Chairman’s Statement for Robin Mills Properties Retirement Benefits Scheme
The Chairman of the Trustees is required to confirm how the Scheme is meeting the Pensions Regulator’s governance standard for Defined Contribution schemes. There are two sections of the Scheme (sub-types 2 and 3). Sub-type 3 provides only DC benefits. Sub-type 2 provides DC benefits, but with an underpin that the benefit will not be less than a member’s Guaranteed Minimum Pension (GMP) which is defined benefit in nature.
This is the Chairman’s statement in respect of the period from 1 August 2017 to 31 July 2018.
The Trustees have reviewed and assessed that our systems, processes and controls across key governance functions are consistent with those set out in The Pensions Regulator’s:
Code of Practice 13: Governance and administration of occupational defined contribution trust-based schemes, and
The most recent Regulatory guidance for defined contribution schemes.
During the year under review the Trustees took investment advice and decided to further reduce the investment risk within the Scheme to give more certainty to providing members’ benefits in full. This was implemented after the year end and detail was provided to members with their annual benefit statements sent out in December 2018.
Default Investment Strategy
Following an investment review by our investment consultant the Trustees agreed to a revised default investment strategy, recognising the implications not only for the two different groups of members (sub-types 2 and 3), but also that within sub-type 2 some members are almost certain to receive their Guaranteed Minimum Pension (GMP), whilst for others their Personal Account may have a greater value than their GMP (in which case they receive benefits based on their Personal Account). The revised strategy was implemented after the Scheme year end and our Statement of Investment Principles (SIP) is in the process of being updated. The attached SIP reflects the position still in place as at 31 July 2018. The SIP covers all funds; not just the default strategy.
For sub-type 3 members (DC only) this is on a ‘lifestyle’ basis, transitioning from 100% in a global equity pooled fund for those members some way from retirement, through a multi-asset fund for members within 10 years of retirement and finishing with 100% in a cash fund for members close to their normal retirement age.
Members may self-select their investment strategy in any proportions they choose. In addition to the funds used within the default strategies, members have access to an ethically invested global equity fund and a pre-retirement fund, intended to protect volatility in a member’s annuity purchasing potential in the run up to retirement. No member has yet chosen the self-select option and therefore all are in the default investment strategy. Given the nature of the membership this is neither a surprise nor a concern to the Trustees. Members are routinely advised of their options and encouraged to seek financial advice as appropriate.
Trustee Knowledge and Understanding
The Trustees undertake ad-hoc training as part of regular trustee meetings.
The Scheme has had a professional independent trustee in place for more than 10 years in order to ensure that the trustee board has sufficient knowledge, experience and understanding to carry out our duties effectively. The current such Trustee (and Chair) is a Fellow of the Pensions Management Institute and member of the PMI’s Trustee Group and as such has a personal duty to undertake, maintain and record training and professional development.
Both Trustees have many years’ experience and are supported by professional advisers.
Core Financial Transactions and Administration
The Scheme closed to active membership in January 2005 and there are no employer (or member) contributions due in respect of DC benefits. As reported last year, XPS (formerly known as Xafinity) now administer the Scheme.
The Trustees receive statements from their investment managers whenever a transaction takes place and also at each month end. In addition, XPS provide the Trustees with a monthly reconciliation of the Trustees’ bank account (which they operate on behalf of the Trustees), itemising all transactions. The Trustees are diligent in monitoring these transactions and prepare a monthly report of assets and changes in values. The Trustees are satisfied that processes with regard to core financial transactions has been sound.
Comprehensive records of individual members’ contributions and fund values are maintained by the Scheme’s administrator and reconciled every time that a transaction takes place. The Trustees have a Service Level Agreement in place with the administrator and adherence to the targets is monitored by way of monthly reporting.
Annual benefit statements are supplied to all Plan members with DC benefits, along with a Statutory Money Purchase Illustration.
XPS have provided the Trustees with an Assurance Report on Internal Controls for the period 1 January – 31 January 2017 (the latest available) confirming that they have had their business control procedures assessed by KPMG and these have been found to be satisfactory and effective.
As reported last year, the change from a ‘bundled’ product with Royal London, where effectively members paid for the costs of running the Scheme, to an explicit fee (paid for by the Employer with the exception of investment management charges), represents excellent value for members.
The annual investment management charge is now a maximum of 0.32% on members’ DC funds, compared to 1% prior to the change, which the Trustees consider represented not only a significant improvement for members, but also excellent value for what is a small pension scheme. (Compare, for example, the cap of 0.75% annual management charge on schemes used for pension automatic-enrolment.)
The Trustees regularly monitor the level of explicit charges, such as the fund specific Annual Management Charge (AMC) applied to the funds. The charges and transaction costs applied to the default arrangement and all other funds during the scheme year were:
Members may select any of the funds above and switch between these options should they wish.
An illustration of the charges levied on members
Below is an illustration of the effect of the Total Expense Ratio costs met by members on an example pension fund over time. This is for illustration only. The actual returns received are likely to differ over time as will individual member pension fund sizes.
This illustration is based on:
• The lifestyle strategy – which is the Scheme default investment option and c.100% of members have investments in this option;
• An initial pension fund of £18,500 (the average Sub type 3 pot size)
• No ongoing contributions.
• Investment returns (after inflation) are an estimated average as 3.1% p.a. before charges for the default lifestyle
• Inflation of 2.5% p.a.
Illustrations for all of the funds available to members in the DC Section are shown in Appendix 1 of this Statement.
In preparing these illustrations, the Trustees have had regard to:
• The Occupational Pension Schemes (Scheme Administration) Regulations 1996;
• The Occupational Pension Schemes (Administration and Disclosure) (Amendment) Regulations 2018;
• The Pensions Regulator’s Code of Practice number 13 on ‘Governance and administration of occupational trust-based schemes providing money purchase benefits’; and
• The Pensions Regulator’s quick guide to the Chair's Statement and the Technical Appendix.
Value for Money for Members
The Trustees have concluded that the Annual Management Charges and transaction costs shown in this statement represent as note above, a significant improvement for members, but also excellent value for what is a small pension scheme.
The administration service reports regularly and have shown through external accreditation that sufficient processes are in place to ensure the administration and governance of the Scheme is in line with the guidelines issued by the Pensions Regulator.
It is also worth noting that the Trustees have once again considered the Freedoms and Choice opportunities introduced by legislation in 2015. Previous reviews have concluded that given the complexities and small size of the Scheme these could not be adequately accommodated from the Scheme. With the growing interest in such pension flexibility the Trustees are investigating ways to comprehensively and fairly communicate member options. Meantime, the Employer, Robin Mills Properties Ltd, adhered to the National Pension Trust in June 2017 and the Trustees are satisfied that this will provide a practical and cost-effective option for their members to avail themselves of such opportunities by transferring, if required, and pending further developments regarding Freedom and Choice options.
Signed 1 February 2019
Pensions Rapport Ltd - Chair of Trustees