The Trustee has made available a range of investment options for members. Each member is responsible for specifying one or more options for the investment of their account, having regard to their attitude to the risks involved. If a member does not choose an investment option, from the range available in the Scheme, their DC pension pot and any future contributions are automatically invested in the Scheme’s default arrangement applicable to them. This is managed as a ’targeted’ strategy (i.e. it automatically combines assets in proportions that vary according to the time to retirement age). The targeted strategies are 100% invested in growth assets (equities and private markets) until twenty years from a member’s target retirement age from which time they switch gradually into lower risk assets appropriate to the type of retirement income targeted. As part of the triennial strategy review on 3 March 2023, the Trustee agreed to adjust the structure of the two main default arrangements the Flexible Income and Lump Sum strategies as well as the Annuity Purchase strategy.
The Scheme has different default arrangements for members, depending on the type of benefits they have. The default options have been designed, with support from the Scheme’s advisors, to be in what the Trustee believes to be the best interests of the majority of the members based on the demographics of the Scheme’s membership.
Your default arrangement
The Scheme has two main default lifecycle arrangements: the Flexible Income Strategy and the Lump Sum Strategy. These lifecycle strategies were set as the default investment arrangement for two distinct cohorts of members, those with DC only benefits and those who are “Hybrid” members (former DB active members on 30 June 2015 who became active DC members from 1 July 2015), respectively.
For members with only a DC pension pot - the Flexible Income Strategy is the default arrangement. It is designed for members, at their retirement or beyond, to take 25% of their DC pension pot as a cash lump sum and the balance to provide a flexible income (e.g. income drawdown), spreading the amount and timing of withdrawals. Members can do this by transferring their DC pension pot out of the Scheme. This strategy works by switching the investment mix of members’ DC pension pots from the ‘Early Growth Fund’ into the ‘Late Growth Fund’ from 20 years to retirement. Members’ DC pension pots are then switched into the ‘Approaching Retirement – Flexible Income Fund’ and when members are in their final working years and reach retirement, their DC pension pots are switched into the ‘Through Retirement – Flexible Income Fund’. This design is based on the overall demographic profile of the membership and the generous contribution structure combined with the belief that members are likely to both accrue large pots and choose to take a flexible income. Market trends and Scheme experience since the introduction of Pension Freedoms in 2015 also indicate that members with larger DC pension pots are moving away from purchasing annuities and are choosing flexible income instead.
For members with Hybrid benefits - the Lump Sum Strategy is the default arrangement. It is designed for members to use their DC pension pot for a cash lump sum at their target retirement age or beyond. This strategy works by switching the investment mix of members’ DC pension pots from the ‘Early Growth Fund’ into the ‘Late Growth Fund’ from 20 years to retirement. Members’ DC pension pots are then switched into the ‘Approaching Retirement – Lump Sum Fund’ and when they are in their final working years and reach retirement, their DC pension pots are switched into the ‘Through Retirement – Lump Sum Fund’. The rationale for this design is the belief that many members with Hybrid benefits are expected to use their DC pension pot as part of their overall Scheme tax-free cash lump sum at retirement.
As a material proportion of members continue to leave their DC pension pots invested past retirement, the Trustee has ensured that both the Flexible Income Strategy and the Lump Sum Strategy continue to de-risk after members’ target retirement age. This was introduced following the triennial investment strategy and performance review in 2017 and confirmed as remaining appropriate as part of the triennial investment strategy review that took place on 3 March 2023 which concluded that the Trustee continues to support this view.
The Trustee is required to calculate the percentage of the Scheme’s assets within the default arrangements allocated to each of the following asset classes. In line with the DWP’s guidance the Trustee has also shown this asset allocation for different ages as at the Scheme year end.
Flexible Income Strategy (main default for members with only a DC pension pot)
Asset class
Allocation 25 y/o %
Allocation 45 y/o %
Allocation 55 y/o %
Allocation at retirement %
Cash
0.0
0.0
0.8
26.3
Corporate bonds (UK and overseas)
0.0
0.0
10.4
23.1
UK government bonds
0.0
0.0
1.0
1.9
Overseas government bonds
0.0
0.0
7.4
16.1
Listed equities
92.0
92.0
71.8
17.4
Private equity
1.7
1.7
0.0
0.0
Infrastructure1
1.2
1.2
1.3
1.0
Property1
1.2
1.2
0.6
0.5
Private debt
2.5
2.5
1.4
1.1
Other2
1.8
1.8
5.5
12.7
Total4
100.0
100.0
100.0
100.0
1Includes listed and unlisted allocations. 2Other includes listed/unlisted natural resources, gold, emerging market climate bonds, convertible bonds, insurance linked securities and derivatives. 3As noted in section 2.6 the Trustee agreed to allocate 15% of the Early Growth Fund to private markets, which is currently being built up and as at 31 December 2024 was at c.9%. 4Figures may not sum due to rounding.
Lump Sum Strategy (main default for members with Hybrid benefits)
Asset class
Allocation 25 y/o %
Allocation 45 y/o %
Allocation 55 y/o %
Allocation at retirement %
Cash
0.0
0.0
0.8
26.4
Corporate bonds (UK and overseas)
0.0
0.0
10.4
31.7
UK government bonds
0.0
0.0
1.0
2.3
Overseas government bonds
0.0
0.0
7.4
21.7
Listed equities
92.0
92.0
71.8
0.0
Private equity
1.7
1.7
0.0
0.0
Infrastructure1
1.2
1.2
1.3
0.0
Property1
1.2
1.2
0.6
0.0
Private debt
2.5
2.5
1.4
0.0
Other2
1.8
1.8
5.5
17.8
Total4
100.0
100.0
100.0
100.0
1Includes listed and unlisted allocations. 2Other includes listed/unlisted natural resources, gold, emerging market climate bonds, convertible bonds, insurance linked securities and derivatives. 3As noted in section 2.6 the Trustee agreed to allocate 15% of the Early Growth Fund to private markets, which is currently being built up and as at 31 December 2024 was at c.9%. 4Figures may not sum due to rounding.
Annuity Purchase Strategy (legacy default and current self-select (“Freechoice” option)
Asset class
Allocation 25 y/o %
Allocation 45 y/o %
Allocation 55 y/o %
Allocation at retirement %
Cash
0.0
0.0
0.8
25.0
Corporate bonds (UK and overseas)
0.0
0.0
10.4
45.9
UK government bonds
0.0
0.0
1.0
29.1
Overseas government bonds
0.0
0.0
7.4
0.0
Listed equities
92.0
92.0
71.8
0.0
Private equity
1.7
1.7
0.0
0.0
Infrastructure1
1.2
1.2
1.3
0.0
Property1
1.2
1.2
0.6
0.0
Private debt
2.5
2.5
1.4
0.0
Other2
1.8
1.8
5.5
0.0
Total4
100.0
100.0
100.0
100.0
1Includes listed and unlisted allocations. 2Other includes listed/unlisted natural resources, gold, emerging market climate bonds, convertible bonds, insurance linked securities and derivatives. 3As noted in section 2.6 the Trustee agreed to allocate 15% of the Early Growth Fund to private markets, which is currently being built up and as at 31 December 2024 was at c.9%. 4Figures may not sum due to rounding.
Cash Lifecycle (legacy default arrangement)
Asset class
Allocation 25 y/o %
Allocation 45 y/o %
Allocation 55 y/o %
Allocation at retirement %
Cash
0.0
0.0
0.8
100.0
Corporate bonds (UK and overseas)
0.0
0.0
10.4
0.0
UK government bonds
0.0
0.0
1.0
0.0
Overseas government bonds
0.0
0.0
7.4
0.0
Listed equities
100.0
100.0
71.8
0.0
Private equity
0.0
0.0
0.0
0.0
Infrastructure1
0.0
0.0
1.3
0.0
Property1
0.0
0.0
0.6
0.0
Private debt
0.0
0.0
1.4
0.0
Other2
0.0
0.0
5.5
0.0
Total3
100.0
100.0
100.0
100.0
1Includes listed and unlisted allocations. 2Other includes listed/unlisted natural resources, gold, emerging market climate bonds, convertible bonds, insurance linked securities and derivatives. 3Figures may not sum due to rounding.
Cash active (default) Fund (additional default arrangement)
Asset class
Allocation 25 y/o %
Allocation 45 y/o %
Allocation 55 y/o %
Allocation at retirement %
Cash
100.0
100.0
100.0
100.0
Corporate bonds (UK and overseas)
0.0
0.0
0.0
0.0
UK government bonds
0.0
0.0
0.0
0.0
Overseas government bonds
0.0
0.0
0.0
0.0
Listed equities
0.0
0.0
0.0
0.0
Private equity
0.0
0.0
0.0
0.0
Infrastructure1
0.0
0.0
0.0
0.0
Property1
0.0
0.0
0.0
0.0
Private debt
0.0
0.0
0.0
0.0
Other2
0.0
0.0
0.0
0.0
Total3
100.0
100.0
100.0
100.0
1Includes listed and unlisted allocations. 2Other includes listed/unlisted natural resources, gold, emerging market climate bonds, convertible bonds, insurance linked securities and derivatives. 3Figures may not sum due to rounding.
There are no performance fees attached to the default arrangements and therefore performance fees make up 0% of the average value of the assets held by that default arrangement.
There are two additional legacy default arrangements: the Annuity Purchase Strategy and the Cash Lifecycle. These strategies are no longer used as default arrangements for new members. A number of members who were within one year of their target retirement age at the time of the asset transition to the current Flexible Income Strategy and the Lump Sum Strategy were allowed to remain invested in these legacy default targeted strategies.
The Annuity Purchase Strategy is designed for members to take 25% of their DC pension pot as a cash lump sum and the balance to buy an annuity (a regular income for life) at their target retirement age. This strategy works by switching the investment mix of members’ DC pension pots from the ‘Early Growth Fund’ into the ‘Late Growth Fund’ from 20 years to retirement. Members’ DC pension pots are then switched into the ‘Approaching Retirement – Annuity Purchase Fund’ and when they are in their final working years and reach retirement, their DC pension pots are switched into the ‘Through Retirement – Annuity Purchase Fund’. The objective of the Annuity Purchase Strategy is to be appropriate for members intending to take their benefits in the form of an annuity at retirement.
The Cash Lifecycle is designed for members to use all of their DC pension pot for a cash lump sum at their target retirement age. This strategy works by switching the investment mix of members’ DC pension pots from the Global Equities – passive Fund into the Diversified Assets – active Fund and then switching into the Cash – active Fund as the member nears retirement. The objective of the Cash Lifecycle is to be appropriate for members seeking to take their entire pot as a cash lump sum at retirement. All members invested in the Cash Lifecycle are at or within 5 years to or beyond target retirement age.
Additional default investment arrangement
The Scheme also makes use of an additional default fund called the Cash - active (default) Fund (previously named the Cash – active (ex-Property) Fund). This fund was introduced in March 2020 (and held a small amount of assets from March 2020 to early December 2020) as a result of a decision taken to ensure that there was a fund where members’ contributions could be allocated if their selected fund closed (as was the case for the Property – active Fund in 2020). This fund invests in the same underlying fund as the Cash - active Fund. As members’ contributions can be directed into this fund without them making an active selection, this fund will continue to be treated as a default for the purpose of fulfilling legislative requirements.
The objective of the Cash – active (default) Fund is to protect the absolute value of the investment by investing in deposits and other short-term money market instruments. The fund aims to perform in line with its benchmark.
Statement of Investment Principles
The Trustee is responsible for the Scheme’s investment governance, which includes setting and monitoring the investment strategy for the Scheme’s default arrangements.
Details of the objectives and the Trustee’s policies regarding the default arrangements can be found in a document called the ‘Statement of Investment Principles - Defined Contribution’ ('SIP'). The Scheme’s most recent DC SIP covering the default arrangements is attached to this Statement.
As stated in the SIP, the Trustee aims to provide default arrangements that the Trustee believes to be in the best interests for those members that do not wish to make their own investment decisions. As at the end of the Scheme Year, the Scheme’s Flexible Income Strategy and the Lump Sum Strategy’s objectives were to generate returns significantly above inflation whilst members are some distance from retirement, but then to switch automatically and gradually into less risky assets as the member nears retirement with the asset allocation at retirement being designed to be appropriate for members who wish to flexibly take their benefits through an income drawdown arrangement or remain invested in the Scheme or in the case of the Lump Sum Strategy, take their retirement pot as cash.
The objectives of the Scheme’s other default arrangements are noted in the applicable sections above.
Review and monitoring of the default arrangements
The Trustee formally reviews the strategy and performance of the default arrangements (and other investments) in detail at least every three years or immediately following any significant change in investment policy or the Scheme’s member profile. The last formal triennial investment strategy and performance review took place on 3 March 2023.
As part of the triennial strategy review on 3 March 2023, the Trustee agreed to adjust the structure of the Flexible Income, Lump Sum and Annuity Purchase strategies. The previous approach of the strategies was for members to be invested in white-labelled funds, split by asset class. The current approach is for members to be invested in the ‘Early Growth Fund,’ before switching into the ‘Late Growth Fund’ from 20 years to retirement. Members are then switched into the ‘Approaching Retirement Fund,’ of which there are three versions dependent on the strategy members are invested in. When members are in their final working years and reach retirement, they are transitioned into the ‘Through Retirement Fund’, of which there are three versions dependent on the strategy members are invested in. These changes were implemented on 20 June 2024.
As part of an ongoing project to investigate how the Scheme can access private markets, the Trustee agreed in the strategy review to allocate 15% of the Early Growth Fund to private markets. The Trustee agreed to use a bespoke multi-asset private markets fund, the WS Fulcrum Diversified Private Markets (H) Long Term Asset Fund (‘LTAF’), and the first investment was made on 1 July 2024. The percentage invested in private markets has been gradually built up over 2024 to reach the target allocation of 15% in 2025.
The Trustee concluded that taking a flexible income (e.g. income drawdown) remains an appropriate retirement income target for the main default arrangement. The growth phase of the default arrangement outperformed inflation over the last 5 years to 31 December 2024. As part of this review the Trustee confirmed that the Scheme's targeted strategies were adequately and appropriately diversified between different asset classes and that the self-select options provide a suitably diversified range to choose from. Members also have the choice to invest into any of the 18 DC funds available in the self-select range (known as ’Freechoice’). These options were also included in the latest review.
The Trustee also reviews the performance of the default arrangements against their aims, objectives and policies on a quarterly basis, through a performance report provided by their investment advisors. This review includes an analysis of DC fund performance and member activity to check that the risk and return levels meet expectations. The Trustee monitors both short- and long-term performance on a quarterly basis. The Trustee reviews that took place during the Scheme year concluded that over the long-term the default arrangements were performing broadly as expected given the market backdrop and the assets held and that the performance of the default arrangements remains broadly consistent with their stated aims and objectives.
View the DC Statement of Investment Principles
If you would like to view the full DC Statement of Investment Principles here
The Trustee is required to set out the charges incurred by members during the Scheme Year in this Statement. As the sponsoring employer pays the DC investment fund annual management charges, platform expenses and all other administration expenses, the member borne charges are limited to the additional fund expenses incurred by the underlying managers in the day-to-day running of the funds (for example, custodian fees etc), with the exception of some legacy AVCs funds
The Trustee carried out a value for members’ assessment, looking back over the Scheme year to 31 December 2019. The Trustee is required to assess the extent to which member borne charges and transaction costs for the Scheme Year represent good value for members.
The Sponsoring employer currently pays the AMC platform expenses and administration costs. Additional expenses (“AE”) are covered by members and are those costs incurred in the management of the underlying funds which are, by nature, flexible and therefore fall outside of the AMC. The Trustee has provided an illustration of the impact of the charges and costs on members pension pots for the default options and four funds from the Freechoice range.
