Statement of Investment Principles My Workplace Pension Scheme

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1 Statement of Investment Principles My Workplace Pension Scheme 1. Introduction The Statement of Investment Principles (SIP) is a statutory requirement of the Pensions Acts 1995 & 2004, the Occupational Pension Schemes (Investment) Regulation The Trustees in preparing this Statement of Investment Principles have also adopted the recommended framework of the Audit and Assurance Faculty (AAF) 02/07. AAF 02/07 provides a framework for performing assurance engagements on various aspects of operations provided by external organisations and which may be subject to external independent examination. The Master Trusts Supplement to AAF 02/07 has been developed based on discussions between ICAEW and the Regulator and is for use by trustees The ICAEW is a professional membership organisation that promotes, develops and supports chartered accountants worldwide. The ICAEW Audit and Assurance Faculty is a leading authority on external audit and other assurance activities and is recognised as a source of expertise on audit issues. The Trustees in preparing this document and the appointment of fund managers the Trustees have consulted a number of suitably qualified persons and firms, regulated by the FCA. The investment strategy can be split between strategic objectives and day to day objectives. The strategic objectives fall within the remit of the Trustees having regard to the rules of the scheme and day-to-day objectives and management of the assets, which is the responsibility of the investment managers. 1 continues > 2. Investment Terminology Some members may be unfamiliar with investment terminology, we have explained the terminology used here. Security: This is a description given to assets (i.e. something of value) which cash is invested into. Securities are typically divided into debts and equities. Debt/Bonds: This security represents money that is borrowed and must be repaid, with terms that define the amount borrowed, interest rate and maturity/renewal date. Debt securities include government borrowings such as gilts, and corporate bonds which are certificates used by companies to raise money. Equities: Represent ownership interest held by shareholders in a corporation, such as a stock. Unlike holders of debt securities who generally receive only interest and the repayment of the principal, holders of equity securities are able to profit from capital gains, as well as income from profits paid to shareholders which is known as dividends. Volatility: This refers to the amount of uncertainty or risk about the size of changes in a security s value. A higher volatility means that a security s value can potentially be spread out over a larger range of values. This means that the price of the security can change dramatically over a short time period in either direction. A lower volatility means that a security s value does not fluctuate dramatically, but changes in value at a steady pace over a period of time. Passive management (also called passive investing) is an investment strategy that tracks a marketweighted index or portfolio. The idea is to minimise investing fees and avoid the adverse consequences of failing to correctly anticipate the future. By tracking an index, an investment portfolio typically gets good diversification, low turnover (good for keeping down internal transaction costs), and low management fees. With low fees, an investor in such a fund would have higher returns than a similar fund with similar investments but higher management fees and/or turnover/ transaction costs. Active management (also called active investing) refers to a portfolio management strategy where the manager makes specific investments with the goal of outperforming an investment benchmark index. Active management will have traditionally higher fund costs than passive management, as the objectives require greater market activity by a fund manager. Proprietary algorithm sounds quite a complex term but their application is now present in day to day applications such as measuring consumer shopping habits, and google search engine rankings. In the field of investing, fund managers use mathematical formulas known as algorithms, to evaluate underlying economic conditions and historical data to select investment stocks which will achieve the best returns for the objectives of the fund. FREEPHONE myworkplacepension.com info@myworkplacepension.com

2 3. Scheme Key Investment Objective The Trustees key objective is to ensure members are provided adequately for their retirement through an appropriate investment of their accumulated pension contributions. In respect of pension transfers in from other pension schemes, the Trustees aim to ensure that the members achieve better retirement outcomes as a consequence of those transfers. 4. Governance The Trustees of the Scheme are responsible for the investment of assets. Strategic decisions are taken by the Trustees, but are delegated to others. Day to Day investment decisions are taken by the fund managers. The appointment of fund managers are recommended to the Trustees. Where the Trustees undertake an informed decision, they consider first whether they have the information and skills to do so. Where they have not they will take relevant advice from a qualified person. 5. Corporate Governance The Trustees require the Fund Managers to exercise current best practice in accordance with certain codes, including the UK Corporate Governance and UK Stewardship Code. The Trustees monitor that best practice. 6. Strategic Investment Decisions (SID) Trust based occupational money purchase schemes are not required to contain capital adequacy or subscription to the Pension Protection Fund provided in defined benefit schemes or, in certain cases, access to the Financial Services Compensation Scheme available to contract based schemes. However, eligibility to FSCS does apply further information is set out in the risk section to this SIP. Members bear the investment risk; there are strong controls over the protection of assets and consideration is given to the availability of compensation when selecting investments. Reflecting this, the Trustees do not permit the holding of nonready realisable assets (as defined by the FCA) in any funds, unless such a holding is necessary to reduce investment risk by a fund manager or to ensure balance within an investment portfolio; for example through a short term currency fluctuation and scheme investment modelling requirements. Additionally, trading in any asset class on a non-recognised exchange by a fund manager is also prohibited. Collaterialisation of assets are not permitted - in particular stock lending unless it is necessary as part of portfolio rebalancing. Further, scheme borrowing is not permitted. The Trustees consider that recognised exchanges and the wide choice of mainstream investments within the list of standard assets proscribed by the FCA and HMRC for fund managers best serve the membership of the fund. Contributions and pension payments are received either into Trustees appointed Banker s account or directed to the Fund Manager, no payments in or out from any other source is permitted. In the case of Sharia investment funds, please refer to our Sharia Guide which forms part of this statement of investment principles. The Trustees policy is for the pooling of investment funds, therefore direct holdings (other than short term cash) of any one investment is not exercised. The Trustees consider that the two approaches to investment management of active and passive should be reflected within management choice. A third combined option should also be available. 7. Risk Approach The Trustees risk approach reflects member circumstances, including: Attitude to risk - some members have a cautious approach to investing whereas others have a more speculative objective with pension saving. As members approach retirement, so should they be offered a reduction of risk (arising for example, from stock-market fluctuation) to investing through an automatic switching facility - lifestyling. A reduction in fund value as a result of investment loss would result in a lower pension commencement lump sum and pension income. Some members, may of course wish to defer lifestyling and be given the option to switch funds at a date which best suits their personal circumstances. Retirement Age - pension flexibility gives members the options to draw benefits from age 55, whilst remaining in employment with the same employer or elsewhere. Further, the decision to stop working does not necessarily force a member from drawing their benefits at a time that may not suit their circumstances. Giving members the opportunity to have flexibility over investment timing is reflected in risk approach and safeguard of pension benefits. The potential impact of inflation does erode the real value of pension savings. Therefore, seeking to outperform inflation on investments both pre and post retirement is such that consideration has to be made to current and forecasted Bank of England inflation policy. 2 continues >

3 7(a). Financial Services Compensation Scheme The Trustees of My Workplace Pension are the Trustees of the Scheme and on behalf of the scheme members are eligible to claim on the FSCS if, for example, a fund manager holds client money or assets belonging to the scheme and is unable to return it, provided the sponsoring employer of the scheme is not large, as defined in FCA rules. A company will be considered large where it meets two of the following criteria: 1. A turnover of more than 6.5m 2. A balance sheet total of more than 3.26m 3. More than 50 employees. In a member s case, the FSCS is required to look through the trustees and treat each member as having a claim (up to the 50,000 limit for each member in the case of investment claims). The Trustees in respect of Scheme boarding will issue an employer questionnaire to qualify the employer s size. It should be noted that at the time of this publication the FCA has stated that it intends to amend it s sourcebook so that that trustees of schemes with large employers will be eligible to claim on the FSCS where the benefits are money purchase benefits. This is because it is not clear that the size of the employer is relevant in the case of money purchase benefits, since the employer is not guaranteeing anything. The change would mean that consumers have the same protection, irrespective of the size of the employer. It should also be noted, that the employers and members will not be affected in respect of their existing cover for the blanket indemnity insurance that applies to the scheme of 2,000,000 per claim. The Trustees will ensure that communication is made to employers before enrolment on whether they are covered by FSCS in respect of the failure of a Fund Manager. 8. Choice of Funds The Trustees policy is to provide a range of suitable funds to members, communicated clearly to help them make an informed choice. Where a member wishes to defer that choice to the Trustees, then a default option is provided, with lifestyling a further facility that can be removed or added as the member chooses. The Trustees have taken expert advice from investment advisors in accordance with current statutory requirements. The current policy of fund choice considers: A comprehensive range of asset classes. Alternative fund management approaches to investing Best outcome charging structure given structure of the Scheme. Diversification of asset mix The appropriateness of such asset mixes for this master trust defined contribution scheme. What can be defined as an operational risk, in that the construction of the funds, managers not only meet regulatory requirements, but in doing so poor advice or negligence is prevented. Over the long term, equities traditionally exceed price inflation and general salary growth. Bond and cash options may offer lower than returns on predominantly equity options on an equivalent basis. Some bond funds may match the price of annuities, and therefore may offer some security where an annuity is secured. Cash holdings whilst short term protection against other asset classes are generally considered appropriate for payment of lump sum and pension benefits. Consideration must be given to economic conditions and equities may not always outperform bonds; the Trustees believe that there are no certainties in respect of strategic investing and regular reviews of funds and managers are necessary. 9. Realisation of Assets The Trustees sell assets on instruction by a member if they wish to move from one fund to another and/or on retirement to pay benefits. Liquidity of the fund is also a consideration. The Trustees will consider actuarial advice where they consider necessary. 10. Selection of Fund Manager The Trustees have considered and been recommended a number of fund managers from financial advisors and investment professionals. The Trustees consider that the three approaches to investment management should be reflected within management choice. The Trustees consider that this wide choice of investment management expertise covers the different approaches to investment management. A. In respect of active management, the Trustees have appointed James Goodchild who is the Principal of Westbury Private Clients LLP. James has managed both private and institutional money exceeding 1 billion in fund. James hold a masters with distinction in Finance and a degree with honours in Law. He holds chartered status at the Chartered Institute for Securities and Investment. He is winner of the Top 40 Under PAM award for the years 2011 and The funds chosen have over their term outperformed the benchmark objectives. B. In respect of passive management the Trustees have appointed Vanguard Asset Management which as part of Vanguard Group is one of the world s largest has passive asset managers which an exemplary track record in passive asset management. Vanguard s target allocation funds achieve their mix of equity 3 continues >

4 and bond exposures by employing passive indexing. Indexing offers a competitive cost profile relative to active strategies thus increasing the likelihood that investors will achieve better overall performance. The funds chosen have outperformed the benchmarks chosen. C. Strand Capital apply a scientific approach to investment forecasting. They have developed an infrastructure that allows them to evaluate a number of different approaches to 11. Fund Managers investment management and apply that approach which best suits the objectives of the fund. The lead managers are Hamilton Keats, a physicist and statistician from Imperial College London, Steffen Hoyemsvoll physicist from University of Oxford and David Cassettari a computer scientist from Imperial College London. The portfolio managers have strong experience in management, investment analysts, market trading, mathematicians and computer science for firms such as Deutsche Bank, RBS and HSBC. The approach combines both active and passive approaches to investment management albeit using a scientific approach. The Trustees consider that these investment firms are best suited to deliver the objectives of the Scheme and give a balance of active, passive, combined investment management expertise. Fund Manager 1 Westbury Private Clients LLP which is authorised and regulated by the Financial Conduct Authority (FCA). FCA Firm Reference No Westbury Private Clients LLP is a limited liability partnership incorporated in England and Wales under Companies House number OC Approach to Investing Westbury Private Clients is a boutique Discretionary Wealth Management and the Trustees have negotiated best cost terms with this fund manager. Westbury Private Clients focus on active wealth preservation whereby controlled risk approach can deliver positive returns in both challenging and not so challenging markets. Westbury are valuedriven investors focussing on long-term wealth preservation. They have a contrarian approach to selecting investments believing that the best long-term opportunities arise when markets are depressed. They aim to take full advantage of opportunities for during periods of market dislocation. They carry out their own internal research, and aim to deliver absolute positive performance and significant relative performance even when equity markets fall. Fund Choices 1. Higher Risk Fund - known as Diamond The objective of this fund is to target cash plus 7% p.a, with an absolute benchmark of 4.5% through investing into asset classes which the fund manager considers most appropriate from time to time. This will include, equities, bonds, property. 2. Medium Risk Fund - known as Marble The balanced fund is a default fund and the objective of the fund is to target cash plus 5% p.a, with an absolute benchmark of 3..5%; through an approach that focuses on two asset classes which the fund manager sees the most value. This strategy is best suited to those who prefer moderate risk and moderate volatility. This will include, equities, bonds, property. 3. Cautious Fund - known as Granite This has been created for those who are concerned with an ultra cautious approach to investment, which can be described as focus of preservation of active wealth preservation. It is designed with a 2.50% benchmark rate of return on investment growth. The fund is highly diversified in it s selection and has a low volatility approach. Granite aims to achieve strong and stable growth that tends to perform well in more challenging market conditions, therefore providing a solid and stable foundation for all, or, part of an individual s investment strategy. 4. Balanced Medium Risk Ethical Fund - known as Greenstone The objective of this fund is to target cash plus 4.5% p.a and aims to minimise volatility. Greenstone aims to generate capital growth by investing in equities, bond and fund with a preference for exposure to sustainable, socially and enviromentally responsible companies. Note: The Trustees are in discussions to provide a lifestyling exposure to sustainable, socially and environmentally responsible investments with reducing risk and cash balances held with banks which in the opinion of the Trustees, clearly articulate an ethical policy covering a range of areas including human rights, genetic modification and animal welfare. Further information will be published shortly. 4 continues >

5 Fund Manager 2 Vanguard Asset Management, are part of Vanguard Group which has $3.4 trillion assets under management. Vanguard Asset Management Limited which is authorised and regulated in the UK by the Financial Conduct Authority under reference number Vanguard Asset Management, Limited is a limited company incorporated in England and Wales under Companies House number Approach to Investing Vanguard has launched the Vanguard Life Strategy Funds, which are single-fund solutions designed to meet a range of needs. Each of the funds has a different target weighting of equities and bonds, with the aim of delivering a range of risk and return outcomes for investors. Vanguard regularly rebalances the funds to their target allocations to ensure that they continue to meet Trustees needs and the needs of the scheme members. Vanguard adopt a passive approach to investing, and principally trade with tracking market indices in a variety of sectors. The Trustees have been recommended Vanguard Asset Management. Vanguard s target-allocation funds apply a number of investment best practices, including global asset allocation, broad diversification and a balance between risk, return and cost. The funds offer straightforward and transparent design, low investment costs and broad exposure across global equity and bond allocations, all of which are designed to reflect the Trustees approach to Strategic Investment Decisions. In short, they also correlate with Vanguard s Principles for Investment Success. They consist of the following funds chosen: Fund Choices 1. Life Strategy 20% Equity Fund (Cautious) Fund Manager: Vanguard Asset Management The Fund seeks to achieve income and/or capital returns through a portfolio comprising approximately 20% stocks and 80% bonds. The Fund gains exposure to stocks and bonds by investing predominantly in Vanguard passive index funds. Direct investment in stocks and bonds may also be made. 2. Vanguard Life Strategy 40% Equity Acc (Cautious to Balanced) Fund Manager: Vanguard Asset Management The Fund s investment objective is to achieve income and/or capital returns through exposure to a diversified notional portfolio comprised of approximately 60% by value of equity securities; and 40% by value of fixed income securities. The Fund will seek to achieve its investment objective predominantly through investment in passive, indextracking collective investment schemes. 3. U.K. Inflation-Linked Gilt Index Fund Fund Manager: Vanguard Asset Management The fund seeks to track the performance of the index. Investment strategy. The fund employs an indexing investment strategy designed to track the performance of the index. The fund invests by either replicating the index or by sampling the index, meaning that it holds a range of securities that, in aggregate, approximate the full index in terms of key risk factors and other characteristics. 5 continues >

6 Fund Manager 3 Strand Capital Limited is authorised and regulated in the UK by the Financial Conduct Authority under reference number Strand Capital Limited is a limited company incorporated in England and Wales under Companies House number Strand Capital is part of Optima Worldwide Group which is has interests in asset management, merchant banking, security, natural resources and agricultural sectors as well as providing professional services and advice, to Governments, Companies and select individuals in the UK, Middle East, South Asia and Africa. Fund Choices 1. Cash Fund This actively managed fund aims to provide capital protection with returns in line with wholesale money market short-term interest rates. The Fund invests principally in cash, deposits and moneymarket instruments denominated in Sterling. The risk rating for this fund is for adventurous investors who on a risk rating from 1 to 10, where 1 is zero risk and 10 is speculative, the risk rating for this fund is Cautious Model Portfolio (Lower Risk) Objective: The Portfolio is generated by a proprietary algorithm that aims to provide income with the potential for consistent yet constrained capital growth by investing principally in fixed income. The strategy selects funds to invest in from a universe of c. 7,000 diversified funds representing active and passive strategies. Top funds are identified based on technical and fundamental data and are subject to a number of investment principles, more information can be found in the fund fact sheet. The risk rating for this fund is for cautious investors who on a risk rating from 1 to 10, where 1 is zero risk and 10 is speculative, the risk rating for this fund is 4. It should be noted that this fund is new in it s launch therefore only simulated performance data is available, further information is available on the fund fact sheet. 3. Defensive Model Portfolio (Medium Risk) The Portfolio is generated by a proprietary algorithm that aims to generate both growth and income by investing in equities and bonds but may realise some short-term volatility. The strategy selects funds to invest in from a universe of c. 7,000 diversified funds representing active and passive strategies. Top funds are identified based on technical and fundamental data and are subject to a number of investment principles, more information can be found in the fund fact sheet. The risk rating for this fund is for adventurous investors who on a risk rating from 1 to 10, where 1 is zero risk and 10 is speculative, the risk rating for this fund is 5. It should be noted that this fund is new in it s launch therefore only simulated performance data is available, further information is available on the fund fact sheet. 4. Growth Model Portfolio (Adventurous) Objective: The Portfolio is generated by a proprietary algorithm that aims to maximise growth over the medium to long term by investing primarily in equities but may realise some short-term volatility. The strategy selects funds to invest in from a universe of c. 7,000 diversified funds representing active and passive strategies. Top funds are identified based on technical and fundamental data and are subject to a number of investment principles, more information can be found in the fund fact sheet. The risk rating for this fund is for adventurous investors who on a risk rating from 1 to 10, where 1 is zero risk and 10 is speculative, the risk rating for this fund is 6. It should be noted that this fund is new in it s launch therefore only simulated performance data is available, further information is available on the fund fact sheet. The members will be provided with a range of investment choices which allows them to choose the investment which best suits their circumstances and the Fund Manager that they prefer having regard to the information made available. 6 continues >

7 13 Default Options The Default Options are those funds which the trustees have selected as default funds where the members defer the decision to the Trustees. Lower Risk Fund Vanguard Life Strategy 20% Equity Fund Fund Manager: Vanguard Asset Management Annual Management Charge: 0.24% Medium Risk Fund Marble Fund Fund Manager: Westbury Private Clients LLP Annual Management Charge: 0.55% Higher Risk Fund Diamond Fund Fund Manager: Westbury Private Clients LLP Annual Management Charge: 0.55% Lifestyle Option Cautious/Balanced Model Portfolio Fund Manager: Strand Capital Annual Management Charge: 0.50% The Lifestyle Option will undertake automatic asset allocation adjustment reflecting the the needs and demographic profile of the membership. The core risk rating of the fund is lower to medium risk at a rating of 4-5. Whilst the demographic profile changes, the risk rating will remain consistent with the core objectives of the statement of investment principles. 14. Summary The following key controls are in place having regard to this SIP. Best outcome charging structure, which does not impact on active investment management of fund A full range of asset classes to suit different attitudes to risk, ethical and religious considerations A variety of styles and investment manager diversification of choice. The suitability of each asset class for a defined contribution scheme. The need for appropriate diversification of asset classes. The risk of malfeasance, negligence, and general poor advice. The Trustee has sought to minimise such risk by ensuring that suitable qualification, indemnity and compensation cover is available and terms of business have been entered into. Members adopting higher risk, balanced or cautious approach will each be offered a lifestying option; with an automatic lifestyling option available using a proprietary algorithm to both stock selection and reflecting the demographic profile of the Scheme, having regard to the fundamental risk approach of the trustees. 15. Compliance with this SIP The Trustee will monitor compliance with this SIP annually. In particular it will obtain written confirmation from the investment managers that they have complied with this SIP as supplied to them and the Trustee undertakes to advise the managers of any material change to the SIP. 16. Review of this SIP The Trustee will review this SIP tri-annually or, where they consider necessary earlier. The Trustees will take expert investment advice over any alterations to this statement. Signed: B.Davis For Workplace Pension Trustees Limited Dated: 5 April 2016 More information You can find out more about how we can add value to your proposition at You can call us at on freephone number: Our Office is situated at: Blackwell House Guildhall Yard London EC2V 5AE FREEPHONE myworkplacepension.com info@myworkplacepension.com