaluate these factors, including climate change considerations, and exercise voting rights and stewardship obligations attached to the investments in line with their own corporate governance policies and current best practice.
Outside of those exercised by investment managers on behalf of the Trustees, no other engagement activities are undertaken.

DB and DC

Investment managers are expected to provide reporting on a regular basis, at least annually including stewardship monitoring results. These are reviewed by the Trustees.

As the Plan invests solely in pooled funds managed by MGIE (DB Section) and LGIM (DC Section), the Trustees requires that sub-investment managers appointed by MGIE and LGIM engage with the investee companies on their behalf. The Trustees are looking to enhance their reporting on manager engagement by reviewing an annual voting and engagement report which will be produced by the Trustees’ fiduciary manager.

10
How the arrangement with the asset manager incentivises the asset manager to align its investment strategy and decisions with the Trustees’ policies

DB and DC – Section 14 of SIP – Trustees’ policies with respect to arrangements with, and evaluation of the performance and remuneration of, asset managers and portfolio turnover costs

DB Section

As Mercer manages the Plan’s assets by way of investment in Mercer Funds, which are multi-client collective investment schemes, the Trustees accept that they do not have the ability to determine the risk profile and return targets of specific Mercer Funds.

However, the Trustees expect Mercer to manage the assets in a manner that is consistent with the Trustees’ overall investment strategy.

The Trustees keep Mercer’s performance under ongoing review and should Mercer fail to align its investment strategies and decisions with the Trustees’ policies, it is open to the Trustees to disinvest some or all of the assets managed by Mercer, to seek to renegotiate commercial terms or to terminate Mercer’s appointment.

DC Section

The Trustees consider the suitability of investment managers at least triennially as part of the default arrangement review. The Trustees will replace investment managers if their approach does not align with the Trustees’ objectives.

DB

In the year to 30 September 2020, the Trustees have discussed their continued appointment of Mercer and were happy that the contractual arrangement in place continues to incentivise Mercer to make decisions based on medium to long-term considerations. Additionally, the Trustees will be carrying out a competitive tender process for the Plan’s investment manager over 2021.

The investment strategy report or a summarised version was reviewed by the Trustees on a quarterly basis – this includes a comparison of how the Plan’s funding level is progressing versus the projections of the Plan’s funding level from the latest investment strategy review in order to assess whether the Trustees are on track to meet their objective.

As at 30 September 2020 the Plan’s funding level on a ‘gilts + 0.5%’ basis was 87.3% (excluding deficit contributions) versus an expected level of 85.9% following outperformance of the Plan’s growth assets over Q2 and Q3 2020.

DC

The default investment option is reviewed on a triennial basis. The date of the last review was 4 September 2018. This confirmed that the manager appointments were appropriate to meet the stated aims and objectives of the default options. The next default investment review is planned for July 2021.

11
How the arrangement incentivises the asset manager to make decisions based on assessments about medium to long-term financial and non-financial performance of an issuer of debt or equity and to engage with issuers of debt or equity in order to improve their performance in the medium to long-term.

DB and DC – Section 14 of SIP – Trustees’ policies with respect to arrangements with, and evaluation of the performance and remuneration of, asset managers and portfolio turnover costs

DB Section

The Trustees have appointed Mercer as the discretionary investment manager who has invested the Plan’s assets in a range of Mercer Funds managed by MGIE.

Neither Mercer nor MGIE make investment decisions based on their assessment about the performance of an issuer of debt or equity. Instead, assessments of the medium to long-term financial and non-financial performance of an issuer are made by the underlying third-party asset managers appointed by MGIE to manage assets within the Mercer Funds. Those managers are in a position to engage directly with such issuers in order to improve their performance in the medium to long term. In their respective roles, Mercer and MGIE assess how each underlying third-party asset managers’ investment capabilities aligns with the relevant financial and non-financial considerations.

DC Section

The Trustees consider the suitability of investment managers at least triennially as part of the default arrangement review. The Trustees will replace investment managers if their approach does not align with the Trustees’ objectives.

DB

The quarterly investment strategy report or a summarised version and the investment performance was reviewed by the Trustees on a quarterly basis which includes financial metrics and Mercer Manager Research Ratings for the underlying asset managers that comprise the Mercer Funds.

The Mercer Research Rating includes a Manager Rating which gives an indication of Mercer’s view on the likelihood of a manager to achieve their performance objective and an ESG Rating which gives an indication of the extent to which ESG considerations are incorporated into the managers’ investment process.

12
How the method (and time horizon) of the evaluation of the asset manager’s performance and the remuneration for asset management services are in line with the Trustees’ policies.

DB and DC – Section 14 of SIP – Trustees’ policies with respect to arrangements with, and evaluation of the performance and remuneration of, asset managers and portfolio turnover costs

DB Section

The Trustees are long-term investors and are not looking to change their investment arrangements on an unduly frequent basis. However, the Trustees do keep those arrangements under review, including the continued engagement of Mercer using, monthly and quarterly reporting provided by Mercer.

The Trustees monitor, and evaluate, the fees they pay for asset management services on an ongoing basis taking into account the progress made in achieving their investment strategy objectives.

Mercer’s, and MGIE’s, fees are based on a percentage of the value of the Plan’s DB assets under management which covers the design and annual review of the de-risking strategy, and investment management of the assets. In addition, the underlying third-party asset managers of the Mercer Funds also charge fees based on a percentage of the value of the assets under management. In some instances, some of the underlying managers may also be entitled to charge fees based on their performance.

MGIE reviews the fees payable to third party asset managers managing assets invested in the Mercer Funds on a regular basis with any negotiated fee savings passed directly to the Plan. Mercer’s, MGIE’s, and the third-party asset managers’, fees are outlined in a quarterly investment strategy report prepared for the Trustees, excluding performance-related fees and other expenses involved in the Mercer Funds not directly related with the management fee.

DC Section

The Trustees consider the suitability of investment managers at least triennially as part of the default arrangement review. The Trustees will replace investment managers if their approach does not align with the Trustees’ objectives.

DB

The quarterly investment strategy report or a summarised version and the investment performance which contains the long-term return for the Plan’s overall investment portfolio and individual Mercer Funds and investment fees incurred over a quarter were reviewed by the Trustees on a quarterly basis.

The Trustees received and reviewed the Plan’s Personalised Cost & Charges statement for the year 2019 in May 2020.

During the year, Mercer was able to utilise their increased buying power to negotiate a reduced fee for the leveraged gilt funds in which the Plan is invested reducing the fees for those funds from 0.07% p.a. to 0.045% p.a. (c.35% reduction) effective from 31 March 2020.

13
How the trustees monitor portfolio turnover costs incurred by the asset manager, and how they define and monitor targeted portfolio turnover or turnover range.

DB and DC – Section 14 of SIP – Trustees’ policies with respect to arrangements with, and evaluation of the performance and remuneration of, asset managers and portfolio turnover costs

DB Section

The Trustees do not have an explicit targeted portfolio turnover range, given the de-risking mandate, but rebalancing ranges have been designed to avoid unnecessary transaction costs being incurred by unduly frequent rebalancing. Performance is reviewed net of portfolio turnover costs, with the review of portfolio turnover of the underlying investment managers undertaken by MGIE.

DC Section

The Trustees consider the suitability of investment managers at least triennially as part of the default arrangement review. The Trustees will replace investment managers if their approach does not align with the Trustees’ objectives.

DB

The quarterly investment strategy report or a summarised version and the investment performance which contains the long-term return for the Plan’s overall investment portfolio (noting that this is net of portfolio turnover costs) was reviewed by the Trustees on a quarterly basis.

Additionally, the Trustees received and reviewed the Plan’s Personalised Cost & Charges statement for the year 2019 in May 2020, which details the transaction costs associated with investment in the Mercer Funds.

14
The duration of the arrangement with the asset manager

DB and DC – Section 14 of SIP – Trustees’ policies with respect to arrangements with, and evaluation of the performance and remuneration of, asset managers and portfolio turnover costs

DB Section

There is no set duration for Mercer’s appointment by the Trustees or an asset managers’ appointment by MGIE.

Mercer’s appointment is reviewed by the Trustees as to their continued suitability and could be terminated either because the Trustees are dissatisfied with Mercer’s ongoing ability to deliver the mandate promised or because of a change of investment strategy by the Trustees.

Similarly, the continued appointment of the underlying asset managers is reviewed by MGIE.

DC Section

The Trustees consider the suitability of investment managers at least triennially as part of the default arrangement review. The Trustees will replace investment managers if their approach does not align with the Trustees’ objectives.

 

Important notices

References to Mercer shall be construed to include Mercer LLC and/or its associated companies.
© 2021 Mercer LLC. All rights reserved.

This contains confidential and proprietary information of Mercer and is intended for the exclusive use of the parties to whom it was provided by Mercer. Its content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity, without Mercer’s prior written permission.

The findings, ratings and/or opinions expressed herein are the intellectual property of Mercer and are subject to change without notice. They are not intended to convey any guarantees as to the future performance of the investment products, asset classes or capital markets discussed. Past performance does not guarantee future results. Mercer’s ratings do not constitute individualized investment advice.

Information contained herein has been obtained from a range of third party sources. While the information is believed to be reliable, Mercer has not sought to verify it independently. As such, Mercer makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential or incidental damages), for any error, omission or inaccuracy in the data supplied by any third party.

This does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates, products or strategies that Mercer may evaluate or recommend.

In certain circumstances, Mercer’s advice will be limited to the discretionary investment management solutions it offers. Where applicable, you will be advised of this. Mercer recognises that this creates a potential conflict of interest and seeks to manage this conflict through procedures designed to protect the interest of our clients.
For the most recent approved ratings of an investment strategy, and a fuller explanation of their meanings, refer to your Mercer representative.

For Mercer’s conflict of interest disclosures, contact your Mercer representative or see www.mercer.com/conflictsofinterest

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