INVESTMENT COMMITTEE TERMS OF REFERENCE.

Transcription

1 OCTOBER 2015 THE LEGAL & GENERAL MASTERTRUST PENSION SCHEME INVESTMENT COMMITTEE TERMS OF REFERENCE. TERMS OF REFERENCE REVIEWED DATE OF NEXT REVIEW 2 OCTOBER 2015 MARCH 2016

2 PURPOSE. The Trustees of the Legal & General Mastertrust Pension Scheme have established an Investment Committee. This document sets out the powers that are delegated to this Committee. The purpose of the Investment Committee (IC) is to: Provide technical investment support, assistance and guidance to the Trustees in both their day to day activities and in meeting their strategic investment objectives To act as a conduit between Participating Employers Governance Committees and the Trustees RESPONSIBILITIES AND OBJECTIVES. The following responsibilities and objectives should be met by the Committee: To review the sole-governance Permitted Fund range in accordance with the Trustees Statement of Investment Principles and to make such recommendations as are necessary in order for the Trustees to comply with the SIP To review the performance and the continued suitability of the investment platform available via the Trustees policy of insurance with Legal & General Assurance Society Limited To review the default structures (including performance, risk-rating and general suitability) To consider any participating employer s Governance Committee s request for a Permitted Investment range for their employment demographic(s) and to make recommendations to the Trustees To review the Permitted Investment range and Default Fund Structure for any participating employer s Governance Committee triennially or more frequently at the request of the Trustees (default and self-select) To consider any fund risk ratings and descriptions (other than such ratings and descriptions adopted by Legal & General) that a Governance Committee wishes to use in its member communications, and to make recommendations to the Trustees as to the general suitability of that request To consider any request for new funds, new blended funds or lifestyle profiles and to agree any payment of the costs of the build of these requests To review and sign off any fund guides, fund fact sheets for any Permitted Investment range To ensure any fund guides for the Trustees Permitted Fund range and any participating employers allowed Permitted Fund range are maintained To act upon any corporate actions (changes to an investment fund caused either by an action of the manager or by external forces exerted on the investment fund or fund management group that change its essential characteristics) for any Permitted Fund range to understand the impact of that corporate action on the fund To ensure that appropriate means are used to inform any member of any corporate action involving a fund that they are in invested in or may invest in, is advised of the change, either by Legal & General or the participating employer To escalate to the Trustees any concerns they may have over any permitted investment range To deal with such ad-hoc queries from the Trustees, participating employers, Governance Committees, intermediary acting for any party and/or members that requires their specialist input To provide such data to the Trustees as they require both on a regular and occasional basis To commission such independent investment advice as they consider appropriate and necessary to discharge their duties

3 MEMBERSHIP. The Committee will be chaired by a Trustee and all meetings will be attended by the Mastertrust Pension Scheme Manager. Additional Committee members will be drawn from senior persons employed within Legal & General s Workplace DC Pensions division who have sufficient subject-matter knowledge and authority to effectively discharge their responsibilities to the Trustees. Membership will consist of: Chair: Trustee of the Mastertrust Pension Scheme Mastertrust Pension Scheme Manager Head of DC Distribution Head of Investment Proposition Investment Manager Proposition Manager Investment Platform Product Specialist Head of DC Product & Proposition A meeting quorum will comprise of 3 members and must always include one or other of the Chair and the Pensions Scheme Manager, to ensure Trustee representation. The membership structure may be reviewed from time to time and is subject to an annual review by the Trustees.. REPORTING. Minutes of all meetings, discussion and recommendations should be maintained and should be treated as confidential. Minutes will be available to members and designated attendees. Any changes to the circulation are to be agreed with the Pension Scheme Manager. The IC will produce a formal written report to the Trustees in advance of each Trustee meeting and the minutes of the ISC will be presented to the Trustees meeting. STANDING AGENDA ITEMS. Standing items will be: Conflicts Sole Governance Default Update Shared Governance Default Update Investment Changes New Scheme Investments Review of investment risks from Trustee Risk Register Progress on annual communications plan

4 FREQUENCY OF MEETINGS. The Committee shall meet quarterly, in person, and more frequently on an ad-hoc basis as and when required, following consultation with the Chairman. The form the meeting should take (e.g. via , audio conference, eshare, etc) should be agreed with the Chairman, or in his / her absence, the Pension Scheme Manager.

5 APPENDIX 1. The Trustees of the Legal & General WorkSave Mastertrust and the Legal & General WorkSave Mastertrust RAS. This Statement, prepared in terms of the Pensions Act 1995, as amended by the Pensions Act 2004, and having regard to the Occupational Pension Scheme (Investment) Regulations 2005, describes the principles governing decisions by the Trustees of the Legal & General WorkSave Mastertrust and the Legal & General WorkSave Mastertrust RAS (the Trustees ) about the investments of the Legal & General WorkSave Mastertrust & the Legal & General WorkSave Mastertrust RAS ( the Mastertrusts ). INVESTMENT ADVICE Before preparing this Statement, the Trustees have considered written advice from its Investment Committee (IC) comprising officers, employees and investment committees of Legal & General Assurance Society Limited and Legal & General (Portfolio Management Services) Limited supported, as appropriate, by independent research conducted by Old Broad Street Research Limited, and by independent investment advice commissioned by the Trustees. The Trustees will continue to receive advice from the IC on a regular basis in accordance with the Terms of Reference and will from time to time commission independent external advisers to provide such advice as is deemed necessary. The Trustees will review this Statement at least every three years or without delay after any significant change in investment policy. No change will be made without first consulting the affected participating employers and without due consideration of the written advice of the IC or such other advisers as are commissioned for this purpose. However, the ultimate power and responsibility for determining the investment policy lies solely with the Trustees. STRUCTURE OF THE MASTERTRUST Members Each Member of each participating scheme has an individual Pension Account derived from the accumulated contributions from their employer and (where applicable) from themselves and (where applicable) from one or more transfers-in from other Registered Pension Schemes. The Pension Account is used to secure such benefits as are permitted by law and prescribed by the rules pertaining to that participating company. Different constituent parts of each member s Pension Account can be invested in any of the different investment funds made available to them. Participating Employers The structure of the Mastertrust is designed to accommodate two categories of participating employer. First is where participating employers wish to delegate the entirety of the fiduciary and governance responsibilities to the Trustees. This is referred to below as sole governance. Second is where the participating employer operates a Governance Committee and will be actively involved in the governance of their membership demographic, including the investment strategy. This is referred to below as shared governance. Scheme leavers from a shared governance section may, at the participating employer s request, and with the agreement of the Trustees, be moved directly into a sole governance section. This structure gives rise to two distinct sets of general investment objective. These are dealt with separately below.

6 CHOOSING INVESTMENTS (GENERAL) The Trustees invest in a policy of insurance through Legal & General Assurance Society Limited. This insurance policy allows participating companies, and their members, access to Legal & General s WorkSave Investment Platform, which comprises approximately 180 funds and 27 lifestyle profiles. The investment managers and funds on the platform have been selected following formal procedures and reflect the mainstream of investment management and funds that are most appropriate to the needs of corporate customers and their workforces. The platform is intentionally dynamic, with the flexibility and expectation that there will be fund additions and fund deletions. All day-to-day investment matters are delegated to each of the respective fund managers. High level overview Currently, there are 34 different Investment Managers on the platform Over 50 funds are offered by Legal & General Investment Management Limited (LGIM) with 120+ from external Investment Managers 29 passive funds exist within the range, the rest being actively managed. All the main assets classes are represented. THE GOVERNED FUND RANGE Within the overall range of funds exists a subset called the Governed fund range. Currently there are some 56 funds which make up this sub-set. These are funds that are subject to a high degree of regular and ongoing scrutiny and monitoring by the Investment Management Review Unit, a committee sitting within Legal & General (Portfolio Management Services) Limited, a firm which is regulated by the Financial Services Authority (Firm reference number ). CHOOSING INVESTMENTS Under the first category ( sole governance ), the Trustees aim: To provide members with access to a diverse universe of investment funds to suit different age demographics, different risk appetites and different retirement income strategies. Under the second category ( shared governance ) the Trustees aim: To enable participant companies to commission and implement such investment advice as they consider appropriate or necessary for their membership demographic, subject to the Trustees agreement. Where they are solely responsible for governance (sole governance), the Trustees will select a range of funds from the platform that satisfy the objective described above. They will do so using the following principles. 1. Simplicity members should not face complex investment choices that hinder engagement 2. There should be sufficient choices to cover all investment risk appetites and tolerances 3. The options should cover all major asset classes 4. We should avoid funds with high charges whose value add cannot be readily identified 5. There should be a single fund multi-asset option 6. A number of pre retirement de-risking options are required 7. Regard should be paid to investment manager pedigree

7 8. There should be a continuous internal governance procedure 9. Wherever practicable, funds should be drawn from the Governed fund range 10. There should be an ethical choice or choices 11. There should be a Sharia compliant fund 12. There should be at least one fund managed by an external Investment Manager available for each major asset class Based on these criteria, the recommendations of the IC, as accepted by the Trustees are shown at Appendix 1. This range of funds can be expected to change from time to time. Shared Governance participants can choose a range of funds from all of the funds available on the fund platform for their scheme. With the prior approval of the Trustees, via a recommendation from the Investment Committee, such participating companies may add a new blend or new fund: such additions may be added to the WorkSave investment platform to be made available to other participants, or they may be isolated for that particular participant s scheme. The Trustees retain ultimate fiduciary responsibility for all investments under the Mastertrusts and must therefore monitor the performance and/or relevance of the funds requested by all employers who choose their own investment options. RIGHTS ATTACHING TO INVESTMENTS The Trustees recognise the importance of exercising rights (including voting rights) attaching to investments. For reasons of practicality, the Trustees delegate responsibility for the exercising of such rights to the relevant fund managers who are expected, so far as is possible, to exercise these rights in the best interests of the Trustees. SOCIAL, ENVIRONMENTAL AND ETHICAL ISSUES The Trustees policy regarding social, environmental or ethical considerations is that the extent to which such issues are taken into account in making day-to-day investment decisions is delegated to the investment manager groups. It is expected that each investment manager understands that the Trustees primary responsibility is to act in the best financial interests of the members. The Trustees expect that shared governance participants recognise the principle of best financial interest for their members, even where they choose a number of socially responsible, ethical and/or belief-based funds. PERFORMANCE MEASUREMENT Performance measurement will be undertaken on a regular basis by the IC or other appropriate body or persons using various data and reports including those produced by the Investment Management Research Unit. The IC will report quarterly or more frequently to alert the Trustees to any corporate or performance issues or to any concerns raised by or actions proposed by other of Legal & General s investment committees (including but not restricted to the Investment Management Research Unit). The Trustees will obtain independent advice, from time to time, on the sole governance fund range and default structure, and may obtain independent advice in respect of any shared governance proposals before granting approval.

8 INFORMATION FOR MEMBERS Detailed information on funds available to members is made available on Legal & General s website and / or on an intranet site of a participant company. REALISATION OF INVESTMENTS The assets of each Member s Personal Account are held in unitised investment funds that are generally readily realisable. Some funds (e.g. property funds) are less liquid in nature and therefore contain risk warnings describing the potential for realization delays. Trustee: Legal & General Trustees Limited Registered in England and Wales No Registered office: One Coleman Street, London EC2R 5AA Administrator: Legal & General Assurance Society Limited. Registered in England and Wales No Registered office: One Coleman Street, London EC2R 5AA We are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.