The McCurrach Group Pension Scheme
Statement of Investment Principles
This Investment Statement sets out the principles governing decisions about investments for the McCurrach Group Pension Scheme (“the Scheme”) to meet the requirements of The Pensions Act 1995, as amended by the Pensions Act 2004, and The Occupational Pension Schemes (Investment) Regulations 2005. It is subject to periodic review by the Trustee at least every three years and more frequently as appropriate.
In preparing this Statement, the Trustee has consulted with the principal employer (McCurrach UK Limited) and has taken professional advice from their Investment Consultant (Isio Group Limited/Isio Services Limited (‘Isio’)).
The Scheme is closed to new entrants and closed to future benefit accrual on 31 December 2011.
The primary objective of the Scheme is to provide pension and lump sum benefits for the current members on their retirement, and/or benefits on death, before or after retirement for their dependents, on a defined benefit basis.
The Scheme’s present investment objective is to achieve a return of around 2.8% p.a. above the return on UK Government bonds (which are considered to move in a similar fashion to the calculated value of the Scheme’s liabilities).
The Trustee’s medium term objective is to reach and maintain a funding position of 100% of technical provisions – such a target being consistent with the strength of the employer covenant and the Trustee’s investment risk tolerance.
The long term funding objective is to reach a funding position such that all Members’ benefits can be secured within an insurance contract (i.e. reach full funding on an insurance buy-out basis). The Trustee also considers the Scheme’s funding position on other relevant bases for valuation and accounting. Funding positions are monitored regularly by the Trustee and formally reviewed at each triennial valuation, or more frequently as required by the Pensions Act 2004.
The Trustee takes a holistic approach to considering and managing risks when formulating the Scheme’s investment strategy.
The Scheme’s investment strategy was derived following careful consideration of the factors set out in Appendix B. The considerations include the nature and duration of the Scheme’s liabilities, the risks of investing in the various asset classes, the implications of the strategy (under various scenarios) for the level of employer contributions required to fund the Scheme, and also the strength of the sponsoring company’s covenant. The Trustee considered the merits of a range of asset classes.
The Trustee recognises that the investment strategy is subject to risks, in particular the risk of a mismatch between the performance of the assets and the calculated value of the liabilities. This risk is monitored by regularly assessing the funding position and the characteristics of the assets and liabilities. This risk is managed by investing in assets which are expected to perform in excess of the liabilities over the long term, and also by investing in a suitably diversified portfolio of assets with the aim of minimising (as far as possible) volatility relative to the liabilities.
The assets of the Scheme consist predominantly of investments which are traded on regulated markets.
Investment Management Arrangements
The Trustee has appointed several investment managers to manage the assets of the Scheme as listed in the SIP. The investment managers are regulated under the Financial Services and Markets Act 2000.
All decisions about the day-to-day management of the assets have been delegated to the investment managers via a written agreement. The delegation includes decisions about:
- Selection, retention and realisation of investments including taking into account all financially material considerations in making these decisions;
- The exercise of rights (including voting rights) attaching to the investments;
- Undertaking engagement activities with investee companies and other stakeholders, where appropriate.
The Trustee takes investment managers’ policies into account when selecting and monitoring managers. The Trustee also takes into account the performance targets the investment managers are evaluated on. The investment managers are expected to exercise powers of investment delegated to them, with a view to following the principles contained within this statement, so far as is reasonably practicable.
As the Scheme’s assets are invested in pooled vehicles, the custody of the holdings is arranged by the investment managers.
Investment Manager Monitoring and Engagement
The Trustee monitors and engage with the Scheme’s investment managers and other stakeholders on a variety of issues. Below is a summary of the areas covered and how the Trustees seek to engage on these matters with investment managers.
Through the engagement described above, the Trustee will work with the investment managers to improve their alignment with the above policies. Where sufficient improvement is not observed, the Trustee will review the relevant investment manager’s appointment and will consider terminating the arrangement.
Realisation of investments
The Trustee operates a bank account for daily cash flow needs.
The significant majority of the Scheme’s investments may be realised quickly if required. The M&G Diversified Credit allocation, which has a target weight of 30% within the strategic benchmark, is relatively illiquid and has monthly dealing dates. All other asset allocations can be realised either daily or weekly.
Signed for and on behalf of BESTrustees as the Trustee of the McCurrach Group Pension Scheme
Revised September 2019
Strategic asset allocation split by fund manager
Appendix B – Risks, Financially Material Considerations and Non-Financial matters
A non-exhaustive list of risks and financially material considerations that the Trustee has considered and sought to manage is shown below.
The Trustee adopts an integrated risk management approach. The three key risks associated within this framework and how they are managed are stated below:
The Scheme is exposed to a number of underlying risks relating to the Scheme’s investment strategy, these are summarised below:
Appendix C - Policy on Investment Manager Arrangements
The Trustee has the following policies in relation to the investment management arrangements for the Scheme: