Siemens Benefits Scheme Pension Scheme Statement of Investment Principles

Transcription

1 Siemens Benefits Scheme Pension Scheme Statement of Investment Principles The Trustees' aim to invest the assets of the Scheme prudently to ensure that the benefits promised to members are provided. The Scheme operates both defined contribution and defined benefit arrangements. In setting investment strategy for the Defined Contribution Section, the Trustees aim to hold units of the various available types as chosen by members. For the Defined Benefits Section, the Trustees first considered the lowest risk asset allocation that they could adopt in relation to the Scheme's liabilities. The asset allocation strategy they have selected is designed to achieve a higher return than the lowest risk strategy while maintaining a prudent approach to meeting the Scheme s liabilities. STRATEGY In the Defined Contribution Section, the Trustees aim to offer members a wide choice of types of units in publically available pooled funds operated by two managers. A private fund specially designed for DC members and which is only available to Siemens members is also available as a choice, and acts as a default for members not specifying a choice of unit fund. The assets held within the Defined Contributions scheme in each unit fund will depend on the choices made by members for the investment of these contributions. In the Defined Benefit Section, the current asset allocation strategy was set on 3 October The table below sets out the approximate initial asset allocation of the Scheme's non-property assets. In addition, the Scheme holds cash earmarked for further property investment and a portfolio of commercial property. Asset Class Initial Weighting % UK Equities 28 Overseas Equities 28 Fixed Interest gilts 20 Index-linked gilts 12 Corporate bonds 12 Private equity 0 This Statement of Investment Principles is produced to meet the requirements of the Pensions Act 1995 and to reflect the Government's Voluntary code of conduct for Institutional Investment in the UK. The Trustees also comply with the requirements to maintain and take advice on the Statement and with the disclosure requirements.

2 The proportions invested in each asset class will vary as stockmarkets move, and the above table will change accordingly. The planned asset allocation strategy was determined with regard to the actuarial characteristics of the Scheme, in particular the strength of the funding position and the liability profile. It was based on the assumption that equities would outperform gilts by 3% pa over the long term. The Trustees' considered written advice from their investment advisers when choosing the Scheme's planned asset allocation strategy. It is the Trustees' policy to consider: A full range of asset classes The risks and rewards of a range of alternative asset allocation strategies The suitability of each asset class The need for appropriate diversification Certain alternative investments, such as private equity, property and hedge funds, have characteristics that cannot be modelled. Therefore decisions about their inclusion / exclusion were made using qualitative judgement.

3 GOVERNANCE The Trustees of the Scheme are responsible for the investment of the Scheme assets in the Defined Benefits Section and for the type and range of units on offer within the Defined Contributions Section. In the Defined Benefits Section the Trustees take some decisions themselves and delegate others. When deciding which decisions to take themselves and which to delegate, the Trustees have taken into account whether they have the appropriate training and expert advice in order to take an informed decision. The Trustees have established the following decision making structure: Trustees Set structures and processes for carrying out their role Select planned asset allocation strategy for Defined Benefits Section Select and monitor type and range of units on offer in Defined Contribution Section Select and monitor direct investments (see below) Select investment advisers and fund managers Decide on structure for implementing investment strategy Monitor investment advisers and fund managers Make ongoing decisions relevant to the operational principles of the Scheme's investment strategy Investment Adviser Advises on all aspects of the investment of the Scheme assets, including implementation Advises on this statement Provides required training Fund Managers Operate within the terms of this statement and their written contracts Select individual investments with regard to their suitability and diversification Advise Trustees on suitability of the indices in their benchmark Monitor the planned asset allocation strategy Provide pooled funds for Defined Contribution Section The Pensions Act 1995 distinguishes between investments where the management is delegated to a fund manager with a written contract and those where a product is purchased without a contract, eg the purchase of an insurance policy or units in a pooled vehicle. The latter are known as direct investments. The Trustees' policy is to review their direct investments and to obtain written advice about them at regular intervals (normally annually). These include vehicles available for members' AVCs and the Defined Contribution Section pooled funds. When deciding whether or not to make any new direct investments the Trustees will obtain written advice and consider whether future decisions about those investments should be delegated to the fund managers.

4 The written advice will consider the suitability of the investments, the need for diversification and the principles contained in this statement. The Trustees' investment adviser, Hewitt Bacon & Woodrow, has the knowledge and experience required under the Pensions Act MFR For the Defined Benefits Section, the Trustees' policy is to target a Scheme MFR funding ratio of 100% or more. The Trustees will consider the MFR funding ratio at intervals as required by legislation, and review the suitability of the planned asset allocation strategy to ensure it remains appropriate. IMPLEMENTATION Hewitt Bacon & Woodrow has been selected as investment adviser to the Trustees. They operate under an agreement to provide a full service designed to ensure that the Trustees are fully briefed both to take the decisions they take themselves and to monitor those they delegate. They are paid on a time cost basis. The fund manager structure and investment objectives for each fund manager ("mandates") are set out below: Defined Benefits Section UBS Global Asset Management To outperform the FTSE All Share Index by 2% per annum over rolling three year periods Legal & General Assurance (Pensions Management) Limited To perform in line with a fixed benchmark comprising UK equities, overseas equities, fixed interest investments, index-linked gilts and corporate bonds. CB Hillier Parker To outperform a bespoke property-based benchmark based on a subset of IPD participating funds. The Trustees' have delegated all day-to-day decisions about the investments that fall within each mandate to the relevant fund manager through a written contract. These duties include Realisation of investments Taking into account socially responsible factors Voting and corporate governance in relation to the financial potential of the Scheme's assets

5 Defined Contribution Section UBS Global Asset Management Life Limited Units are available in the following pooled funds: Siemens Core Growth Private Fund, UK Equity Fund, Overseas Equity Fund(excluding UK) and Triton Property Fund Legal & General Assurance (Pensions Management) Limited Units are available in the following indexed pooled funds: UK Equity Fund, World excluding UK Equity Fund, Over 15 year Gilt Fund, Over 5 Year Index Linked Gilt Fund, Cash Fund & UK Equity Ethical Fund. The Trustees expect the fund managers to manage the assets delegated to them under the terms of their respective contracts and to give effect to the principles in this statement so far as is reasonably practicable. For the Defined Benefits Section, UBS Global Asset Management and CB Hillier Parker are remunerated on a performance related fee basis, while Legal & General are remunerated on a fixed fee basis. This structure has been chosen to align the fund managers' interests with those of the Scheme. For the Defined Contributions Section, each pooled fund operates on a fixed fee basis, except for the Triton Property Fund and the Siemens Core Growth Private Fund which include a performance related element. Legal & General Assurance (Pensions Management) Limited and UBS Global Asset Management Life Limited operate a portfolio of holdings in passively managed unit funds for the Scheme, and the Trustee has a policy of assurance with both companies rather than segregated assets. Fund managers pay commissions to third parties on many trades they undertake in the management of the assets. For the Defined Benefits Section, the Trustees receive an annual statement from the investment adviser setting out all the costs of the investment of the Scheme. They use this statement to ensure that the costs incurred are commensurate with the goods and services received. The Trustees have appointed UBS Global Asset Management Client Services Ltd. and its property legal advisers as the Scheme's custodians. No external custodian is needed for the policies with Legal & General Assurance (Pensions Management) Limited and UBS Global Asset Management Life Limited. The custodians provide safekeeping for all the Scheme's assets and perform the administrative duties attached, such as the collection of interest and dividends and dealing with corporate actions.