The People’s Pension Scheme · 2019-11-04 · The People’s Pension Scheme - Annual report and inancial statements for the year ended 31 March 2019 | 1 At a glance The People’s

For people, not profit

The People’s Pension Scheme

18 19

Annual report and financial statements for the year ended 31 March 2019

Pension scheme registry number: 12005993

Contents

1 At a glance

3 Chair’s review

7 Trustee, Directors and advisers

11 Trustee’s report

21 Chair’s annual governance statement

31 Independent auditor’s report to the Trustee of The People’s Pension Scheme

34 Fund account

35 Statement of net assets available for benefits

36 Notes to the financial statements

46 Appendix 1 - Statement of Investment Principles

The People’s Pension Scheme - Annual report and financial statements for the year ended 31 March 2019 | 1

At a glance

The People’s Pension now has 4.4 million members (2018: 3.8 million).

Most of our members have benefitted from the government’s policy of automatically enrolling people into a workplace pension scheme – and others transferred in from the B&CE EasyBuild scheme.

4.4 million members

(2018: 3.8 million)

86,700 employers

(2018: 81,000)

£6.2bn net assets

(2018: £3.9bn)

£1.9bn in contributions

(2018: £0.9bn)

£69m benefits drawn

(2018: £30m)

Members are working for 86,700 employers (2018: 81,000).

Those members have an aggregated pot of £6.2bn.

At the same time last year net assets were £3.9bn and the increase includes £0.2bn of transfers in from other schemes (2018: £1.2bn, including £1bn from the B&CE EasyBuild scheme).

Increase in net assets includes £1.9bn in contributions to the Scheme (2018: £0.9bn).

During the year to 31 March 2019, we paid out a total of £69m (2018: £30m) to members in benefits.


At a glance

Award winning

The People’s Pension continues to win awards and received four in the year to the end of March 2019: The Pensions Age ‘Master Trust Offering of the Year’; The Pensions Insight DC ‘Best IGC or Master Trust Board’; the Financial Times PIPA awards ‘Multi-employer DC Provider’; and the Corporate Adviser awards ‘Best Master Trust’.

B&CE also collected a further award recognising its achievements in pensions: ‘DC Pension Provider of the Year’ at the prestigious 2018 UK Pensions Awards.

Moreover, and following year end, The People’s Pension was named Best Master Trust and highly commended for the Ultimate Default Fund category at the 2019 Corporate Adviser Awards.

We’re tremendously proud of these achievements because they acknowledge the hard work that we and B&CE put in for our members.

In August 2019, we were granted master trust authorisation from The Pensions Regulator. As one of the UK’s largest master trusts, for our members and employers, authorisation offers peace of mind. But at The People’s Pension we know that this is just the beginning of much closer ongoing regulation of master trust provision – and rightly so. Authorisation and regulation, will leave stronger, well-governed master trusts – like us – in the market to offer better financial stability and protection to pension savers.


Chair’s review

Welcome to the Annual report and financial statements for The People’s Pension Scheme (the Scheme), covering the year to 31 March 2019, issued by The People’s Pension Trustee Limited (the Trustee).

I’m delighted to report the Scheme continued to grow significantly during the year.

On 6 April 2018, the minimum rate on qualifying earnings at which members and employers contribute to the Scheme (assuming the employer pays their minimum percentage) rose from 1% and 1% respectively, to 3% and 2% respectively. Rates have since gone up again, from 6 April 2019, to 5% and 3% respectively, and that brings an end to the government’s phased approach to auto-enrolment.

This is important because the increase in April 2018 helped push the Scheme’s assets under management up by a remarkable £2bn, to more than £6bn, by the end of March 2019. This rise has also been driven by investment growth and a rise in membership, from 3.8m to 4.4m in the same period, attributable to new employees using The People’s Pension as their workplace savings scheme and also transfers into the Scheme.

The Scheme remains one of the largest master trusts in the UK. And, with contributions now flowing in at a rate of more than £200m a month, the Scheme’s assets could reach £25bn by the year 2025.

While the Scheme grows, the broader master trust industry is evolving. Auto-enrolment has created a solid bedrock for the nation’s future pensions savings. Master trusts, with The People’s Pension helping lead the way, have been instrumental in this.

The Trustee and the B&CE Group (B&CE Holdings Limited and its subsidiary undertakings, commonly referred to as B&CE) have long been very supportive of the need for more robust regulation of master trusts – and that’s come to fruition in The Pensions Regulator’s master trust authorisation process.

The Trustee applied for authorisation before the Regulator’s deadline and has recently received confirmation of authorisation. I’d like to thank everybody at The People’s Pension and B&CE for their hard work in preparing the authorisation submissions and in its success. This was a massive project that involved numerous teams from B&CE and the Trustee.

It’s reasonable to expect the period after authorisation to be one of significant further growth for the master trust sector. There are two reasons.

Firstly, we should see larger master trusts absorbing smaller ones, delivering economies of scale and more effective and consistent administration. As individual schemes grow and strengthen, so should the overall market. The master trust market will be critical to driving UK pensions savings over the coming decade and beyond.

Secondly, employers and trustees running single trust defined contribution schemes may well look at the value for members their schemes deliver and conclude that a better option for members is to transfer their scheme into a master trust. Such an inflow will swell the numbers of employers, members and assets within master trusts.

The People’s Pension, now an authorised master trust, is well positioned to benefit in this new environment.

Both B&CE and the Trustee have a genuine passion for delivering for members. B&CE also offers a strong track record of administration excellence – backed by considerable resources with a great team ethic – and award-winning customer service.

Moreover, The People’s Pension has a logical, straightforward approach to investment that balances the complexity of risk management and generating investment performance with a simple and effective presentation of facts and choices to members. Our default fund, used by most scheme members, has been carefully thought through to ensure that it delivers an appropriate pension savings solution for members at different stages of their careers.

I’m delighted to report the Scheme continued to grow significantly during the year.

Steve Delo | Chair of the Trustee


Chair’s review (continued)

The Scheme also has a fee structure that puts member needs first. Since the start of the Scheme, members have paid a 0.5% annual management charge on their savings. This is set to change, thanks to B&CE’s not-for-profit status and its desire, shared by the Trustee, to improve retirement saving. We have announced the launch of a new approach to charging where the percentage a member pays will reduce as their pension pot grows. The charge decreases to as low as 0.2%, giving members a long-term incentive to continue with auto-enrolment saving and to consolidate multiple pension pots.

In cash terms, this change should make an appreciable difference over time to retirement outcomes.

All of the above means that the Scheme continues to be attractive to employers – and some 86,700 businesses now use The People’s Pension for their workplace scheme. This figure was 81,000 at the end of March 2018.

Something that we believe differentiates the Scheme from other master trusts is its commitment to deliver high-quality service and support to members and employers. This is a collective effort by the Trustee, People’s Financial Services Limited (the new Founder of the Scheme since December 2018) and B&CE Financial Services Limited (the Administrator).

This commitment is measured both internally – where B&CE consistently delivers strong service, according to monitoring by the Trustee – and externally, with good member, employer and industry feedback.

Investment governance

The Trustee is responsible for setting the investment strategy and governing the Scheme’s investments.

The Trustee’s Investment Committee oversees the Scheme’s investments in line with the Trustee’s agreed strategies and the Scheme’s ‘Statement of Investment Principles’ (SIP).

The Trustee worked with B&CE to adjust the Scheme’s default fund to spread investment risk more widely and to control it more effectively through diversification. This fund contains the savings of 98.7% of the Scheme’s members.

There were two elements to the changes. The first broadened the allocation to include different market opportunities, such as infrastructure, commercial property, emerging markets and the debt of global companies. The second, in December 2018, added a new approach that aims to reduce environmental, social and governance risks – such as exposure to fossil fuels.

The addition of these new investment areas is being achieved progressively by the use of cash flow into the Scheme, thereby avoiding transaction costs.

We explain our governance and our approach to responsible investment on page 17.



The Trustee Board and its Committees

The Trustee Board meets quarterly. The meetings cover Scheme governance and representatives of B&CE management attend to present to the Trustee on relevant items.

The Trustee delegates some aspects of governance to two sub-committees:

• The Investment Committee is responsible for considering changes to the overall investment strategy, investment monitoring and formulating recommendations to the Board on asset all aspects of investment strategy and implementation.

• The Risk, Administration and Communications Committee (RACC) is responsible for risk assessment and monitoring, oversight and evaluation of administrative services and the effectiveness and accuracy of Scheme communications. It also has responsibility for maintaining and monitoring the Scheme’s risk register, evaluating risks and creating and implementing strategies to manage or minimise those risks.

The Trustee Board may also address specific issues by forming ad-hoc sub committees or working parties. Each will have clear terms of reference or a project brief and must report to the Board, for noting, approval and/or ratification of decisions and actions, as appropriate.

The Trustee Board is supported by a Trustee Pension Manager, employed by B&CE, who is responsible for progressing Trustee business and controlling projects.

The Trustee’s objective is to maintain a standard of governance that befits a scheme of this scale and which meets the standards envisaged by The Pensions Regulator’s Code of Practice 13 and 15 and The Institute of Chartered Accountants in England and Wales (ICAEW) assurance framework for master trusts.

Scheme management skills

All the Trustee Directors undertake a learning and development programme to maintain the skills and knowledge to run the Scheme. This includes professional development, external training and formal face-to-face training at Trustee meetings. We are trained on current regulatory and industry issues, including the Pension Schemes Act 2017.

Trustee Directors also declare in writing that they meet the standards required by the Trustee ‘fitness and propriety’ policy. Detailed individual skills assessments of all members of the Trustee Board are carried out annually and as Chair of the Trustee, I carry out an assessment of the Trustee Board’s effectiveness. In addition, each of the Trustee’s advisers is subject to periodic performance reviews by the Board.

Administration

The Trustee works with the Administrator to ensure Scheme administration meets and exceeds necessary standards. This includes having the right people and processes in place and having good quality, secure and regulatory compliant data.

Value for members

The Trustee has a clear understanding of the costs and charges of running the Scheme. The low annual management charge deducted from members is used to cover investment management fees and the Administrator’s fee for running the Scheme.

The Trustee’s view is that the Scheme represents excellent value for members with a combination of costs, and what is provided for the costs, being appropriate for the Scheme’s members. This Trustee Assessment is supported by responses to research with our customers, awards made to the Scheme and the significant increase in the number of employers and members over the year.

More detail’s included in the Chair’s Annual Governance Statement on page 26 and 27.



Communicating and reporting

We aim to set a high standard for clear, simple and effective communications – and that means understanding members’ needs and presenting information simply, to help them make good decisions.

We do this by phrasing and presenting information thoughtfully and carefully – and by investing in high-quality customer service (not least B&CE’s highly trained and well-motivated call centre teams) and digital capabilities.

All of this is underpinned by B&CE’s strong values of Creating Simplicity, Showing Compassion and Keeping Promises.

On behalf of the Trustee, I would like to thank all at B&CE for their tremendous work ethic, their drive to deliver a strong customer experience in all areas of the service and on enthusiasm for The People’s Pension that shows no signs of stopping.

I’d also like to thank my fellow Trustee Directors. Alan Pickering, Sue Lewis, David Maddison and Chris Fagan are a talented group of people, with complementary skills and a shared passion for delivering a great pension scheme for members. Sue and Alan have both commenced a second term on the Board and David and Chris both joined during the year – all selected through an open, transparent and multi-stage process. I’m excited to be working with all of them, as we continue building on the Scheme’s success.

On behalf of the Trustee Board, I commend The People’s Pension Scheme to all members and employers.

Steve Delo Chair

The People’s Pension Trustee Limited 4 September 2019


Trustee, Directors and advisers

Steve Delo

Chair of the Trustee

Steve Delo is the Managing Director of PAN Governance LLP, an award-winning independent trustee firm, and is a former President of the Pensions Management Institute. Steve has twice been named ‘Independent Trustee of the Year’ by Engaged Investor and been listed as one of the Top 50 people in pensions by Pensions Insight.

His 30 year career has included senior roles in scheme management, consulting, asset management and trusteeship. He now specialises in the governance of large scale pension arrangements. He is a leading independent trustee who has been sitting on major pension scheme trustee boards for the last 11 years. He currently works with a wide range of occupational defined benefit and defined contribution schemes, in most cases acting as chair of trustees, with total assets in excess of £20bn. He sits on three master trust boards – two defined contribution, one defined benefit. He is a Fellow of the Pensions Management Institute.

Chris Fagan

Trustee Director (appointed 1 July 2018)

Chris is an independent trustee and investment specialist with almost 30 years of pensions industry experience. In addition to his role at The People’s Pension, he is Chairman of Trustees at a final salary pension scheme and an Associate Director with Muse Advisory Ltd, an independent consultancy, where he advises pension schemes on investment governance.

Prior to his appointment by The People’s Pension, he was a Trustee of the Towers Watson Pension Scheme and worked in Willis Towers Watson’s Investment Advisory and Fiduciary Management teams. He has also led the internal investment team at a major UK pension fund.

Trustee

The People’s Pension Trustee Limited acts as corporate trustee of the Scheme.

Directors of The People’s Pension Trustee Limited

The Directors of the Trustee who served during the year and up to the date of signing are listed below.


Trustee, Directors and advisers (continued)

Sue Lewis

Trustee Director

Sue is an experienced financial services consumer expert. She chaired the Financial Services Consumer Panel from 2013 to 2018 and is currently a Trustee of a number of charities, including StepChange, Surviving Economic Abuse, and the FairBanking Foundation.

Sue is a member representative on the EIOPA Occupational Pensions Stakeholder Group. She also works with international bodies on financial education, financial inclusion and consumer protection regulation. She was previously a senior civil servant, most recently responsible for savings and investments policy in HM Treasury.

David Maddison

Trustee Director (appointed 31 May 2018)

David has 33 years’ pension industry experience across multiple functions and was with RPMI Limited from 1989. He’s a Chartered Director with the Institute of Directors and a fellow of the Pensions Management Institute with a degree in Law.

He has recently retired from RPMI Limited, the executive arm of the Railways Pension Trustee Company Limited, where he fulfilled a number of senior roles within the business.

David is also Chairman of Health Shield Friendly Society Limited, having previously served as non-executive director, which included chairing its business development and investment committee.

Directors of The People’s Pension Trustee Limited (continued)



Alan Pickering CBE

Trustee Director

Alan is Chairman of BESTrustees and is a Trustee of a number of pension schemes.

He has over 40 years’ experience across a wide variety of roles in the pensions industry. He has sat on the board of a number of important industry bodies, including serving as Chair of the former National Association of Pension Funds (now the Pensions and Lifetime Savings Association).

Ruston Smith

Trustee Director (resigned 31 May 2018)

Ruston is the former Group Director – People, Pensions and Insurable Risk at Tesco PLC and now chairs the Tesco Trustee Board.

He is also currently the Chairman of GroceryAid. Ruston has won a number of awards, including Trustee of the Year and two for industry achievements.

Directors of The People’s Pension Trustee Limited (continued)



Advisers

Secretary

Registered office

Scheme administrator

Banker

Independent auditor

Investment manager

Investment adviser

Investment administration provider

Legal adviser

Contact us

Further information is available at www.thepeoplespension.co.uk.

You can also contact us in the following ways:

Telephone:

Email:

Post:

Employers and advisers: 01293 586666

Members: 0300 2000 555

[email protected]

The People’s Pension Trustee Limited Manor Royal Crawley West Sussex RH10 9QP

Lydia Harratt (to 20 May 2019)

The People’s Pension Trustee Limited Manor Royal Crawley West Sussex, RH10 9QP

B&CE Financial Services Limited

HSBC Bank plc

KPMG LLP

State Street Global Advisors Limited

Barnett Waddingham LLP

The Northern Trust Company (from December 2018)

Eversheds Sutherland (International) LLP


Trustee’s report

The Trustee of the Scheme presents its annual report for the year ended 31 March 2019.

Scheme constitution and management

The Scheme was established in 2012 by B&CE Holdings Limited (B&CE) as an occupational defined contribution master trust to provide retirement benefits. The People’s Pension Trust Deed and Scheme Rules are the governing documents by which the Scheme is administered and managed.

During the year, the Scheme’s Founder changed from B&CE Holdings Limited to People’s Financial Services Limited.

The Trustee has responsibility for implementing the strategy and overseeing the operation of the Scheme. During the year the Trustee had a total of five Directors, identified on pages 7, 8 and 9, including two appointments and one resignation. The Directors of the Trustee are appointed and can be removed by People’s Financial Services Limited. The Directors are paid a fee and reimbursed by B&CE for expenses incurred in the performance of their duties as Directors of the Trustee.

The Investment Committee consists of three of the Directors who oversee the Scheme’s investments in line with the Trustee’s agreed strategies and the Scheme’s ‘Statement of Investment Principles’ (SIP). The Committee reports on investment performance to the Trustee and makes recommendations on investment strategy and implementation to the Trustee.

The Risk, Administration and Communication Committee is responsible for risk assessment, the administration services and the effectiveness and accuracy of Scheme communications. It also monitors, updates and takes responsibility for the risk register.

The Administrator carries out the day-to-day operation of the Scheme including communication with members and processing contributions and allocations to members’ pension funds on behalf of the Trustee.

A service level agreement is in place with the Administrator and quarterly service reports are provided to the Trustee, which include details of whether these levels have been attained and the accuracy and timeliness of all transactions.

The Administrator has agreed to pay all expenses relating to the Scheme (excluding investment management fees) and receives an administration fee from the Scheme for the services that it provides.

The Trustee appoints professional advisers and other organisations to support it in delivering the Scheme’s objectives. These individuals and organisations are listed on page 10. The Trustee has written agreements in place with each of them.

Details of the number of meetings and the Directors’ attendance at Trustee Board and Committee meetings are in the table below. Where a Director was not in place for the full year, the maximum number of meetings is given in brackets.

Trustee Board 5 meetings

Investment Committee 4 meetings

Risk, Administration and Communication Committee

3 meetings

Steve Delo 5 4 N/A

David Maddison 3 (of 4) N/A 3 (of 3)

Alan Pickering 5 4 N/A

Sue Lewis 5 N/A 3

Ruston Smith 1 (of 1) 0 (of 1) 1 (of 1)

Chris Fagan 4 (of 4) 3 (of 3) N/A


Trustee’s report (continued)

Financial developments and financial statements

The financial statements included in this annual report are the accounts required by the Pensions Act 1995. They have been prepared and audited in compliance with regulations made under sections 41(1) and (6) of that Act.

Membership and benefits

The change in membership during the year is as follows:

1 Duplicate accounts can arise when a member is enrolled in the Scheme by more than one employer or when an employer enrols a member in error.

At the end of the year, there were 86,700 employers in the Scheme (2018: 81,467).

Where an active member has an employer, both the employer and member are required to pay contributions for that member at a rate in accordance with the appropriate participation agreement. A payment schedule is prepared for each employer’s section of the Scheme and contributions must be paid by the employer in accordance with the participation agreement and by the due date specified in that schedule. The employer remits their contributions by submitting a contributions schedule to the Administrator. If the Scheme is not in receipt of a contributions schedule or payment by the due date, then the Trustee is required to consider reporting the breach to The Pensions Regulator (TPR). Members may make additional voluntary contributions to the Scheme if they so wish.

Members

As at 1 April 2018 3,798,046

New members joining 753,305

Members opting out (20,779)

Cancellation of duplicate accounts1 (45,663)

Net members before leavers 4,484,909

Members leaving with short service refunds (1)

Members retired (26,517)

Members transferred out (14,874)

Members deceased / terminal illness (2,833)

At the end of the year 4,440,684

Active members 1,867,298

Deferred members 2,573,386

At the end of the year 4,440,684



Membership and benefits (continued)

Members can access their money held in the Scheme in the following ways:

Retirement

Members aged 55 or over can generally choose from the following options (some are available earlier than age 55 when retiring on ill health grounds)

• Keep their money where it is. Members who don’t need to access their pension savings yet can leave it invested.

• Take it all in one go. 25% is tax-free and the remainder will be taxed at the member’s marginal rate.

• If they have over £10,000 in their pension pot they can take it a bit at a time as flexible lump sums. There are two ways for members to do this depending on how they want to take their 25% tax free cash. With the first option, members take their tax-free cash gradually. Each time they take money from their pension pot, 25% of what is taken is tax free and they pay tax at the marginal rate on the other 75%. The technical name for this option is an ‘uncrystallised funds pension lump sum’ (or UFPLS). With the second option, members take their 25% tax-free cash up front and the remainder is moved to a flexi-access drawdown account within the Scheme. To start, members need to have £10,000 or more in their pension pot.

• Buy a guaranteed income (annuity). Up to 25% of the pension pot can be paid out as tax-free cash while the remainder is used to purchase an annuity with an insurer to provide a guaranteed level of income for life.

Transfer

The Scheme can pay transfers out to other HM Revenue & Customs (HMRC) registered schemes that are able to accept a transfer in.

Death

The Trustee will pay the member’s pension pot to one or more persons if a member dies before taking their money out of the Scheme. The Trustee can pay the pension pot to a number of persons including relatives, dependants and member nominated beneficiaries.

The decision on who receives the pension pot is at the Trustee’s discretion but members are encouraged to complete an expression of wishes nomination.

The People’s Pension has a logical, straightforward approach to investment that balances the complexity of risk management and generating investment performance with a simple and effective presentation of facts and choices to members.

Steve Delo | Chair of the Trustee



Investment management

Investment strategy and principles

In accordance with Section 35 of the Pensions Act 1995, the Trustee has prepared a ‘Statement of Investment Principles’ (SIP), agreed on 4 September 2018. A copy is included in Appendix 1 on page 46.

The Trustee monitors compliance with the SIP annually. During the year and at the end of the year all investments were in accordance with the SIP. The Trustee reviews the SIP at least every three years and immediately following any significant change in investment policy.

Funds and investment risk

The Trustee’s key objective is to enable members to provide adequately for their retirement via an appropriate investment of their accumulated pension contributions.

There are currently three investment profiles for members to choose from in the Scheme:

Profile Summary

Balanced

• Medium to high-risk

• Potential for long-term growth with some security

• Moves to lower-risk investments approaching retirement

• For members who prefer to take some risk but would also like some of their investments to be secure

Cautious

• Lower-risk and volatility

• Moderate growth over the long-term


• For members who are prepared to accept some degree of risk, but who look for investments with lower volatility

Adventurous

• Higher-risk and increased volatility

• Aims to maximise growth in the long-term


• For members who are prepared to take on more risk for the potential for increased growth



Investment management (continued)

Funds and investment risk (continued)

New members are automatically placed into the ‘balanced’ investment profile unless they choose otherwise.

Each of the investment profiles gradually and automatically moves pension savings into lower-risk investments as members get closer to retirement.

This change in asset allocation is known as a glidepath and it normally begins 15 years before a member’s State Pension age (or the date they told us they’d like to retire). An example glidepath based on retirement at 65 is shown below.

Alternatively, those with more confidence in investing can decide for themselves what funds their money is invested in. They can choose from the Scheme’s range of funds, which are classified by risk so that members can see which of them have the potential for higher returns, and which of them may remain more stable. However, any members choosing this ‘self-select’ option will not see their money move automatically into lower-risk investments as they approach retirement – they have to request that the money be moved between investment funds.

100%

80%

60%

40%

20%

0%

Age

B&CE Pre-retirement Fund

B&CE Global Investments Fund

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65




Funds and investment risk (continued)

The Scheme has a range of passive investment funds for members to choose from. These are shown in the table below with the target asset allocations as at 31 March 2019.

Asset allocations are reviewed regularly and updated when appropriate. For information on current asset allocations contact us using the details on page 10.

Fund Summary

B&CE Global Investments (up to 60% shares) Fund

• Used in the ‘cautious’ investment profile

• 8.3% UK equity, 41.2% global equity, 10.5% alternatives, 10% corporate bonds, 10% gilts, 20% global bonds

• A ‘cautious’ fund available as a self-select option


• Used in the ‘balanced’ investment profile

• 11% UK equity, 55% global equity, 14% alternatives, 5% corporate bonds, 5% gilts, 10% global bonds

• A ‘balanced’ fund available as a self-select option


• Used in the ‘adventurous’ investment profile

• 13.8% UK equity, 68.7% global equity, 17.5% alternatives

• An ‘adventurous’ fund available as a self-select option

B&CE Ethical Fund

• A higher-risk fund available as a self-select option

• Has an investment strategy that, by tilting away from free-float market cap weights, seeks to gain exposure to those companies demonstrating both a robust environmental, social and governance (ESG) profile as well as a positive trend in improving that profile, using minimal exclusions from the MSCI World Index

• 100% global equity

B&CE Shariah Fund

• A higher-risk fund available as a self-select option

• Has an investment approach based on Islamic Shariah principles

• 100% global equity

B&CE Pre-Retirement

Fund

• Used within each investment profile and available as a self-select option

• 15% corporate bonds, 15% gilts, 30% global bonds, 20% money market, 16.5% global equity, 3.5% alternatives

B&CE Cash Fund • Invests in short-term money markets such as bank deposits and treasury bills

B&CE Annuity Fund• A medium/low-risk fund available as a self-select option

• 70% corporate bonds, 30% gilts




Management and custody of investments

The Trustee has delegated management of the investments through mandates with a professional investment manager, State Street Global Advisors Limited (SSGA). SSGA, which is regulated by the FCA in the United Kingdom, manages the investments within the restrictions set out in the investment management agreement. This is designed to ensure that the objectives and policies set out in the SIP are followed.

Administration of the Scheme’s unitised funds was until the 10 December 2018 via an investment only platform with SSGA. Since that date investment administration services have been provided through The Northern Trust Company.

Custody of the underlying investments is carried out by State Street Bank and Trust Company.

The Trustee has considered the nature, disposition, marketability, security and valuation of the Scheme’s investments and considers them to be appropriate relative to the reasons for holding each class of investment. More details about investments are given in the notes to the financial statements.

Policy on responsible investment

In 2018, the Trustee introduced a new responsible investment policy to ensure it acts as a responsible investor, identifying, and evaluating a range of issues that may present major opportunities – or threats – to members’ interests. In simple terms it’s a set of tools to evaluate environmental issues, social behaviours and governance practices (ESG) in the companies the Scheme invests member money in.

Whilst the Trustee has less influence over the underlying investments within the pooled investment vehicles, it still reviews the managers’ policies and statements of compliance in relation to these matters and challenges the managers where it disagrees with their policies.

The Trustee is supportive of the UK Stewardship Code published by the Financial Reporting Council and encourages the Scheme’s managers who are registered with the Financial Conduct Authority to comply with the UK Stewardship Code. Such managers are expected to report on their adherence to the code on an annual basis.

Fund performance

The performance of the funds as at 31 March 2019 (net of the 0.5% annual management charge (AMC)) is shown in the table overleaf.

The first half of the year was mostly well ordered with positive returns for global markets, while the second half in contrast saw downturns in October and December along with increased volatility driven by a multitude of macro-economic factors and deepening fears of a U.S-China trade dispute. Volatility was especially notable in France, Italy, and the United Kingdom as local politics and/or economic woes added to the market tumult.

In early 2019 markets rebounded considerably, regaining most of the losses recorded in the previous three months. Most global equity and bond markets produced positive returns over the year to 31 March 2019 as a whole.




Fund performance (continued)

The funds track a variety of indices as described below.

FundFund

Performance** Benchmark

Performance Benchmark*

Asset Allocation


6.11% 1 Year 9.23% 3 Year 8.62% 5 Year

4.96% 1 Year 5.28% 3 Year 4.47% 5 Year

UK CPI +3%

8.3% FTSE All-Share Index 8.3% FTSE All-World Developed North America Index 8.3% FTSE All-World Developed Europe ex UK Index 4.1% FTSE All-World Japan Index 4.1% FTSE All-World Developed Asia Pacific ex Japan Index 3.8% FTSE Emerging Index 12.6% MSCI World Select 5-Factor ESG Low Carbon Target Index **** 5.3% Dow Jones Global Select Real Estate Securities Index 5.3% Morningstar Global Multi-Asset Infrastructure Index 10% Barclays Sterling Corporate All Stocks Index 10% FTSE Actuaries British Government All Stocks Index 20% Bloomberg Barclays Global Aggregate Bond Index


7.28% 1 Year 10.72% 3 Year 8.62% 5 Year

5.98% 1 Year 6.30% 3 Year 5.48% 5 Year

UK CPI +4%

11.1% FTSE All-Share Index 11.1% FTSE All-World Developed North America Index 11.1% FTSE All-World Developed Europe ex UK Index 5.5% FTSE All-World Japan Index 5.5% FTSE All-World Developed Asia Pacific ex Japan Index 5% FTSE Emerging Index 16.8% MSCI World Select 5-Factor ESG Low Carbon Target Index **** 7% Dow Jones Global Select Real Estate Securities Index 7% Morningstar Global Multi-Asset Infrastructure Index 5% Barclays Sterling Corporate All Stocks Index 5% FTSE Actuaries British Government All Stocks Index 10% Bloomberg Barclays Global Aggregate Bond Index


8.19% 1 Year 11.81% 3 Year 8.53% 5 Year

7.00% 1 Year 7.32% 3 Year 6.49% 5 Year

UK CPI +5%

13.8% FTSE All-Share Index 13.8% FTSE All-World Developed North America Index 13.8% FTSE All-World Developed Europe ex UK Index 6.9% FTSE All-World Japan Index 6.9% FTSE All-World Developed Asia Pacific ex Japan Index 6.3% FTSE Emerging Index 21% MSCI World Select 5-Factor ESG Low Carbon Target Index **** 8.8% Dow Jones Global Select Real Estate Securities Index 8.8% Morningstar Global Multi-Asset Infrastructure Index




Fund performance (continued)

The funds track a variety of indices as described below.

3 year and 5 year returns are annualised* The Trustee may review and amend the benchmark of the funds as appropriate, the benchmarks above are the target benchmark correct as of 31 March 2019. ** The performance figures shown are after the deduction of 0.5% AMC. The Scheme uses single priced funds so investment performance figures include any anti-dilution levies applied. These factors may lead to deviation from the benchmark performance.*** Figures unavailable as fund launched on 5 September 2016. **** Contribution flows are being used to move this holding towards the target weight.

FundFund

Performance** Benchmark

Performance Benchmark*

Asset Allocation

B&CE Ethical Fund

11.30% 1 Year 13.50% 3 Year 11.71% 5 Year

11.70% 1 Year 14.33% 3 Year 12.34% 5 Year

MSCI World ESG Universal Index

100% Global equity

B&CE Shariah Fund

17.97% 1 Year 15.48% 3 Year 13.87% 5 Year

18.60% 1 Year 16.40% 3 Year 14.64% 5 Year

Dow Jones Islamic Titans

100 Index100% Global equity

B&CE Pre-Retirement

Fund

3.67% 1 Year 7.07% 3 Year 8.05% 5 Year

2.92% 1 Year 3.23% 3 Year 2.44% 5 Year

UK CPI +1%

2.8% FTSE All-Share Index 2.8% FTSE All-World Developed North America Index 2.8% FTSE All-World Developed Europe ex UK Index 1.4% FTSE All-World Japan Index 1.4% FTSE All-World Developed Asia Pacific ex Japan Index 1.3% FTSE Emerging Index 4.2% MSCI World Select 5-Factor ESG Low Carbon Target Index **** 1.8% Dow Jones Global Select Real Estate Securities Index 1.8% Morningstar Global Multi-Asset Infrastructure Index 15% Barclays Sterling Corporate All Stocks Index 15% FTSE Actuaries British Government All Stocks Index 30% Bloomberg Barclays Global Aggregate Bond Index 20% 7 Day Sterling LIBID

B&CE Cash Fund

0.23% 1 Year 0.02% 3 Year 0.01% 5 Year

0.51% 1 Year 0.31% 3 Year 0.34% 5 Year

7 Day LIBID Money Market

B&CE Annuity Fund

4.01% 1 Year *** 3 Year *** 5 Year

4.71% 1 Year *** 3 Year *** 5 Year Composite

70% Barclays Sterling Aggregate 100 mm Non Gilts Over 15 Years Index 15% FTSE Actuaries British Government Over 15 Years Index 10% Barclays UK 4.25% Dec 55 TRI 5% Barclays UK 4.00% Jan 60 TRI




Employer-related investments

Details of employer-related investments are given in note 13 to the financial statements on page 42 and 43.

Master trust authorisation

The Trustee received confirmation in August 2019 from The Pensions Regulator that it had been successful in its application for master trust authorisation. This is a landmark piece of regulation, which both B&CE and the Trustee have long called for, designed to ensure the master trust pensions market meets specific standards in governance, financial sustainability and other criteria.

Auditor

During 2018, the Trustee undertook a competitive tender of its external audit provider. KPMG LLP was appointed as the Scheme’s external auditor on 4 September 2018 and replaced PricewaterhouseCoopers LLP, who resigned on 4 September 2018 following the completion of the 31 March 2018 Annual report and financial statements.

Statement of Trustee’s responsibilities

Trustee’s responsibilities in respect of the

financial statements

The audited financial statements, which are to be prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, are the responsibility of the Trustee. Pension scheme regulations require the Trustee to make available to scheme members, beneficiaries and certain other parties, audited financial statements for each scheme year which:

(i) Show a true and fair view of the financial transactions of the Scheme during the Scheme year and of the amount and disposition at the end of the Scheme year of the assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Scheme year.

(ii) Contain the information specified in the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, including a statement whether the accounts have been prepared in accordance with the Statement of Recommended Practice, ‘Financial Reports of Pension Schemes’.

The Trustee has supervised the preparation of the financial statements and has agreed suitable accounting policies, to be applied consistently, making estimates and judgements on a reasonable and prudent basis. They are also responsible for:

• Assessing the Scheme’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern.

• Using the going concern basis of accounting unless they either intend to wind up the Scheme, or have no realistic alternative but to do so.

• Making available each year, commonly in the form of a Trustee’s annual report, information about the Scheme prescribed by pensions legislation, which they should ensure is consistent with the financial statements it accompanies.

The Trustee is responsible for such internal control as it determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to it to safeguard the assets of the Scheme and to prevent and detect fraud and other irregularities.

Further information

Requests for additional information about the Scheme generally, or queries relating to members’ own benefits, should be made to the contact listed on page 10.

Approval

The Trustee’s report was approved by the Trustee and signed on its behalf by:

Steve Delo Chair of The People’s Pension Trustee Limited

4 September 2019


Chair’s annual governance statement for the year ended 31 March 2019

Statement objective

This is an annual statement from the Trustee regarding the governance of the Scheme. This statement is included in the Scheme’s annual report in accordance with Regulation 23 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (the Administration Regulations).

Default arrangement

Within the range of investment options available to members, the Scheme offers three investment profiles, as detailed in the previous section. These are designed to build up a member’s savings and, 15 years before their State Pension age or the date they’ve told us they’d like to retire, they start moving those savings into lower-risk investments.

If no selection is made, a member’s pension savings go into the default arrangement – which is the ‘balanced’ investment profile.

This moves a member’s pension savings gradually from the B&CE Global Investments (up to 85% shares) Fund into lower-risk funds as the member nears retirement. The B&CE Global Investments (up to 85% shares) Fund is viewed as a medium to high-risk fund and is made up of a series of individual passive funds, each closely tracking a pre-determined index.

By investing in this way, the Trustee expects to deliver capital growth over the member’s lifetime within the Scheme, without excessive cost or taking inappropriate risk. There’s an increased focus in the later years on reducing the volatility of returns, and the potential for substantial falls in the value of investments – to enable members approaching retirement to plan with confidence.

The Trustee considers this approach to be in the interests of relevant members and their beneficiaries.


Default arrangement (continued)

As part of its remit to oversee investment strategy, the Investment Committee looks at material matters, including:

• Maintaining an up-to-date SIP setting out the principles governing how decisions about investments must be made.

• Considering the needs and demographic profile of the Scheme’s membership when designing and reviewing all investment options, including the ‘default’ investment profile.

• Considering and setting appropriate investment strategies for all investment options, including the ‘default’ investment profile.

• Regularly reviewing the investment strategy and performance of all investment options, including the ‘default’ investment profile, and making recommendations on investment strategy changes to the full Trustee Board.

Members can also choose their own combination of available funds instead.

During the year, the Trustee – acting in the interests of members – continued to review and evolve the default arrangement and other investment options offered by the Scheme.

Key highlights this year included:

• Two underlying sub-funds were created: a ‘Growth blend’ and an ‘Income blend’ which are common across the core fund range. These changes, though not visible to the membership and largely administrative, enable trading and asset allocation within the blends to be kept consistent across the core fund range and will ultimately help reduce transaction costs.

• In July 2018 the following four asset classes were introduced in order to diversify the default portfolios

- Emerging Market Equity - Global Aggregate Bonds - Global Real Estate - Multi-Asset Infrastructure

• These improve the efficiency of the investment portfolio by improving the risk adjusted returns of the funds.

• In December 2018, the equity holdings in the Growth blend were amended as initial allocations were made to the MSCI World Select 5-Factor ESG Low Carbon Target Index which incorporates environmental, social and governance (ESG) data into the equity selection process. This complements diversification by using different weightings to traditional passive approaches, emphasising investments with the potential to offer better long-term performance.

• In December, the Scheme appointed Northern Trust to provide unit pricing and fund administration services, to enable greater flexibility around future investment design and implementation and provide the Trustee with greater oversight of the Scheme’s investments.

• The Scheme published an update to its Policy on Responsible Investment in November 2018 and further demonstrated its commitment to ESG issues by adding screening based on carbon emissions.

The Trustee board operates an Investment Committee – this provides investment oversight on behalf of The People’s Pension Trustee Limited of the Scheme. The Committee met on 8 May 2018, 1 August 2018, 6 November 2018 and 7 February 2019. Key areas for review at each meeting included:

• The overall performance of the default arrangement particularly measured against the performance of its benchmark.

• The performance attribution of the default arrangement (ie how each of the different components within the fund contributed to its overall performance).

• The one-year volatility of the funds.

• Analysis of the default investment profile – namely the returns and annualised volatility for a member in the default arrangement.

• Alternative choices selected by members who are not in the default arrangement.

Supporting investment advice was provided by Barnett Waddingham, the appointed investment adviser to the Scheme. Barnett Waddingham attended all the Investment Committee meetings. Barnett Waddingham is an FCA authorised advising orgnisation with a prominent reputation in the pensions industry.

Chair’s annual governance statement (continued) for the year ended 31 March 2019


Statement of Investment Principles

The current SIP was agreed by the Trustee on 4 September 2018. It’s appended to the Annual report and financial statements, on page 46. A copy of the latest SIP can also be found online at www.thepeoplespension.co.uk/jargonbuster/

statement-investment-principles-sip/

The Trustee will publish an updated SIP by October 2019 to meet new regulations requiring occupational pension schemes to take into account financially material environmental, social and governance considerations in their investments.

Processing scheme transactions

The Trustee has a specific duty to ensure that core financial transactions relating to the Scheme are processed on time and accurately. Core financial transactions include the following:

• Investment of contributions.

• Transfer of member assets into and out of the Scheme.

• Transfers between different investments within the Scheme.

• Payments to and in respect of members.

These transactions are carried out on the Trustee’s behalf by the Administrator, the investment administration provider (Northern Trust Company) and its investment manager, SSGA.

The Scheme has a Risk, Administration and Communications Committee (RACC), reporting to the Trustee, to ensure members’ needs are properly considered and that the requirements for processing core financial transactions are met. Monitoring of the promptness and accuracy of processing of core financial transactions is a key function of the RACC, which met on three occasions. Amongst other things this committee has:

• Reviewed the processes and controls operated and considers them to be suitably designed to ensure that core financial transactions are processed promptly and accurately, this included the investment and reconciliation of contributions, transfers of assets into and out of the Scheme, switches of assets within the Scheme and payment from the Scheme to members that are processed in line with agreed service levels.

• Received regular management information and reviewed in detail the information provided.

• Worked with the operations team, who carry out monthly contribution reconciliations based on a sample level agreed with the Trustee and include detailed results in the quarterly administration report reviewed by the RACC and Trustee.

• Agreed service levels and received reports to assess performance against those service levels.

• Commissioned B&CE’s internal audit function to perform an annual assessment of whether the controls are operating effectively.

• Amended the controls and asked the operations team to provide wider sampling on the contribution reconciliation and more Management Information.

• Monitored the completeness and accuracy of member data at each quarterly Trustee meeting.

Through their monitoring processes during the year, the Trustee and the RAC Committee became aware of the increasing demands on the administration service. This was prompted by the increase in member and employer auto-enrolment contribution levels from April 2018, as well as an uplift in public awareness of pensions through the Department for Work and Pensions’ advertising campaign – ‘get to know your workplace pension’.

The level of additional member activity, including telephone enquiries and claims, resulted in a sustained and significant increase in administration workload. The management of the administration service had anticipated an increase in activity – and resource planned accordingly – but the workload level exceeded expectations. It was anticipated that the additional workload would fall away to some extent over a period of two or three months, but demand and incoming volumes of work have stayed at the same higher level and is now the ‘new normal’ level of activity.

The increased workload put the administration service under some pressure, and this resulted in some areas of service delivery falling outside the agreed service levels (SLA)s. The Trustee considered the most significant SLA impacted to be in respect of member claims, with 81% of claims being handled within SLA during the reporting period. While this is disappointing compared to previous years, the Trustee considered it explicable and justifiable given the change in administration demand. The Trustee noted that the investment of contributions and fund switches were completed on time. The monitoring of the Administrator clarified the need for strong resource planning and accordingly, the Trustee and the RACC had positive discussions with B&CE regarding securing additional administration resource. These discussions will continue at Trustee Board and RACC meetings in 2019/20.



The costs for the year 1 April 2018 to 31 March 2019 are shown the table below:

Fund Total Cost %

Global Investments (up to 85% shares) Fund*

-0.004

Global Investments (up to 60% shares) Fund

0.001

Global Investments (up to 100% shares) Fund

-0.010

Pre-Retirement Fund* 0.010

Ethical Fund 0.000

Annuity Fund -0.010

Cash Fund 0.000

Shariah Fund -0.010


*These are the component parts of the default balanced investment profile.

Whilst not all SLAs were met within the agreed standard, the level of overrun was deemed tolerable, given the considerable volume of work and the actions taken for continued resource planning and process reviews. It should be noted that the SLAs are a measure of timeliness, not accuracy, and the Trustee believes that, during periods of high demand, risks with accuracy should not be taken in an attempt to meet SLAs. The Trustee is satisfied that the Administrator maintained its focus on accuracy during the period.

The Trustee Board commissioned Crowe LLP to undertake a review and provide assurance around the Scheme’s systems and processes as part of the Trustee’s application for master trust authorisation, where a clean report dated February 2019 was provided by Crowe LLP and without qualification which means that no material issues were identified.

Charges and transaction costs

During the year, the Scheme operated an AMC of 0.5% across all funds, including the default investment profile and all non-default options. The Scheme is compliant with the statutory cap of 0.75% of funds under management and operates well within it.

The Trustee took a decision to increase the value delivered to members and, in February 2019, announced it will amend the AMC structure that members pay from a flat fee to a new structure. This change means the percentage a member pays as a charge will fall as their pension pot grows. This will vary between 0.5% and 0.2%.

Considering the breadth and quality of the Scheme’s core service elements (investment, administration, communications, governance), the Trustee is satisfied that the costs are appropriate for the Scheme both as a whole and when compared to other options in the market. The Trustee believes the Scheme represents good value for members.

The Trustee has reviewed the transaction costs associated with the investment funds used by the Scheme. Transaction costs are a component of the overall costs borne by members, as they have the effect of reducing the net investment returns of the funds.

Transaction costs are incurred by pension schemes in two ways. Firstly, a fund manager will trade in markets to invest money flowing into or out of a fund (when scheme members contribute to or leave a fund). Secondly, they will implement investment decisions in the course of the day-to-day management to achieve the fund’s objectives.

Until the recent involvement of the FCA there has been no agreed definition of transaction costs across the industry, although they can be broadly broken down into explicit and implicit costs. Explicit costs are observable

and, where the costs are incurred, an invoice could be generated. Examples include brokerage fees, stamp duty and custodian fees, and foreign exchange levies.

Implicit costs cannot be directly observed and cannot be invoiced. These include bid ask / offer spreads, implementation shortfall (the difference between the decision price and the execution price of a trade) and market impact (the change in the price of a security caused by the trade). Implicit costs will use a `slippage cost’ methodology to calculate the market impact of trading. This method calculates the trading cost by comparing the price at which the transaction was actually executed with the price when the order to transact entered the market. Implicit costs can be positive or negative depending upon whether market movements were favourable.

As noted above, a consequence of the implicit slippage cost calculation is that it can produce negative transaction costs if the implicit cost is negative and is greater than the effect of the explicit transaction costs. As the table above illustrates two of the funds had a negative transaction cost (shown as a positive figure). Given certain implicit costs, this sort of negative performance effect – which marginally boosts performance – is always positive but not guaranteed.


Charges and transaction costs (continued)

While negative transaction costs should not be taken to mean that trading in the market carries no cost, by reviewing underlying data and associated disclosures, the Trustee is comfortable that the level of transaction costs incurred by the funds are reasonable, in line with other providers and represent a small proportion of theoverall cost. An illustrative example of the effect of the annual management charge of 0.5% and the transaction costs for the balanced investment profile is shown in the table below:

• Projected pension pot values are shown in today’s terms, and do not need to be reduced further for the effect of future inflation. This is consistent with the Financial Reporting Council’s AS TM1: Statutory Money Purchase Illustrations

• Starting pot size is £1,500 (average pot size of active member was £1,370 at 31 March 2019)

• Contributions are assumed to be £90 per month from age 22 to 68 and increase each year in line with inflation (2.5%) (average monthly contribution was £87 at 31 March 2019)

• Values are estimates and not guaranteed

• Charges include the 0.5% annual management charge and transaction costs

• The ‘balanced’ investment profile, consists of the Global Investment (up to 85%) Shares Fund (growth rate 4.5%), gradually switching into the Pre-Retirement Fund (growth rate 3.0%) in the last 15 years

• Where transaction costs are negative for example on the Pre-Retirement Fund, these have been treated as zero for the purposes of the projection.

Year in Scheme No charges After all costs and charges deducted

1 year £2,670 £2,660

3 years £5,260 £5,210

5 years £8,200 £8,080

10 years £17,300 £16,900

15 years £29,700 £28,500

20 years £46,300 £43,800

25 years £68,000 £63,600

30 years £96,600 £88,900

35 years £132,000 £120,000

40 years £174,000 £156,000

45 years £222,000 £196,000



Charges and transaction costs (continued)

99% of the membership are in the balanced lifestyle profile as illustrated above. Full details of the Scheme transaction costs and projections for other funds available in the Scheme can be found at www.thepeoplespension.co.uk/costs-and-charges/

Value for Members

When thinking about whether the Scheme offers members good value for money, the Trustee looked at different aspects of what the Scheme offers and took account of those areas suggested by The Pensions Regulator. For example, are the charges made to members reasonable, are appropriate investment choices available, are the features of the scheme appropriate and likely to provide good outcomes for members, and does the Scheme compare well to other similar arrangements? It does not necessarily mean the Scheme is low cost.

The value members receive will be influenced by how much a member pays in, the investment returns on their contributions, the choices members make and how the Scheme is run – so what happens between members joining and leaving.

Members of The People’s Pension have a choice of where to invest their savings. There are three lifestyle profile investment options or a range of self-select funds. If members do not choose an option, their savings are invested in the default ‘balanced’ investment profile which initially invests in the B&CE Global Investments (up to 85% shares) Fund before gradually switching their savings into the B&CE Pre-Retirement Fund which carries less risk in the years before retirement. At the moment 98.6% of our members’ savings are invested in the default investment arrangement. The Investment performance of our three B&CE Global Investment Funds compared well to their benchmarks and overall performance has been monitored.

Scheme communications are is well understood, evidenced by positive customer satisfaction survey results from 73%, and only 6% of respondents were negative. Members have access to the Scheme through a number of different channels, for example online, a dedicated contact centre, website and paper. Support materials and tools are also provided through the Scheme website including videos and animations to help guide members though their savings journey to retirement with easy to understand information.

An AMC is levied against members’ pension pots, which covers the cost of administering the Scheme and managing member investments. The AMC is reflected in the unit price for each investment fund and is calculated daily at a rate of 0.5% per annum. This means that members are charged 50p for every £100 of pension savings each year.

To measure how The People’s Pension compares to other companies, in 2018 the Founder commissioned a cost benchmarking exercise with a professional services firm which has been providing Insight & Peer Analysis to the UK Financial Services Industry for over 15 years. The benchmark compared The People’s Pension (TPP) costs to those of 18 companies in the Life & Pension market.



The Scheme operates to strong governance and administration standards and is well run by an independent board of Trustee Directors and this is evidenced by the Scheme recently receiving master trust authorisation. For our members authorisation offers peace of mind. But we know that this is just the beginning – rightly – of much closer ongoing regulation of master trust provision.

In summary taking all these factors into consideration the Trustee believes The People’s Pension provides members with a good quality scheme and services at a competitive cost that will deliver good member outcomes.

Trustee’s knowledge and understanding

In accordance with section 248 of the Pensions Act 2004 and TPR’s Code of Practice 07, the Trustee has, and will maintain, relevant knowledge and understanding.

As well as being familiar with both the Scheme’s Trust Deed and Rules and the SIP, the Trustee has an extensive knowledge and understanding of:

• The law relating to pensions and trusts.

• The principles relating to the investment of the Scheme assets.

Trustee Board and Structure

The Scheme establisher and Principal Employer, B&CE Holdings Limited, has appointed five Directors to sit on the Board of The People’s Pension Trustee Limited, which is the Trustee of the Scheme, to provide effective governance to the Scheme. None of the Trustee Directors are affiliated to any company that provides advisory, administration, investment or other services or undertakings to the Scheme or taken

Value for Members (continued)

The table below shows how TPP ranked compared to the other companies in the benchmark.


Total cost per member account 2nd lowest out of 18

Total administration and contact centre cost per member account Lowest out of 18

Total administration and contact centre cost per transaction Lowest out of 16

Costs (as a % of funds under management) 5th lowest out of 12

Complaints per 100,000 members Lowest out of 18

payment or benefits from such organisations, and have no affiliations to B&CE Holdings Limited or any of its subsidiary companies. None of the individual Trustee Directors have served on the Trustee Board for a period of 5 years since 6 April 2015 or for more than 10 years in total.

Each Trustee Director has extensive defined contribution, administration, investment, trusteeship and/or consumer industry experience – their names are detailed on pages 7, 8 and 9. The Trustee continues to safeguard effective standards of governance, taking into account the size and complexity of the Scheme.

The number of directors is kept under review to ensure relevant skills and resources are in place to meet the Scheme’s work levels. In December 2018, People’s Financial Services Limited became the new Founder and is now responsible for the appointment of Trustee Directors. The change in Founder was made to align with the rest of the B&CE Group’s financial activity.

The Articles of Association of the Trustee confirms all Trustee Directors shall be appointed and may be removed and be in office for a term determined by the Founder.

Trustee Directors have the discretion to appoint the Chair of the Trustee, in accordance with the model articles of association, as determined by the Articles of Association of The People’s Pension Trustee Limited. The Chair is not affiliated in any capacity with The People’s Pension and his term of office expires on 31 March 2020.

The Board is supported on technical matters by its Trustee Pension Manager, and by professional advisers. The Trustee has in place a policy for evaluating adviser performance and selecting new advisers. Relevant skills and experience are crucial criteria.


The law sets out time limits relating to the appointment of non-affiliated trustees. Trustee Directors can be treated as non-affiliated for a single period of up to five years and up to 10 years in total.

The limit on the length of appointment starts from the later of 6 April 2015 and the date of the appointment. A Trustee Director’s appointment may run for five years, and if re-appointed may serve a maximum of 10 years in total, from the start date noted above.

Trustee Board skills and training

The Chair reviews the effectiveness of the Trustee Board annually. This review looks into individual knowledge and understanding, the expertise of the appointed advisers and steps taken to address any training gaps.

The Trustee maintains and periodically reviews its policy on obtaining and improving Trustee knowledge, understanding and skills. All Trustee Directors maintain their personal training logs. For example, the Chair has an unbroken completed CPD record with the Pensions Management Institute dating back to commencement of its CPD programme in the early 1990s and maintains a detailed log of all CPD in this wider role as an independent trustee that is relevant to the Trustee Pension Manager.

These personal logs, and all professional and institutional CPD records, are available to the Trustee Pension Manager to evidence the CPD and Trustee knowledge and understanding work carried out by the Directors. Training is delivered throughout the year and future training needs are discussed at each Trustee meeting.

Trustee Director Appointed End of Current Term

Steve Delo28 June 2012

(Prior to 31 March 2015 acted under the appointment of PAN Governance LLP)

31 March 2020

Alan PickeringRe-appointed 1 March 2019

(previously effective from 6 April 2015)31 March 2023

Sue LewisRe-appointed 1 June 2018

(original appointment 1 April 2016)31 March 2020

David Maddison 1 June 2018 31 March 2021

Chris Fagan 1 July 2018 31 March 2022

Trustee Director term of office and status



Trustee Board skills and training (continued)

The cumulative training for the Trustee Directors for 1 April 2018 to 31 March 2019 was as follows:

Moreover, the Directors on the Trustee Board have completed a self-assessed skills matrix. A review of the data received from each Board member was completed during the year and the gap analysis was used to determine the development and training programme required for 2019/20. This process will be carried out annually to maintain the high level of skill and application on the Board. On 15 May 2019, the Trustee Board had an extensive training session to cover the gaps identified in the skills analysis. This covered administration, IT security, governance and investment. Further training will take place throughout the year as part of the Trustee’s ongoing development plan.

The Chair conducts individual one-to-one reviews with each Trustee Director. In 2018/19, these discussions focused on the following areas:

• Trustee Director’s view of the last 12 months’ work - what works well and what could be improved.

• Personal development.

• Board composition and support.

• Feedback.

The chair of the Trustee and the Trustee Pension Manager also carried out an evaluation of the skills of each Director and how these skills combine at board level, presenting the information graphically to assist year on year monitoring of trends.

New Trustee Directors must complete the TPR’s Trustee Toolkit within their first six months. In that same period, they must also complete a detailed induction programme. This has the following five components:

• A comprehensive reading list that includes the SIP, the Scheme Rules and the conflicts of interest policy. Trustee Directors must read 12 items in all, many of which are provided through an online training system that logs completed activity.

• An induction day provided through an online training tool.

• Familiarisation with relevant documents such as TPR’s ‘Welcome to pension scheme trusteeship’.

• Newly appointed Trustee Directors must provide the Secretary with a detailed list of items, including but not limited to a signed fit and proper person declaration, the Trustee knowledge and understanding log and a conflicts of interest register update.

• The induction may, on agreement with the Chair, include externally provided training courses. Following on from the induction, further training will be provided on an ongoing basis and each Trustee Director will have the opportunity to suggest future training requirements.

All Trustee Directors with the Scheme on 31 March 2019 had completed TPR’s Trustee Toolkit – an online learning programme for trustees.

Trustee structure and independence

The Trustee Board is currently made up of five Trustee Directors, all of whom are independent of and have no affiliations to B&CE. Their names and professional experience are detailed on pages 7, 8 and 9. The Trustee continues to safeguard effective and leading standards of governance, taking into account the size and complexity of the Scheme.

Note: During the year two Trustee Directors were appointed and one Trustee Director resigned.

Key Areas Governance Investment AdministrationScheme

managementKnowledge and understanding

Communication

Strength

Training Completed

Hours41 51 22 21 44 19



Trustee appointment process

Appointments to the Trustee Board are open and transparent.

The process comprises the following steps:

• An assessment of the composition and breadth of skills, experience and knowledge on the Trustee Board, followed by a gap analysis. The profile of the candidate role is drawn from these conclusions.

• The new role is advertised publicly, and an external headhunting specialist may be retained. CVs are requested and all are examined by the Trustee Pension Manager.

• A thorough two-stage interview process managed by B&CE in conjunction with the Trustee. Final interviews are conducted by the Chair of the Trustee and the Chief Executive Officer of B&CE.

During January and February 2019, interviews were held to consider the open position resulting from Alan Pickering coming to the end of his term of office. The Trustee Board received 26 applications, with four candidates interviewed in the first stage, two candidates shortlisted (which included Alan Pickering) and, on 1 March 2019, reappointed Alan Pickering.

All new Trustee Directors undergo a thorough induction programme as detailed above. This involves training on the governance framework of the Trustee Board, and more generally a review of Scheme documentation and completion of ‘fit and proper’ checks as part of the Master Trust Authorisation application in February 2019.

In addition, the Trustee Pension Manager has a job objective to ensure that all Trustee Directors meet The Pensions Regulator’s requirements for Trustee knowledge and understanding.

Member views

The People’s Pension exists for the benefit of its members – and their views play a key role in its management.

Working with B&CE, and its customer experience, marketing and communications teams, the Scheme undertook a variety of initiatives to elicit views from members:

• Research focus groups to explore members’ general understanding of pensions, and their level of engagement in planning for retirement.

• The testing of communications at each stage in the savings journey to retirement.

• In February 2019 a series of live webinars were run to address recent and forthcoming issues, such as contribution increases, and to also answer questions. They were well attended by members, employers and advisers and 92% of users rated the content as ‘very good’ or ‘excellent’.

The key topics covered and the number of attendees were as follows

Members - Saving into a Pension, accessing your money, investments, transfers, tax and Brexit. The session was attended by 954 members compared to 257 attendees of the previous session.

Employers - Employer Contributions, charges, investments and Brexit. 700 employers attended compared to 99 at last year’s session.

Advisers - Annual Management charges, new employee benefits, increasing contributions, with 131 advisers joining the session. The previous session had 79 attendees.

Any questions that could not be answered on the day were passed to subject experts to respond. All feedback from this year’s event will also be reviewed in preparation for the 2020 series of webinars.

The Trustee receives detailed information each quarter from the Administrator regarding the profile of the Scheme’s membership, and about any complaints or disputes. All second stage decisions on submissions through the Internal Disputes Resolution Procedure are tabled and discussed at a quarterly Trustee Board meeting.

The Trustee periodically joins B&CE employees at The People’s Pension contact call centre and listens to calls from members, to enhance understanding of member concerns and needs.

All members have the facility to make a submission to the Trustee at www.thepeoplespension.co.uk/contact-us.

The Statement regarding governance was approved by the Trustee and signed on its behalf by:

Steve Delo Chair of The People’s Pension Trustee Limited

4 September 2019



Independent auditor’s report to the Trustee of The People’s Pension Scheme

Opinion

We have audited the financial statements of The People’s Pension Scheme (“the Scheme”) for the year ended 31 March 2019 which comprise the Fund Account, the Statement of Net Assets available for benefits and related notes, including the accounting policies in note 1.

In our opinion the financial statements:

• show a true and fair view of the financial transactions of the scheme during the scheme year ended 31 March 2019 and of the amount and disposition at that date of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the scheme year;

• have been properly prepared in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and

• contain the information specified in Regulation 3 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the scheme in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.


Independent auditor’s report to the Trustee of The People’s Pension Scheme (continued)

The impact of uncertainties due to the UK exiting the European Union on our audit

Uncertainties related to the effects of Brexit are relevant to understanding our audit of the financial statements. All audits assess and challenge the reasonableness of estimates made by the Trustees, and related disclosures and the appropriateness of the going concern basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and The People’s Pension Scheme’s future prospects and performance.

Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. We applied a standardised firm-wide approach in response to that uncertainty when assessing the scheme’s future prospects and performance. However, no audit should be expected to predict the unknowable factors or all possible future implications for a Scheme and this is particularly the case in relation to Brexit.

Going concern

The Trustee has prepared the financial statements on the going concern basis as they do not intend to wind up the scheme, and as they have concluded that the scheme’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).

We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least a year from the date of approval of the financial statements. In our evaluation of the trustees’ conclusions, we considered the inherent risks to the scheme, including the impact of Brexit, and analysed how those risks might affect the scheme’s financial resources or ability to continue operations over the going concern period. We have nothing to report in these respects.

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor’s report is not a guarantee that the scheme will continue in operation.

Other information

The trustee is responsible for the other information, which comprises the trustee’s report, the Chair’s Statement and the Governance Statement. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon in this report.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on this work we have not identified material misstatements in the other information.

Trustee’s responsibilities

As explained more fully in their statement set out on page 20, the scheme trustee is responsible for: supervising the preparation of financial statements which show a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the scheme’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to wind up the scheme, or have no realistic alternative but to do so.


Independent auditor’s report to the Trustee of The People’s Pension Scheme (continued)

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the scheme trustee in accordance with the Pensions Act 1995 and Regulations made thereunder. Our audit work has been undertaken so that we might state to the scheme Trustee those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the scheme trustee, for our audit work, for this report, or for the opinions we have formed.

Fang Fang Zhou for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants 15 Canada Square London E14 5GL

4 September 2019


Fund account for the year ended 31 March 2019

Note 2019 2018

£000 £000

Contributions and benefits

Employer contributions 907,600 481,239

Employee contributions 949,870 385,978

Total contributions 4 1,857,470 867,217

Transfers in 163,016 1,167,057

Other income 10 -

2,020,496 2,034,274

Benefits paid or payable 5 (69,168) (30,129)

Payments to and on account of leavers 6 (3,979) (2,232)

Transfers to other plans (53,226) (23,700)

Administrative expenses 7 (21,565) (11,981)

(147,938) (68,042)

Net additions from dealings with members 1,872,558 1,966,232

Returns on investments

Change in market value of investments 8 331,788 43,411

Investment management expenses (2,924) (965)

Net return on investments 328,864 42,446

Net increase in the fund during the year 2,201,422 2,008,678

Opening net assets 3,962,993 1,954,315

Closing net assets 6,164,415 3,962,993

The notes on pages 36 to 45 form part of these financial statements.


Statement of net assets available for benefits as at 31 March 2019

Note 2019 2018

£000 £000

Investment assets

Pooled investment vehicles 8 6,115,307 3,952,299

Total net investments 8 6,115,307 3,952,299

Current assets 14 73,222 40,884

Current liabilities 15 (24,114) (30,190)

Net assets available for benefits 6,164,415 3,962,993

The financial statements summarise the transactions of the Scheme and deal with the net assets available for benefits at the disposal of the Trustee. They do not take account of obligations to pay pensions and benefits which fall due after the end of the Scheme year.

The notes on pages 36 to 45 form part of these financial statements.

These financial statements were approved by the Trustee on 4 September 2019 and signed on its behalf by:

Director

Director


Notes to the financial statements

for the year ended 31 March 2019

1. Basis of preparation

The financial statements of The People’s Pension Scheme (the Scheme) have been prepared in accordance with the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, Financial Reporting Standard 102 – The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102), and the guidance set out in the Statement of Recommended Practice ‘Financial Reports of Pension Schemes’ (revised 2018) (SORP).

The Trustee has taken advantage of the option to adopt the amendments to FRS 102 and the the 2018 SORP, which is early for these financial statements.

2. Identification of the financial statements

The Scheme is a defined contribution occupational pension scheme established as a trust under English law.

The Scheme was established to provide an auto-enrolment workplace pension scheme for employers. The address of the Scheme’s registered office is Manor Royal, Crawley, West Sussex RH10 9QP.

The Scheme is a registered pension scheme under Chapter 2, Part 4 of the Finance Act 2004 (Pension Scheme Registration (PSR) number: 12005993). This means that contributions by employers and employees are normally eligible for tax relief, and income and capital gains earned by the Scheme receive preferential tax treatment.

3. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Currency

The Scheme’s functional currency and presentational currency is pounds sterling (GBP).

Assets and liabilities in foreign currencies are expressed in sterling at the rates of exchange ruling at the year end. Foreign currency transactions are translated into sterling at the spot exchange rate at the date of transaction.

Gains and losses arising on conversion or translation are dealt with as part of the change in market value of investments.

(b) Contributions

Normal and additional voluntary contributions, both from members and employers, when submitted by the employers are accounted for on an accruals basis based on the pay period to which they relate. Contributions made directly by members are accounted for when they are received from the members.

All contributions payable under salary sacrifice arrangements are classified as employer contributions.

c) Transfers from and to other plans

Individual transfers in and out are accounted for on a cash basis, as recipient schemes are normally not liable for any pensions benefits in respect of the transferring member until assets have actually been received.

(d) Benefits and payments to and on account of leavers

Benefits payable to members are accounted for on an accruals basis from the date the Trustee is notified.

Refunds and opt-outs are accounted for when the Trustee is notified of the member’s decision to leave the Scheme.

Where the Trustee agrees or is required to settle tax liabilities on behalf of a member (such as where lifetime or annual allowances are exceeded) with a consequent reduction in that member’s benefits receivable from the Scheme, any taxation due is accounted for on the same basis as the event giving rise to the tax liability and shown separately within Benefits on the Fund account.

(e) Administrative expenses

An annual management charge (AMC) is levied against members’ funds which is accounted for on an accruals basis and is calculated daily on the value of the investments at 0.5% per annum. The charge is reflected through a reduction in the unit price of the fund that the member is invested in and is received monthly in arrears from the investment manager.

The AMC is the only administration cost borne by the Scheme. All direct costs of administration, including fees payable to the Trustee Directors, are met by B&CE. The AMC, less any investment management fees payable, is payable to the Administrator.


3. Summary of significant accounting policies (continued)

(f) Investment income and expenditure

The change in market value of investments during the year comprises all increases and decreases in the market value of investments held at any time during the year, including profits and losses realised on sales of investments and unrealised changes in market value. In the case of pooled investment vehicles which are accumulation funds, where income is reinvested within the fund without issue of further units, the change in market value also includes such income.

Transaction costs are included in the cost of purchases and sale proceeds. Transaction costs include costs charged directly to the Scheme such as fees, commissions, stamp duty and other fees. Other investment management expenses are accounted for on an accruals basis and shown separately within investment returns.

(g) Valuation and classification of investments

Investment assets and liabilities are included in the financial statements at fair value. Where separate bid and offer prices are available, the bid price is used for investment assets and the offer price for investment liabilities. Otherwise, the closing single price, single dealing price or most recent transaction price is used.

The fair value for the unitised pooled investment vehicles which are not traded on an active market but are priced daily, weekly or at each month end, and which are traded on substantially all pricing days, are included at the last price provided by the manager at or before the year end.

Notes to the financial statements (continued)



4. Contributions 2019 2018

£000 £000

Employers

Normal 907,600 481,239

Employees

Normal 935,685 374,799

Additional voluntary contributions 14,185 11,179

949,870 385,978

1,857,470 867,217

5. Benefits 2019 2018

£000 £000

Lump sum retirement benefits 63,543 28,138

Lump sum death benefits 5,625 1,991

69,168 30,129

6. Payments to and on account of leavers 2019 2018

£000 £000

Refund of contributions in respect of:

Short service refunds - 119

Opt-outs 3,979 2,113

3,979 2,232

7. Administrative expenses 2019 2018

£000 £000

Administrative expenses 21,565 11,981

The AMC deducted from members’ funds during the year totalled £24,490k (2018: £12,946k). The administration fee paid to the Administrator is calculated by taking the AMC and deducting any investment management fees paid directly by the Scheme. The administrative expenses have increased due to higher fund values throughout the year.




Opening value as 1 April 2018

Purchases Sales proceeds

Change in market value

AMC Closing value as

31 March 2019

£000 £000 £000 £000 £000 £000

Pooled investment vehicles 3,952,299 2,179,958 (324,248) 331,788 (24,490) 6,115,307

Represented by: Allocated to members 3,952,299 6,115,307

The underlying assets of the pooled investment vehicles are: 2019 2018

£000 £000

Equity 4,212,199 2,785,812

Bond 1,686,374 1,000,712

Cash 216,734 165,775

6,115,307 3,952,299

8. Reconciliation of net investments

9. Pooled investment vehicles

The investments purchased by the Scheme are allocated to provide benefits to the individuals on whose behalf corresponding contributions are paid. The investment manager holds the investment units on a pooled basis for the Trustee. The Administrator allocates investment units to members. The Trustee may hold investment units representing the value of employer contributions that have been retained by the Scheme that relate to members leaving the Scheme prior to vesting.

10. Fair value of investments

The fair value of investments has been determined using the following fair value hierarchy:

• Level 1: Unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

• Level 2: Inputs (other than quoted prices included in Level 1) that are observable for the assets or liabilities, for example developed using market data, either directly or indirectly.

• Level 3: Inputs are unobservable, ie for which market data is unavailable, for the assets or liabilities.

The Scheme’s investment assets and liabilities have been included at fair value and all fall into Level 2 in this and the prior period.




11. Investment risks

FRS 102 requires the disclosure of information in relation to certain investment risks. These risks are set out by FRS 102 as follows:

Credit risk: this is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Market risk: this comprises currency risk, interest rate risk and other price risk.

• Currency risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in foreign exchange rates.

• Interest rate risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in market interest rates.

• Other price risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

The Trustee determines the investment strategy after taking advice from a professional investment adviser. The Scheme has exposure to these risks because of the investments it makes in following the investment strategy set out in the Trustee’s report. The Trustee manages investment risks, including credit risk and market risk, within agreed risk limits that reflect the Scheme’s strategic investment objectives. These investment objectives and risk limits are implemented through the investment management agreements in place with the Scheme’s investment manager – and these are monitored by the Trustee through regular reviews of the investment portfolio.

The following table summarises the extent to which the underlying investments held in pooled investment vehicles are affected by financial risks:

Credit risk Market risk 2019 2018

Currency Interest rate Other price £000 £000

B&CE Global Investments (up to 60%) Yes Yes Yes Yes 14,193 8,944

B&CE Global Investments (up to 85%) Yes Yes Yes Yes 5,055,100 3,251,802

B&CE Global Investments (up to 100%) Yes Yes No Yes 134,941 77,573

B&CE Ethical Fund Yes Yes No Yes 13,279 8,180

B&CE Shariah Fund Yes Yes No Yes 9,407 4,116

B&CE Pre-Retirement Fund Yes Yes Yes Yes 847,776 557,447

B&CE Cash Fund Yes No Yes No 40,546 44,221

B&CE Annuity Fund Yes Yes Yes Yes 65 16

6,115,307 3,952,299




11. Investment risks (continued)

Further information on the Trustee’s approach to risk management, credit risk and market risk is set out below.

Investment strategy

The Trustee’s objective is to enable members to provide adequately for their retirement via an appropriate investment of their accumulated pension contributions.

In relation to the default option in particular, the objective is to provide an investment strategy that is intended to be suitable for a typical member.

The SIP outlines the investment objectives and strategy for the assets of the Scheme – namely the investment options built from pooled investment funds provided by SSGA, which is overseen by an investment management agreement.

The day-to-day management of the underlying investments in the funds is the responsibility of SSGA, including the direct management of credit and market risks.

The Trustee monitors the underlying risks and receives quarterly investment monitoring reports from its investment adviser which covers SSGA.

The risks disclosed here relate to the Scheme’s investments as a whole. Members who choose their own investments may face a different profile of risks from their individual choices compared with the Scheme as a whole.

Credit risk

The Scheme is subject to direct credit risk in relation to SSGA through their holding in unit-linked insurance funds provided by SSGA. SSGA is regulated by the Prudential Regulation Authority (PRA) and maintains separate funds for its policy holders. The Trustee monitors the creditworthiness of SSGA by reviewing published credit ratings and regulatory solvency positions. SSGA invest all the Scheme’s funds in their own unit-linked investment funds and do not use other investment funds or reinsurance arrangements. In the event of default by SSGA, members may be entitled to limited compensation from the Financial Services Compensation Scheme (FSCS) or other regulatory body in the country in which the fund is domiciled.

The Scheme is also subject to indirect credit and market risk arising from the underlying investments held in the pooled investment vehicles. Member level risk exposures will be dependent on the funds invested in by members.

The Trustee only invests in funds where the financial instruments and all counterparties are at least investment grade – which is a financial term meaning a level of credit rating that carries a lower level of risk to investors.

Market risk

The Scheme is subject to indirect foreign exchange, interest rate and other price risk arising from the underlying financial instruments held in the funds managed by SSGA.

Currency risk

The Scheme is subject to currency risk because some of the Scheme’s investments are held in overseas markets via pooled investment vehicles (indirect exposure). The Scheme’s liabilities are denominated in sterling and to the extent that there is exposure to non-sterling currencies the Trustee will consider whether to hedge this risk.




12. Concentration of investments

Investments accounting for more than 5% of the net assets of the Scheme were:

These investments are pooled investment vehicles which have multiple underlying assets, none of which exceeds 5% of the net assets of the Scheme.

13. Employer-related investments

The top 100 investments as at 31 March 2019 have been calculated on a look-through basis to the underlying holdings of the pooled funds invested in by the Scheme. There are currently no Employer Related Investments in the top 100 investments. The employer-related investments would be participating employers in which the Scheme invests at arms-length through the investment manager.

2019 2018

£000 % £000 %

B&CE Global Investments (up to 85% shares) Fund 5,055,100 82 3,251,802 82

B&CE Pre-Retirement Fund 847,776 14 557,447 14

5,902,876 96 3,809,249 96




13. Employer-related investments (continued)

Investment % of Investment Investment % of Investment

1 HSBC Holdings PLC 0.67% 51 RELX 0.19%

2 BP 0.58% 52 UK Treasury Gilt 5% 2025 0.18%

3 Royal Dutch Shell A 0.56% 53 UK Treasury Gilt 4.25% 2040 0.18%

4 Nestle 0.54% 54 UK Treasury Gilt 3.25% 2044 0.18%

5 Royal Dutch Shell B 0.48% 55 UK Treasury Gilt 4.25% 2027 0.18%

6 Samsung Electronics 0.45% 56 Sanofi 0.18%

7 Apple 0.43% 57 UK Treasury Gilt 3.5% 2045 0.18%

8 Microsoft 0.43% 58 Johnson & Johnson 0.18%

9 GlaxoSmithKline 0.41% 59 Allianz 0.17%

10 AstraZeneca 0.41% 60 UK Treasury Gilt 3.75% 2052 0.17%

11 Diageo 0.39% 61 LVMH Moet Hennessy Louis Vuitton 0.17%

12 Novartis 0.39% 62 AXA 0.17%

13 British American Tobacco 0.39% 63 UK Treasury Gilt 4.25% 2046 0.17%

14 Roche Holding 0.36% 64 Alphabet Class C 0.17%

15 Intel 0.34% 65 Taiwan Semiconductor Manufacture 0.17%

16 Amazon.com 0.34% 66 Alphabet Class A 0.17%

17 AIA Group 0.29% 67 Novo Nordisk 0.17%

18 Simon Property Group REIT 0.28% 68 Intuit 0.17%

19 Rio Tinto 0.28% 69 Unilever NV 0.17%

20 TOTAL 0.26% 70 Pub Storage REIT 0.16%

21 Accenture 0.26% 71 Exxon Mobil 0.16%

22 Unilever 0.25% 72 UK Treasury Gilt 4.75% 2020 0.16%

23 UK Treasury Gilt 4.25% 2032 0.24% 73 UK Treasury Gilt 1.75% 2019 0.16%

24 Texas Instruments 0.24% 74 JPMorgan Chase 0.16%

25 Toyota Motor 0.23% 75 UK Treasury Gilt 3.5% 2068 0.15%

26 National Grid 0.23% 76 Siemens 0.15%

27 Lloyds Banking Group 0.23% 77 UK Treasury Gilt 2.75% 2024 0.15%

28 UK Treasury Gilt 4.25% 2055 0.23% 78 CSL 0.15%

29 Tencent Holdings 0.23% 79 Westpac Banking 0.15%

30 Prologis REIT 0.23% 80 Mitsui Fudosan 0.15%

31 Link REIT 0.22% 81 Compass Group 0.15%

32 Prudential 0.21% 82 UK Treasury Gilt 4.25% 2049 0.15%


34 UK Treasury Gilt 4.75% 2030 0.21% 84 UK Treasury Gilt 4% 2 2020 0.15%

35 Commonwealth Bank of Australia 0.21% 85 UK Treasury Gilt 2% 2025 0.15%

36 Reckitt Benckiser 0.21% 86 Welltower REIT 0.15%

37 SAP 0.21% 87 UK Treasury Gilt 2.25% 2023 0.15%

38 UK Treasury Gilt 4% 2060 0.20% 88 UK Treasury Gilt 1.5% 2021 0.15%

39 BHP Group PLC 0.20% 89 UK Treasury Gilt 1.75% 2022 0.14%

40 UK Treasury Gilt 4.25% 2036 0.20% 90 Barclays 0.14%

41 UK Treasury Gilt 4% 2022 0.20% 91 Goodman REIT 0.14%

42 Vodafone Group 0.20% 92 ASML Holding 0.14%

43 Alibaba Group 0.19% 93 AvalonBay Communities REIT 0.14%

44 UK Treasury Gilt 4.75% 2038 0.19% 94 Equity Residential REIT 0.14%

45 BHP Group 0.19% 95 Banco Santander 0.14%

46 Unibail-Rodamco-Westfield 0.19% 96 UK Treasury Gilt 8% 2021 0.14%

47 Eli Lilly & Co 0.19% 97 Airbus 0.13%


49 Facebook Class A 0.19% 99 Norfolk Southern Corp 0.13%

50 Glencore 0.19% 100 Imperial Brands 0.13%




14. Current assets

2019 2018

£000 £000

Contributions due in respect of:

Employers 28,666 13,039

Employees 33,831 10,970

Other debtors 2,010 4,728

Cash balances 8,715 12,147

73,222 40,884

2019 2018

£000 £000

Tax deducted from benefits 821 583

Contributions pending settlement with investment manager - 17,077

Contributions prepaid 16,724 9,747

Contributions to be returned to employers 164 165

Other creditors 5,188 1,528

Amounts owed to the Administrator 1,217 1,090

24,114 30,190

Contributions due to the Scheme from employers and employees at 31 March 2019 totalled £62,497k (2018: £24,009k).

Included in cash balances is £4k (2018: nil) which is not allocated to members. All other current assets are allocated to members.

During the year the Scheme changed its processes to settle contributions with the investment manager on the same day which is why there is no longer a liability for contributions pending settlement with investment manager.

15. Current liabilities




16. Related party transactions

Related party transactions and balances comprise:

• The administration fees amounting to £21,565k (2018: £11,981k) mentioned in note 7, including £1,217k (2018: £1,090k) outstanding at the year-end as detailed in note 15, which is payable to B&CE Financial Services Limited.

• As explained on page 36, all fees and expenses payable to the Trustee’s Directors, amounting to £236k (2018: £218k), were met by B&CE Holdings Limited.



• B&CE Holdings Limited uses the Scheme for its employees and its employer pension contributions amounted to £1,622k (2018: £1,275k).

• PAN Trustee Services Ltd (part of PAN Group) uses the Scheme for its employees and its employer pension contributions amounted to £8k (2018: £2k). Steve Delo is the Managing Director of PAN Governance LLP (part of PAN Group).


Appendix 1

Statement of Investment Principles – Approved 4 September 2018

IntroductionThis Statement of Investment Principles (SIP) has been prepared for The People’s Pension Trustee Limited (The Trustee), the Trustee of The People’s Pension Scheme (the Scheme).

This SIP is produced to meet the requirements of the Pensions Acts 1995 & 2004, the Occupational Pension Schemes (Investment) Regulation 2005 as amended by the Occupational Pension Schemes (Investment) (Amendment) Regulations 2010 and the Occupational Pension Schemes (Charges and Governance) Regulations 2015 as well as to reflect the Government’s Voluntary Code of Conduct for Institutional Investment in the UK. The Trustee also complies with the requirements to maintain and take advice on the SIP and with the disclosure requirements

The Trustee has consulted a suitably qualified person by obtaining written advice from Barnett Waddingham LLP.

Overall investment strategy falls into two parts: the strategic management of assets, which is the responsibility of the Trustee, and the day-to-day management of the assets, which is the responsibility of the investment managers. The Trustee invests the assets of the Scheme with two investment managers: State Street Global Advisors Ltd and HSBC Investment Funds (Luxembourg) S.A. via an investment only platform with State Street Global Advisors Ltd. They are responsible for day-to-day management. Both investment managers are regulated by the Financial Conduct Authority and are signatories to the United Nations Principles on Responsible Investment (UNPRI), which can be found at www.unpri.org.

Scheme investment objectiveThe Trustee’s key objective is to enable members to provide adequately for their retirement via an appropriate investment of their accumulated pension contributions.

In relation to the default option in particular, the objective is to provide an investment strategy that is intended to be suitable for a typical member.

StrategyThe Trustee has made available a range of investment options as set out in Appendix A. There are three investment profiles which invest in funds with varying degrees of risk. The profiles include a ‘balanced’ investment profile which is the default option.

Under each of the investment profiles, members’ assets are switched gradually from predominantly equity-based funds into funds with expected lower volatility as the member approaches the nominated target retirement age. Details of this process are given in Appendix B. The investment options are designed to be appropriate for a member with a predictable retirement date but with different attitudes to risk. The Trustee acknowledges that members will have different attitudes to risk and different aims for accessing their retirement savings, and so it is not possible to offer a default investment option that will be suitable for all. However, the Trustee believes that the default option provided represents a suitable default investment option for members who do not make a choice about how their contributions (and those made on their behalf by their employer) are invested.

Fund share in the 15-year glidepath

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

-15 -7 0-11 -3-13 -5-9 -1-14 -6-10 -2-12

% o

f fu

nd

Years from selected retirement age-4-8

B&CE Global Investment Fund

Pre-Retirement Fund


Appendix 1 (continued)

The Trustee’s policy is to provide suitable information for members so that they can make appropriate investment decisions. The default option and range of funds was chosen by the Trustee after taking expert advice from the Trustee’s investment advisers. In choosing the Scheme’s investment options, it is the Trustee’s policy to consider:

• The optimal charging structure given the financial model for the Scheme.

• A full range of asset classes.

• The suitability of the possible styles of investment management and the need for manager diversification.

• The suitability of each asset class for a defined contribution scheme.

• The need for appropriate diversification of asset classes.

• Operational risk as described below.

• In relation to the default option (as describe throughout this Statement):

• the kinds of investments to be held

• the balance between different kinds of investments

• investment risks

• the expected return on investments

• the realisation of investments

• socially responsible investment, corporate governance and voting rights.

The Trustee expects the long-term return on the investment options that invest predominantly in equities to exceed price inflation and general salary growth. The long-term returns on the bond and cash options are expected to be lower than returns on predominantly equity options but are expected to be less volatile. Bond funds are also expected to move similarly with the price of an annuity in most circumstances, giving some protection in the amount of secured pension for members closer to retirement should members choose to purchase an annuity. Cash funds are expected to provide protection against changes in short-term capital values and may be appropriate for members receiving part of their retirement benefits in the form of tax-free cash.

It is up to members to decide what strategy is best for them given their circumstances. The default option has been designed in consideration of all of the above and in keeping with the objectives of the Trustee. Given the uncertainty of how members will take their retirement savings the Trustee believes this represents an appropriate strategy that can be used having regard to these options (especially where members do not yet know how they will access their retirement savings), noting that there may be more appropriate strategies given members’ individual circumstances and in particular if the way in which savings will be accessed is known.

The Trustee’s policy is to use pooled investment funds (eg the purchase of an insurance policy or units in pooled vehicles) and not to hold any direct investments.

RiskWithin the Scheme, investment risk is ultimately borne by the members themselves. The Trustee has taken into account members’ circumstances and considered ways of managing/monitoring risks. In particular:

• The expected/perceived range of members’ attitudes to risk and term to retirement.

• The risk that market movements in the years prior to retirement might lead to a substantial reduction in size of a member’s pot – in the default option this is managed via gradual de-risking of the assets held as members approach retirement age.

• The potential impact of inflation – The Trustee has made available investment options that invest predominantly in equities that are expected to provide a long-term rate of return in excess of inflation. The default option invests in these prior to the de-risking phase before retirement age.

• Conversion risk – The risk that fluctuations in the assets held, particularly in the period before retirement savings are accessed, lead to uncertainty over the benefit amount likely to be received.

• Concentration risk – Each investment manager is expected to manage broadly diversified portfolios and to spread assets across a number of individual shares and securities.

• Investment manager risk – The majority of the assets (excluding the cash funds) of the Scheme are currently managed on an index-tracking basis and therefore the main risk here comes from the investment managers not being to meet their benchmarks. The Trustee monitors the performance of each of the Scheme’s investment managers on a regular basis in addition to having meetings with each manager from time to time as necessary. The Trustees have a written agreement with each investment manager, which contains a number of restrictions on how each investment manager may operate, for example the HSBC Amanah Fund is designed to be compliant with Shariah principles.

• Operational risk –The risk of fraud, poor advice, errors, administrative failure or acts of negligence. The Trustee has sought to minimise such risk by ensuring that all advisers and third-party service providers are suitably qualified and experienced and that suitable liability and compensation clauses are included in all contracts for professional services received.

• Currency risk – Some of the funds made available to members by the Trustee can invest in overseas assets which will be denominated in currencies other than Sterling. There is therefore a risk that the relative movements of Sterling and other currencies leads to losses (or gains) in the value of the investment.

Statement of Investment Principles – Approved 4 September 2018 (continued)



GovernanceThe Trustee of the Scheme is responsible for the investment of the Scheme assets. The Trustee takes some decisions itself and delegates others. When deciding which decisions to take itself and which to delegate, the Trustee has taken into account whether it has the appropriate training and expert advice in order to make an informed decision. The Trustee has established the following decision-making structure:

Trustee

• Sets the structures and processes for carrying out its role.

• Selects appropriate experts to provide advice as and when required.

• Sets the structure for the implementation of the investment strategy.

• Selects and monitors the planned asset allocation strategy.

• Reviews the self-select fund range and investment profiles on a regular basis.

• Monitors investment advisers and investment managers.

• Makes ongoing decisions relevant to the operational principles of the Scheme’s investment strategy.

• Monitors investment performance and costs.

Investment adviser

• Advises on all aspects of the investment of the Scheme’s assets, including implementation.

• Advises on this SIP.

• Provides required training to the Trustee.

• Ensures that it delivers advice that is compliant with the requirements of the Financial Conduct Authority.

Investment managers

• Operate within the terms of this SIP and their written contracts.

• Selects individual investments with regard to their suitability.

B&CE

• Administrative and operational liaison with the investment managers.

• Negotiation of fee terms and contractual terms.

• Recommendations on generic fund options required to keep the Scheme an attractive option to participating employers.

• Scheme secretarial and reporting liaison with the investment managers.

The Trustee expects the investment managers to manage the assets delegated to them under the terms of their respective contracts and to give effect to the principles in this SIP so far as is reasonably practicable.

Day-to-day management of assetsThe Trustee has taken steps to satisfy itself that the investment managers have the appropriate experience for managing the Scheme’s investments and they are carrying out their work competently. The Scheme is permitted to invest in a wide range of assets under the Scheme rules. The Trustee shall not invest in employer-related investments (as defined in Section 40 of the 1995 Act) except in accordance with that legislation.

Details of each of the funds available are as set out in Appendix A. The Trustees consider the merits of both active and passive management for the various elements of each Section’s portfolio and may select different approaches for different asset classes. The current arrangements are set out in the appendices to this Statement. The Trustees are aware that the appropriate balance between different kinds of investments will vary over time and the asset allocation may change as the membership profile evolves or there is a fundamental change in economic conditions

The Trustee has delegated all day-to-day decisions about the investments that fall within each mandate, including the realisation of investments, to the relevant investment manager through a written contract. When choosing investments, the Trustee and the investment managers (to the extent delegated) are required to have regard to the criteria for investment set out in the Occupational Pension Schemes (Investment) Regulations 2005 (regulation 4). The managers’ duties also include:

• Taking into account social, environmental or ethical considerations in the selection, retention and realisation of investments.

• Voting and corporate governance in relation to the Scheme’s assets (including taking into account the Institutional Shareholders’ Committee Statement of Principles on the Responsibilities of Institutional Shareholders and Agents).

All investment managers are remunerated on a fee basis related to the amount of assets under management.

Realisation of assetsThe Trustee will realise assets as required following member requests on retirement or earlier where required. In selecting assets, the Trustee considers the liquidity of the investments in the context of the likely needs of members.




Social, environmental and ethical investment policy The Trustee believes that environmental, social and corporate governance (ESG) issues can affect the performance of investment portfolios and should therefore be taken into account as part of the Scheme’s investment process.

It is accepted that pooled vehicles will be governed by – and constrained by – the individual investment policies of the investment managers. However, we recognise the important role the Trustee has to influence positive ESG standards both through the voting on key policies and decisions at general meetings – and our manager’s ability to engage with boards on our behalf as an asset owner. Full details of how the Trustee integrates ESG issues can be found in the Responsible Investment Policy.

The Trustee is supportive of the UK Stewardship Code published by the Financial Reporting Council and encourages the Scheme’s managers who are registered with the Financial Conduct Authority to comply with the UK stewardship code. Such managers are expected to report on their adherence to the code on an annual basis.

Corporate governanceThe Trustee accepts that the assets are subject to the investment manager’s own corporate governance policies. However, the Trustee expects the managers to discharge their responsibilities by taking account of current best practice which includes the UK Corporate Governance Code and the UK Stewardship Code. The investment managers’ policies are monitored on a regular basis.

Compliance with this SIPThe Trustee will monitor compliance with this SIP. 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.

The Trustee accepts that the very detailed benchmarks overleaf will change over time.

Review of this SIPThe Trustee will review this SIP and in particular the default option (and its performance) at least every three years and immediately following any significant change in investment policy or the demographic profile of members. As part of this the Trustee will review the extent to which the return on investments relating to the default strategy (after deduction of any charges relating to those investments) is consistent with the aims and objectives of the Trustee in respect of the default strategy. The Trustee will take expert investment advice over any changes to the SIP.




Appendix A Fund options agreed as at 1 July 2018

Fund Asset allocation

B&CE Global Investments (up to 60% shares) Fund 49.4% Equity5.3% Infrastructure5.3% Property10% Corporate Bonds10% Gilts20% Global Fixed Interest

B&CE Global Investments (up to 85% shares) Fund 66% Equity7% Infrastructure7% Property5% Corporate Bonds5% Gilts10% Global Fixed Interest

B&CE Global Investments (up to 100% shares) Fund 82.4% Equity8.8% Infrastructure8.8% Property

B&CE Ethical Fund 100% Global Equity

B&CE Shariah Fund 100% Global Equity

B&CE Pre-Retirement Fund 15% UK Gilts15% Corporate Bonds17.6% Equity1.2% Infrastructure1.2% Property20% Money Market30% Global Fixed Interest

B&CE Cash Fund The fund invests in the short-term money markets such as bank deposits and Treasury Bills

B&CE Annuity Fund 70% Corporate Bonds30% UK Gilts

It should be noted that the asset allocations stated for the B&CE Pre-Retirement, B&CE Global Investments (up to 60% shares), B&CE Global Investments (up to 85% shares) and B&CE Global Investments (up to 100% shares) funds are central benchmarks and are subject to change within certain tolerances. The asset allocation of the B&CE Annuity Fund is correct at the 1 April 2018 but is subject to change at the discretion of the investment manager at the discretion of the investment managers.




Appendix B

The ‘balanced’ investment profile switches on the following basis.

Years from retirement

B&CE Global Investments (up to 85% shares)

Pre-Retirement Fund

-15 93.75% 6.25%

-14 87.50% 12.50%

-13 81.25% 18.75%

-12 75.00% 25.00%

-11 68.75% 31.25%

-10 62.50% 37.50%

-9 56.25% 43.75%

-8 50.00% 50.00%

-7 43.75% 56.25%

-6 37.50% 62.50%

-5 31.25% 68.75%

-4 25.00% 75.00%

-3 16.67% 83.33%

-2 8.34% 91.66%

-1 0.00% 100.00%

0 0.00% 100.00%

The ‘cautious’ investment profile uses the same basis as described above but initially invests in the B&CE Global Investments (up to 60% Shares) Fund instead of the B&CE Global Investments (up to 85% Shares) Fund.

The ‘adventurous’ investment profile uses the same basis as described above but initially invests in the B&CE Global Investments (up to 100% Shares) Fund instead of the B&CE Global Investments (up to 85% Shares) Fund.




Appendix C Version control record

The following table records changes to this document:

Version Document name Nature of change Implemented

Version 1 Initial creation 01.09.2012

Version 2 Update Reflecting changes in fund composition

06.01.2014


03.09/.2014


01.09.2015

Version 5 Update Reflecting changes to investment managers, benchmarking, current regulations and fund composition

23.08.2016


05.04.2017


01.09.2018


FR TPP 0006.0619

The People’s Pension Trustee Limited Manor Royal, Crawley, West Sussex, RH10 9QP. Tel 0300 2000 555 Fax 01293 586801 www.bandce.co.uk

Registered in England and Wales No. 8089267. The People’s Pension Trustee Limited is the corporate Trustee of The People’s Pension Scheme. To help us improve our service, we may record your call.

For more information:

01293 586666

[email protected]

www.bandce.co.uk

The People’s Pension Scheme · 2019-11-04 · The People’s Pension Scheme - Annual report and inancial statements for the year ended 31 March 2019 | 1 At a glance The People’s

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