DC Pension Scheme Governance
Statement of the Trustee Chair of the J P Lennard Ltd (1986) Retirement & Death Benefits Scheme (the “Scheme”) for the year ending 30th November 2023
This Statement has been prepared by the Trustee, in accordance with regulation 23 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (as amended). It sets out how the Trustee has met the statutory defined contribution (DC) governance standards during the Scheme Year ended 30th November 2023.
The Trustee continually reviews and assesses systems, processes, and controls across key governance functions to determine whether these are consistent with those set out in the Pensions Regulator’s:
a. Code of practice 13: Governance and administration of occupational trust-based schemes providing money purchase benefits
b. Regulatory guidance for defined contribution schemes.
Additionally, the Trustee will assess the Scheme against the DC Code of Practice standards using the Pensions Regulator’s self-assessment template. This sets out the key quality features that underpin both the code of practice and regulatory guidance which the Pensions Regulator considers should be present in well-governed pension schemes.
A. Sufficient Knowledge and Understanding
Actions will be taken by the Trustee to gain the appropriate knowledge and understanding required to effectively run the Scheme with good governance: the Scheme has a sole Trustee being J P Lennard Ltd. For completeness,
1. Each director of J P Lennard Ltd will work towards the Pensions Regulator’s Trustee Knowledge and Understanding requirements, in order to comply with sections 247 and 248 of the Pensions Act 2004 with time set aside for monitoring the Scheme governance and ensuring it is run in accordance with the Scheme Rules and in line with the Pensions Regulator’s guidance notes.
The Directors of the Trustee have registered for the Pensions Regulator’s Trustee toolkit and also will consider attending additional and relevant training courses. The Trustee Directors are encouraged to identify and fill gaps in their knowledge. The Chair of Trustees for the Scheme is Nigel G Lennard, a director of J P Lennard Ltd.
2. The Trustee receives annual investment updates and relevant information on the scheme at the Annual Review in December each year.
3. The two Directors of the Trustee will maintain an individual training register to keep a log of all such training undertaken by the said directors. The log will be reviewed from time to time to identify any knowledge gaps.
4. The Directors of the Trustee are familiar with the Trust Deed and Rules and the powers granted to it and ensures benefits are paid accordingly.
5. The Directors of the Trustee will keep up-to-date with developments in the DC landscape and new guidance issued by The Pensions' Regulator.
The Trustee, together with assistance from the Scheme’s professional adviser (Bryan J Hollingsworth ACII DipPFS CeMAP, chartered financial planner), uses its combined knowledge and understanding of Pension Law, specific Scheme documentation, legal requirements, and The Pensions Regulator’s guidance to ensure that the Scheme is run effectively, and members’ benefits are paid in accordance with the Scheme rules and to carry out the fiduciary duties required of it.
This combined knowledge helps the Trustee to ensure that good Scheme governance is a priority and identify where any improvements can be made to existing procedures and processes.
The Directors of the Trustee’s knowledge of the Scheme rules will ensure that they can consider non-standard benefit request options and whether this is permissible under the current rules and whether legal opinion is required and / or a rule change needed, with the appropriate assistance of the scheme’s professional advisers.
Ensuring good governance helps the Trustee determine whether the Scheme is good value for money and whether members and beneficiaries are being treated fairly and seeks to safeguard the interests of all members and beneficiaries.
B. Administration Standards including processing of Core Financial Transactions
a. The Trustee has appointed a professional adviser, Bryan J Hollingsworth ACII DipPFS CeMAP, chartered financial planner and has delegated the day-to-day running of the Scheme to Aegon Scottish Equitable.
b. The Trustee is aware that the responsibility of the running of the Scheme remains with it and will establish adequate internal controls, which are to be reviewed periodically.
c. The Trustee’s Directors are aware that they have a specific duty of care to ensure that core financial transactions relating to DC benefits within the Scheme are processed promptly and accurately.
d. There are no new regular contributions to this scheme, so core financial transactions include transfer of member funds out of the Scheme, transfers between investments within the Scheme and payments to and in respect of members.
e. There are currently no Service Agreements, which set out the scope of work undertaken by AEGON Scottish Equitable but the Trustee’s adviser has been informed that the standard turnaround for this Pension Provider is 5 to 10 working days for normal administration.
f. Aegon Scottish Equitable, the appointed administrators of the Scheme, work to industry standards providing timely turnaround times for both non-financial and financial matters. The Trustee’s pension adviser will monitor AEGON Scottish Equitable on their service delivery times.
For the year in question, service standards have occasionally not been adequately met on pension transfer timetables but the issue of Annual Statements to the members have been satisfactory, there have been no changes to investment holdings or fund switches during the period covered by this statement, so no comment is appropriate on Aegon Scottish Equitable’s administration on these latter points.
g. During 2024, the Trustee’s pension adviser will continue to monitor any pension transfers and if standards are not satisfactory representations to AEGON Scottish Equitable will be made requesting appropriate improvements.
h. The Trustee considers all areas of risk and specifically risks of significant impact such as fraud (including pension liberation), investment, management of costs, administration, regulatory requirements, operational procedures, communications and member understanding, corporate activity relevant to the Scheme (including employer covenant) and options at retirement.
i. The Directors of the Trustee will identify, evaluate, manage, and monitor risk. They will additionally consider establishing a Risk Register at the next Annual Review, any risks will be categorised in accordance with its likelihood of occurring and the potential impact it would have if it did occur.
j. The Trustee has reviewed its data management procedures and those of its service providers and has a post 25 May 2018 data protection policy in place.
k. Any errors are resolved immediately.
l. Financial transactions are subject to review as part of the Annual Scheme Review.
m. In accordance with regulation 24 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (as amended), the Trustee has reviewed the core financial transactions to ensure that they continue to be processed promptly and accurately.
As there are no regular contributions and no investment fund changes, there have been no notifiable events arising during the year.
C. Costs and Charges borne by members.
In accordance with regulation 25(1)(a) of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (as amended), the Trustee is required to calculate the charges and transaction costs paid by members and assess the extent to which these charges paid by members represent good value for money.
There are no fees charged to the member for administration of their policy. All contributions made by the member and the Employer were invested with no deductions made other than the investment manager’s fees. These fees are:
1. Explicit charges paid by members of the fund annual management charges and additional expenses. These are reflected in the daily pricing of the funds and AEGON Scottish Equitable have advised that this is 1.02% of the default fund value.
The Trustee has also taken into account that the scheme members receive a fund rebate of 0.40% on the ‘single priced’ investment funds, available within the AEGON Scottish Equitable scheme
2. All investment funds have transaction costs which are not charged directly to the investor (member). However, these charges are taken from the fund and therefore reflected in the performance of the fund and in the overall return received by the investor .
Some funds may potentially have different levels of transaction costs depending on the number of assets that are bought or sold within the fund. It is generally expected that the more actively a fund buys and sells assets, the higher the possible transaction fees might be.
The funds available for investment with their published Annual Management Charges (AMCs), transaction costs and their International Security Identification Numbers (ISINs) or Stock Exchange Daily Official List (SEDOL) number, where available, are as follows.
|
Fund |
ISIN |
SEDOL |
Total Charge |
Additional expenses |
Transaction Costs |
Scheme Fund Rebate |
Net Charge |
|
Cash Fund |
GB0007829228 |
0782922 |
1.01% |
Included |
Included |
0.40% |
0.61% |
|
Mixed |
GB0032305707 |
3230570 |
1.02% |
Included |
Included |
0.40% |
0.62% |
|
Balanced Lifestyle |
GB0030359243 |
3035924 |
1.02% |
Included |
Included |
0.40% |
0.62% |
|
With-Profits Growth Fund (WPE) |
N/A |
N/A |
1.00% |
Included |
Included |
0.40% |
0.60% |
|
High Equity With-Profits Fund (WP2) |
N/A |
0783389 |
1.02% |
Included |
Included |
0.40% |
0.62% |
E&OE
Appendix A provides an illustrative example of the cumulative effects over time of charges and costs borne by members, showing a range of periods.
D. Default arrangement and Statement of Investment Principles
There has previously not been a default arrangement in place, but the Trustee has agreed to put in place a default fund, AEGON Scottish Equitable Mixed fund (GB003230570) from 25th July 2024. The Scheme is not used as a ‘qualifying scheme’ for automatic enrolment purposes.
The Scheme has not produced a Statement of Investment Principles, as under Regulation 6 of the Occupational Pension Schemes (Investment) Regulations 2005, this is not required for schemes with less than 100 members.
E. Net returns
The historic ‘annualised’ returns on the funds available within the Scheme to 31st March 2024, except the High Equity High Growth With Profits fund, are as follows:
|
|
1 year |
3 years |
5 years |
|
Mixed |
9.8% |
3.3% |
6.9% |
|
Balanced Lifestyle |
9.8% |
3.3% |
6.9% |
|
Cash |
4.5% |
1.9% |
1.1% |
|
High Equity With-Profits (WP2) - figures 29/02/2024* |
4.9% |
2.7% |
4.2% |
|
With-Profits Growth |
8.6% |
6.3% |
6.0% |
E&OE
The above returns have been adjusted from the published figures to allow for the fund rebate of 0.40%.
Source used is the AEGON fund fact sheet using information from FE fundinfo calculated on a bid-to-bid basis net of charges with gross income reinvested with performance annualised for periods over 1 year.
Past performance is not a reliable guide to future results and the value of an investment can fall as well as rise and is not guaranteed. Investors could get back less than they invested.
*These figures represent the investment return on the WP2 fund net of the annual management charge, but not incorporating charges for guarantees and the distribution from the inherited estate. Actual With Profits payouts also include the effects of smoothing of investment returns and will therefore not necessarily reflect these returns. Further details are available on request to the Trustee.
F. Communicating with members.
a. The Trustee will endeavour to provide Scheme communication that is accurate, clear, understandable, and engaging
b. The Trustee, with their advisers, carefully considers all member communications. The Trustee works closely with the Scheme Advisers to try to ensure members’ interests are understood and represented in all decision making.
c. Retirement packages prepared by AEGON Scottish Equitable are sent to members which cover all disclosure requirements, . including clear details of the retirement choices available to them, how they work and details of the Government’s Pension
Wise service.
d. Members receive an annual benefit statement.
e. Ad hoc announcements are sent periodically as and when the Trustee deems necessary.
f. The Trustee provides a Member’s Clinic annually so that the members/employees have adequate opportunities to raise any queries or matters of concern to Bryan J Hollingsworth ACII DipPFS CeMAP, the scheme pension adviser, additionally during the year the members have access by letter, email or telephone to the pension scheme adviser should any matter arise or assistance be needed before the date of the next Member Clinic.
Guidance from the pension scheme adviser is limited to factual information or generic guidance as ‘personalised advice’ cannot be provided, unless the member appoints the adviser to act for them.
G. Value for Members assessment
The Administration Regulations require the Trustee to make an assessment of charges and transactions costs borne by members and the extent to which those charges and costs represent good value for money for members.
The Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations 2021 introduced a prescribed assessment framework for specified small schemes such as this scheme. The Trustee will follow this framework in carrying out this year’s assessment. The prescribed assessment framework is made up of three parts, as outlined below.
1. Cost and charges
The cost and charges that members pay in the scheme have been compared to those that members may pay in three other pension schemes, referred to as the comparator schemes. For the purpose of this exercise, we have selected three Master Trusts as the comparator schemes: the People’s Partnership Master Trust, the Smart Pension Master Trust, and the Mercer Pension Master Trust.
The charges on investments are impossible to accurately compare due to some of the funds being held in With Profits funds and the opaque nature of these investments. However, our assessment showed that the costs and charges members pay in the Plan are higher than the average costs and charges they would pay, across comparable funds, in the comparator schemes.
We therefore believe that the costs and charges payable in the scheme currently do not represent good value for members compared to the comparator schemes, although it must be noted that the range of funds available from AEGON Scottish Equitable for selection by the members is considerably wider than the comparator funds.
However, no current members have actually taken advantage of the range of AEGON Scottish Equitable funds available and have not been actively involved in the investment of their pension savings.
See Appendix B for more details of comparisons.
2. Net investment returns
The investment returns members achieved in the Plan, net of all member borne costs and charges, over the one, three and five-year periods to 31st March 2024 have been compared to those that members may have achieved in the three comparator schemes mentioned above.
Our assessment showed that the net investment returns members achieved in the Plan were lower than the average net investment returns, across comparable funds, in the comparator schemes. However, for With Profits returns a direct comparison is not possible.
See Appendix B for more details of comparisons.
The Trustee believes that, on balance, the net investment returns achieved in the Plan do not represent good value for members compared to the comparator schemes.
3. Administration and Governance
An assessment of the following Governance and Administration metrics has been undertaken for the scheme: Level of trustee knowledge, understanding and skills to operate the pension scheme effectively; effectiveness of management of conflicts of interest; appropriateness of the default investment strategy; quality of investment governance; quality of member communications; promptness and accuracy of core financial transactions and quality of record keeping. These metrics are not benchmarked against the comparator schemes, simply assessed by the Trustee.
Our assessment concluded that for all members, the Governance and Administration of the Plan does provide good value for members, but there is scope for improvement. We have provided further detail below, under the four broad areas in which we carried out this part of the assessment:
Plan governance
The Trustee is not an independent professional Trustee company, so will set procedures in place to meet the level of knowledge, understanding and skills required and will work alongside it’s professional advisers in the running of the scheme. The Trustee will ensure the governance arrangements will be robust, with the right structures in place to support effective management of risks. Any conflicts of interests will need to be identified and handled appropriately.
Investments
The Trustee has established robust investment governance procedures which are in place. Regular performance reviews will be carried out on the funds within the scheme actually used by the current membership, the choice of funds is not restricted, but it is noted that the bulk of members assets are in the Mixed fund.
Administration
AEGON Scottish Equitable provides administration services to the Plan.
The Trustee obtains information to assess the member experience through feedback from the members themselves and from their pension adviser, over the reporting period the standard of service for pension transfers provided was below what the Trustee expects,
Whilst the Trustee believes Aegon has sufficient checks in place to monitor and report on the standard of the administration service, the Trustee and it’s pension adviser will need to continue to work with AEGON Scottish Equitable to improve the level of service received.
Where necessary the Trustee’s pension adviser will issue a formal complaint when service standards are unacceptable and in any severe
cases, seek compensation from AEGON Scottish Equitable.
Member communications
The Trustee provides members with required communications such as annual benefit statements and retirement wake-up packs, however, currently there is no online access to information due to the AEGON Scottish Equitable IT systems being unable to facilitate old type DC Pension Schemes.
Sadly, this is unlikely to improve in future.
Overall conclusion of the Value for Members Assessment
The Trustee’s overall conclusion is that on the whole, the Plan does not provide good value for members.
As a result of the above conclusion, the Trustee will now consider what action is needed to improve value in the Scheme or to commence the transfer of members’ benefits to an alternative arrangement, where better value may be provided.
The Employer is now undertaking a detailed review of the various options in order to provide the members with the best alternative, one option is to use the concurrent ‘qualifying pension’ scheme, provided by The People’s Partnership.
This Governance Statement along with its Appendices will be made publicly available at: (https://www.jplpensionaegon.uk)
Signed: Nigel G Lennard Date: 27th August 2024
Chair, J P Lennard Limited (1986) Retirement & Death Benefits Scheme
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APPENDIX A
Illustrations showing the impact of fund and scheme charges on a projected pension fund in today’s money (£)
The “Before Charges” column shows the projected pension fund without any transaction costs, charges or rebates being applied.
The “After all Charges” column shows the projected pension fund after transaction costs, charges and rebates that have been applied.
|
|
Default fund – AEGON Scottish Equitable Mixed fund – value at inception £43,000 |
|
|
|
|
|
|
After Year |
Before Charges |
After all Charges |
|
1 |
£44,075 |
£43,808 |
|
3 |
£46,306 |
£45,471 |
|
5 |
£48,651 |
£47,197 |
|
10 |
£55,044 |
£51,803 |
|
15 |
£62,277 |
£56,859 |
|
20 |
£70,461 |
£62,409 |
E&OE
About these illustrations:
For these illustrations, we have assumed:
- Illustrations are based on the Mixed fund as approximately 70% of the members investments are held in this fund.
- the Growth rate for the Mixed fund is 5.00%, before deduction of charges
- the starting age is 45 and the retirement age is 65;
- no future contributions are made.
- Projected pension fund values are shown in today's terms, and do not need to be reduced further for inflation. Inflation has been assumed to be 2.50%, each year;
- the starting pension fund value in the first year is £43,000, being approximately the average fund value for the main members of the AEGON scheme
- the illustration has been produced on the basis this is the only fund invested in and that all transaction costs and scheme charges are deducted from that.
- The calculations are based on Annual Growth being applied just once a year.
The growth rate is for illustrative purposes only and is not guaranteed. The investment growth achieved may be more or less.
If a member has any investments in a With-Profits fund, please note this may contain valuable guarantees, provided they remain invested until their selected retirement age. However, for the purposes of these illustrations, we have not included any such guarantees.
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APPENDIX B
The three Comparator funds mentioned above were compared based on the best available figures to 31st March 2024 and information supplied by the respective Master Trust Pension schemes.
The data has been designed to be the investment returns net of costs, including transactional costs.
For the purposes of the comparison, the Default Funds are as follows – AEGON Scheme – Mixed, Mercer Trust – Long Term Growth, Smart Pension – Sustainable Growth, People’s Partnership – Global 85% Equity fund.
The growth rate is for illustrative purposes only and is not guaranteed. The investment growth actually achieved may be more or less.
|
Year |
AEGON |
SMART PENSION |
MERCER |
PEOPLES |
|
Scottish Equitable |
MASTER TRUST |
MASTER TRUST |
PARTNERSHIP |
|
|
|
||||
|
1 |
£43,808 |
£43,923 |
£43,897 |
£43,929 |
|
2 |
£44,632 |
£44,866 |
£44,814 |
£44,879 |
|
3 |
£45,471 |
£45,830 |
£45,749 |
£45,849 |
|
4 |
£46,326 |
£46,815 |
£46,704 |
£46,841 |
|
5 |
£47,197 |
£47,822 |
£47,678 |
£47,854 |
|
6 |
£48,084 |
£48,850 |
£48,673 |
£48,890 |
|
7 |
£48,988 |
£49,902 |
£49,689 |
£49,948 |
|
8 |
£49,909 |
£50,976 |
£50,726 |
£51,029 |
|
9 |
£50,847 |
£52,074 |
£51,785 |
£52,135 |
|
10 |
£51,803 |
£53,196 |
£52,866 |
£53,265 |
|
11 |
£52,777 |
£54,343 |
£53,969 |
£54,421 |
|
12 |
£53,769 |
£55,515 |
£55,095 |
£55,602 |
|
13 |
£54,780 |
£56,712 |
£56,245 |
£56,810 |
|
14 |
£55,810 |
£57,936 |
£57,419 |
£58,045 |
|
15 |
£56,859 |
£59,187 |
£58,617 |
£59,308 |
|
16 |
£57,928 |
£60,465 |
£59,841 |
£60,599 |
|
17 |
£59,017 |
£61,771 |
£61,089 |
£61,919 |
|
18 |
£60,127 |
£63,106 |
£62,364 |
£63,268 |
|
19 |
£61,257 |
£64,471 |
£63,666 |
£64,648 |
|
20 |
£62,409 |
£65,865 |
£64,995 |
£66,059 |
E&OE
Projected figures for the Mercer Master Trust are simulated as the fund has not been in existence for 12 months, the costings for The People’s Partnership assume that the AEGON Scottish Equitable scheme is transferred to The People’s Partnership scheme and obtains the special terms quoted to the Trustee.
For these Comparator illustrations, the Trustee has assumed:
Illustrations are based on the Default funds of the comparators
- the Growth rate for the Default fund is 5.00% before deduction of charges
- the starting age is 45 and the retirement age is 65;
- no future contributions are made.
- Projected pension fund values are shown in today's terms, and do not need to be reduced further for inflation. Inflation has been assumed to be 2.50%, each year;
- the starting pension fund value in the first year is £43,000, being the average fund value for the main members of the AEGON scheme.
- the illustration has been produced on the basis this is the only fund invested in and that all transaction costs and scheme charges are deducted from that.
- The calculations are based on Annual Growth being applied just once a year.
- Any Monthly charges are collected just once a year, i.e. multiplied by 12 and treated as one deduction.
Performance Results of the respective ‘default’ funds
|
|
AEGON |
SMART PENSION |
MERCER |
PEOPLE’S |
|
Scottish Equitable |
MASTER TRUST |
MASTER TRUST |
PARTNERSHIP |
|
|
|
||||
|
1 year |
9.44% |
17.30% |
23.90% |
12.42% |
|
|
|
|
|
|
|
3 years |
2.91% |
8.07% |
7.77% |
4.31% |
|
|
|
|
|
|
|
5 years |
6.52% |
7.57% |
10.56% |
6.21% |
The above figures are based on the limited information supplied to the Trustee’s pension adviser and are supplied in good faith, the Trustee believes this information is adequate for the purposes of the Value for Members Assessment.
Performance figures for the Mercer Master Trust are simulated as the fund has not been in existence for 12 months, the costings for The People’s Partnership assume that the AEGON Scottish Equitable scheme is transferred to The People’s Partnership scheme and obtains the special terms quoted to the Trustee.
E&OE