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 (see below).
The Trustee endeavours to ensure that the additional fund expenses are below 0.20% per annum on each fund. As at 31 December 2019, the highest additional expenses of all funds that were available to members was for the Sustainable and Responsible Equities – active Fund, at 0.19%.
The Trustee is also required to disclose transaction cost figures. In the context of this Statement, the transaction costs shown are those incurred when the Scheme’s fund managers buy and sell assets within investment funds but are exclusive of any costs incurred when members invest in and switch between funds.
The transaction costs are borne by members. The charges and transaction costs have been supplied by Fidelity (the Scheme’s platform provider). All transaction cost information has been provided for the Scheme Year.
When preparing this section of the Statement, including the illustrations, the Trustee has taken account of statutory guidance. All additional fund expenses and transaction cost figures shown in this section are over the Scheme Year. Due to the way in which transaction costs have been calculated it is possible for figures to be negative; since transaction costs are unlikely to be negative over the long term the Trustee has shown any negative figure as zero.
You have four investment options:
The default arrangement for most DC-only members is the Flexible Income Strategy, for most Hybrid members the default arrangement is the Lump Sum Strategy. The default arrangements have been set up as a Lifecycle approach, which means that members’ assets are automatically moved between different investment funds as they approach their retirement date. This means that the level of charges and transaction costs will vary depending on how close members are to retirement and in which funds they are invested.
For the period covered by this Statement, annualised charges and transaction costs are set out in the following tables.
Flexible Income Strategy (current DC Only default) charges and transaction costs
Years to
retirement
Additional
fund expenses
Transaction
costs
20 or more years to retirement
0.00%
0.11%
15 years to retirement
0.02%
0.19%
10 years to retirement
0.03%
0.27%
5 years to retirement
0.04%
0.28%
At retirement
0.03%
0.22%
Lump Sum Strategy (current hybrid member default) charges and transaction costs
Years to
retirement
Additional
fund expenses
Transaction
costs
20 or more years to retirement
0.00%
0.11%
15 years to retirement
0.02%
0.19%
10 years to retirement
0.03%
0.27%
5 years to retirement
0.04%
0.28%
At retirement
0.02%
0.10%
For the Scheme Year, annualised charges and transaction costs for the legacy default arrangements are set out in the following tables. Charges are only shown at retirement for the Cash Lifecycle as the strategy is closed to new members and all members in this strategy are at least at their Target Retirement Age.
Annuity Purchase Strategy (legacy default arrangement: prior to 2018 named ‘Income Lifecycle’ and current Freechoice option) charges and transaction costs
Years to
retirement
Additional
fund expenses
Transaction
costs
20 or more years to retirement
0.00%
0.11%
15 years to retirement
0.02%
0.19%
10 years to retirement
0.03%
0.27%
5 years to retirement
0.02%
0.19%
At retirement
0.00%
0.00%
Cash Lifecycle (legacy default arrangement) charges and transaction costs
Years to retirement
Additional fund expenses
Transaction costs
At retirement
0.00%
0.00%
With the exception of the legacy Cash Lifecycle Strategy, the default arrangements are also available as self-select options for those not defaulted into them. Members also have the choice to invest into any of the 18 funds available in the self-select range (known as “Freechoice”).
The level of charges for each self-select fund and the transaction costs over the Scheme Year are set out in the following table. The underlying funds used within the current main default arrangements are shown in bold.
Self-select fund charges and transaction costs
Fund name
Additional fund expenses
Transaction costs
UK Equities - active
0.02%
0.13%
Diversified Assets - active
0.06%
0.43%
Shariah Law Equities - passive
0.00%
0.04%
Sustainable and Responsible Equities - active
0.19%
0.18%
Global Bonds - active
0.03%
0.13%
UK Equities - passive
0.00%
0.00%
Global Equities - passive
0.00%
0.11%
Property - active
0.03%
0.00%
Fixed Annuity Tracker - passive
0.00%
0.00%
Inflation Linked Annuity Tracker - passive
0.00%
0.03%
Cash - active
0.00%
0.00%
European (ex UK) Equities - passive
0.00%
0.00%
North American Equities - passive
0.00%
0.00%
Japanese Equities - passive
0.00%
0.00%
Asia Pacific (ex Japan) Equities - passive
0.00%
0.03%
Global Equities - active
0.09%
0.13%
Sterling Corporate Bonds - active
0.01%
0.12%
Emerging Markets Equities - active
0.04%
0.39%
The Scheme also has three further legacy lifecycle strategies which were previously available for members to select namely the Capital Lifecycle, Lifecycle 2 and Flexicycle. These strategies are closed to new members, but existing members have been permitted to remain invested. For the Scheme Year, annualised charges and transaction costs are set out below.
Capital Lifecycle (legacy Freechoice lifecyle) charges and transaction costs
Years to retirement
Additional fund expenses
Transaction costs
At retirement
0.05%
0.32%
All members invested in this strategy are past their Target Retirement Age.
Lifecycle 2 (legacy Freechoice lifecyle) charges and transaction costs
Years to retirement
Additional fund expenses
Transaction costs
20 or more years to retirement
0.07%
0.16%
15 years to retirement
0.07%
0.16%
10 years to retirement
0.07%
0.16%
5 years to retirement
0.07%
0.16%
At retirement
0.00%
0.00%
Flexicycle charges and transaction costs
Flexicycle is a lifecycle strategy that allowed members to create an investment strategy by selecting their preferred growth and consolidation phase funds and the point at which their DC pension pot would switch between them. There was also a choice of switching periods between these phases and a choice of at retirement allocation. The Trustee is therefore not able to display annualised charges and transaction costs for each possible combination in this Statement. The relevant charges and costs can be seen for the possible underlying funds with the options for the growth phase being the Global Equities – active, Global Equities – passive, Diversified Assets – active, Sustainable and Responsible Equities – active and Emerging Markets Equities – active Funds and the options for the consolidation phase being the Fixed Annuity Tracker – passive, Inflation Linked Annuity Tracker – passive, Diversified Assets – active and Cash – active Funds.
As well as the DC funds noted above, which contain the majority of the Scheme’s AVC investments, some members were also invested in a number of legacy AVC funds during the Scheme Year.
The majority of the Scheme's legacy AVC assets invested in "with-profits" funds. With-profits returns are delivered through guaranteed annual and non-guaranteed terminal bonuses (guarantees only apply at contractual events, eg retirement) and these can be influenced by the asset allocation within the fund which is itself reflective of the strength of the provider, and therefore affects investment returns and bonus rates.
The Trustee, with their investment advisors, have sought to obtain details of the transaction costs from the Scheme’s legacy AVC providers for the Scheme Year. At the time of producing this statement, that process is still ongoing. The Trustee will continue to ask its legacy AVC providers on a regular basis to disclose details of the transaction cost data with the intention of adding this into the next annual governance statement.
The charges shown for the AVC arrangements are the Total Expense Ratios (“TER”) over the Scheme Year (except where otherwise shown), which includes the annual fund fees as these are not met by the Bank, unlike for the DC funds.
Friends Life AVC funds
TER*
Transaction costs
GM Mixed Fund
0.32%
*****
GM UK Equity Fund
0.36%
*****
GM Overseas Equity Fund
0.45%
*****
GM North American Equity Fund
0.48%
*****
GM European Equity Fund
0.41%
*****
GM Asia Pacific ex Japan Equity Fund
0.47%
*****
GM Property Fund
0.60%
*****
With-profits Fund
0.64%
n/a****
Standard Life AVC funds
TER/*
Transaction costs
Pension Millennium With Profits Fund
1.15%
n/a****
Pension With Profits Fund
1.75%
n/a****
Standard Life Managed Pension Fund
1.02%
0.00
Standard Life Property Pension Fund
1.03%
*****
Standard Life European Equity Pension Fund
1.02%
*****
Standard Life International Equity Pension Fund
1.03%
*****
Standard Life North American Equity Pension Fund
1.01%
*****
Standard Life UK Equity Pension Fund
1.01%
*****
Pension Millennium With Profits 2006 Fund
1.20%
n/a****
Other AVC providers
TER*
Transaction costs
Schroders Life Managed Balanced Fund
1.69%
*****
Aegon Cash Fund
1.00%**
*****
Equitable Life With-Profits Fund*
1.50%
1.04%
Phoenix Life With-Profits Fund
n/a****
n/a****
Prudential With-Profits Cash Accumulation Fund
1.24%
0.09%
Scottish Widows With-Profit Fund
n/a****
n/a****
*TER = Total Expense Ratio. The TER encompasses charges made to / by funds, typically including the Annual Management Charge, custody fees and other expenses
**Annual Management Charge only. TER varies depending on performance/day to day running costs
***Data as at 31 March 2020. The Scheme’s investment advisers are working with the provider to get information for the Scheme Year period.
****TER and/or Transaction cost is implicit. The Scheme’s investment advisors are working with the provider to confirm this cost over the period.
***** Transaction costs were not provided to the Trustee from the fund provider. The Scheme’s investment advisors are working with the
provider to confirm this cost over the period.
View the Governance Statement
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The Trustee has made available a range of investment funds for members.Each member is responsible for specifying one or more funds for the investment of their account, having regard to their attitude to the risks involved.If a member does not choose an investment option, their account will be invested into the default option applicable to them, which is managed as a “lifecycle” strategy (ie it automatically combines investments in proportions that vary according to the time to retirement age). The lifecycles are 100% invested in equities until twenty years from a member’s target retirement age from which point they transition gradually into less risky assets appropriate to the outcome targeted.
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 as and four funds from the Freechoice range.