Chairs Statement Annual governance statement by the Chair of Trustees


Government requirements apply to defined contribution pension arrangements like the

AJ Power Ltd No.1 Retirement & Death Benefits Scheme (the “Scheme”) from 6 April 2015. These were designed to help members achieve a good outcome from their pension savings.

The Trustees of the AJ Power Ltd No.1 Retirement & Death Benefits Scheme are required to produce a yearly statement (signed by the Chair of Trustees) which explains what steps have been taken by the trustee board, with help from our advisers, to meet the governance standards. The law sets out what information has to be included in my statement and this is covered in the sections below.

  • The investment options in which members’ funds are invested (this means the “default arrangement” and other funds members can select or have assets in, such as self-select or legacy funds);
  • The requirements for processing financial transactions;
  • The charges and transaction costs are born by members;
  • An illustration of the cumulative effect of these costs and charges;
  • A value. for members’ assessment; and
  • Trustee knowledge and understanding.

This statement covers the period from 1st January 2021 to 31st December 2021.

The Trustees are committed to having high governance standards, to monitor the controls and processes in place in connection with the Scheme’s investments and administration. The pension arrangement is a Defined Contribution Occupational Money Purchase scheme and is a wholly insured arrangement via Aegon. This means that all the relevant administration, other services and investment funds are provided by Aegon. The scheme was set up and operates under a Trust Deed and Rules originally dated 1st August 2003.

We have progressively accepted more members into the scheme and by the end of our scheme year (31/12/21) there were 126 members within the scheme (79 active members and 47 deferred members) and net assets of £2,936,929.78.

I welcome this opportunity to explain what the Trustees do to help to ensure the schemes are run as effectively as they can be. If you have any questions about anything or any suggestions on what can be improved, please do not hesitate to contact me.

1. Default investment arrangement

The scheme is used as a Qualifying Scheme for auto-enrolment. Members who join the Scheme and who do not choose an investment option are placed into the Cautious Lifestyle fund as the default arrangement. This year 46% of members had their contributions invested in the default investment arrangement. Members can also choose to invest in a range of insured pension funds provided by Aegon.

Setting an appropriate investment strategy

The Trustees are responsible for the Scheme’s investment governance which includes setting and monitoring the investment strategy for the Scheme’s default arrangement.

We have chosen Aegon’s Cautious Lifestyle fund as the Scheme’s default arrangement. Details of the investment objectives of the default arrangement are recorded in the Statement of Investment Principles which is attached to this annual statement regarding governance.

The aims and objectives of the default arrangement as stated in the Statement of Investment Principles are as follows:

  • Long term growth whilst the members are far from their target retirement date;
  • Gradually reducing the risk taken in the investment strategy as members become close to their target retirement date which means that members’ assets are automatically moved between different investment funds as they approach their target retirement date; and
  • Having an asset allocation at the target retirement date that is appropriate and consistent with how most members are expected to take their retirement savings.

Reviewing the default investment strategy

The Trustees are expected to:

  • Review the investment strategy and objectives at regular intervals - at least once every 3 years or immediately following any significant change in investment policy or the scheme’s member profile.
  • Take into account the needs of the scheme membership.

2. Requirement for processing core financial transactions

The Trustees have received assurance from the scheme’s administrator Aego worldwide steps to try and ensure that there were adequate internal controls to ensure that core financial transactions relating to the Scheme were processed promptly and accurately during the scheme year. This includes the following:

  • Investment of contributions into the scheme
  • Processing of transfers in and out of the scheme
  • Transfers of assets between different investments within the scheme and
  • Payments from the scheme to members or beneficiaries

We delegate the scheme administration to Aegon (our pension provider) in association with the trustees. The service level agreement with the administrator covers the accuracy and timeliness of all core financial transactions (status of requests for money in and out within the service level), and online enquiries. Due to continuing Covid restrictions, a large proportion of their staff were working from home, however, all core financial transaction processes continued to operate efficiently with service levels above 98%, with an average call waiting time 0.23 seconds. This is in line with the normal business-as-usual services.

The trustees measure the accuracy of the financial transactions by carrying out sampling on certain transactions, and monitoring the end-to-end process for contribution payments by reconciling monies applied to each member from their payment records with the annual audit report.

The scheme also uses Aegon’s Smartenrol which is an intelligent online service that automates the auto-enrolment tasks and records and their Smartpay systems for the payment and application of contributions in.

The Trustees are satisfied that over the period covered by this statement:

  • The administrator was operating appropriate procedures, checks and controls and within the service level agreement:
  • There have been no material administration errors in relation to processing core financial transactions; and
  • All core financial transactions have been processed promptly and accurately during the scheme year.

3. Charges and transaction costs paid by members

The Trustees are required to set out the ongoing charges which are paid by members rather worldwide than the employer. Which are the Annual management charges plus any additional fund expenses, such as custody costs but excluding transaction costs. This is also known as the total expense ratio (TER). The TER is paid by the members and is reflected in the unit price of the funds.

The level of charges and transaction costs applicable to the Scheme’s default arrangement during the last scheme year were an Aegon Annual Management charge of 0. 70%. This includes a fixed management fee and expenses.

The level of charges applicable to the funds offered which are not part of the scheme’s default arrangement range and chosen by the member from Aegon fund list (including the use of external fund managers) range from 0. 70% - 1.8%pa.

Annual management charges and transaction costs for all funds available, including the default arrangement can be found in Appendix 1 within the Statement of Investment Principles.

The Trustees are also required to present an illustration of the impact of charges and costs on a member’s pot size. This illustration is shown in Appendix 2.

4. Value for members assessment

The Trustees are required to assess the extent to which member borne charges and transactions costs represent good value for members. There is no legal definition of “good value” and so the process of determining good value for members is a subjective one. We have received advice on how to assess good value from our advisers and considered regulatory guidance.

The Trustees have considered that it broadly means that the combination of costs and the quality of what is provided in return for those costs is appropriate for the Scheme membership as a whole, when compare to other options available in the market. The benefits of membership include amongst other things, the design of the default arrangement, the range of investment options available, the efficiency of administration processes and the extent to which Aegon (pension provider) met and exceeded its service level standards.

The Trustees have assessed member’s investment returns and overall fund performance to ensure that the charges borne by the members are reasonable for each fund we offer. Market factors have been taken into account. The Trustees considered in particular that higher costs in specialist funds are usual and justified should the member wish to invest in such funds. Value for money does not necessarily mean the lowest fee, and the overall quality of the service

received has also been considered in this assessment.

The Trustees financial advisers to the scheme have confirmed that the fund charges are competitive for the types of funds available to members.

The value for money assessment considered the following:

  • Annual management charges and administration fees
  • Net of cost performance in the context of their investment objectives
  • Transaction costs where available.

In carrying out the assessment, the Trustees also consider the other benefit members receive from the Scheme which include:

  • The design of the default arrangement and how this reflects the membership as a whole;
  • The range of investment options and strategies to meet the membership’s different returns/risks and income preferences.
  • The quality of communications delivered to members eg. Annual benefit statements;
  • The quality of support services, such as online access to their individual plan and fund information; and
  • The efficiency of administration processes and the extent to which the administrator met its service level standards.

As detailed in the earlier section covering the processing of financial transactions, the Trustees are comfortable with the quality and efficiency of the administration processes. The Trustees believe the transactions costs provide value for members as the ability to transact forms an integral part of the investment approaches, and we expect this to lead to greater investment returns net of fees over time.

Overall, the Trustees believe that members of the scheme are receiving good value for money for the charges and cost that they incur. The Trustees believe this because the members have access to institutional-priced investment fund management at charges which are competitive. In addition, Administration performance is regularly reviewed by the Trustees. Service levels over the period have met expectations and there have been no material administration service issues which need to be reported. We are confident that the processes and controls in place with Aegon are robust and will ensure that the financial transactions which are important to members are dealt with properly. The Trustees aim to improve this in the future through reviewing the default investment strategy.

5. Trustee knowledge and understanding

It Is required that the trustees possess, or have access to, sufficient knowledge and understanding to run the Scheme effectively. They must:

  • Be conversant with the trust deed and rules of the scheme, the scheme’s statement of investment principles and any other document recording policy for the time being adopted by the Trustees relating to the administration of the scheme generally,
  • Have, to the degree that is appropriate for the purposes of enabling the individual properly to exercise his or her functions as trustee, knowledge and understanding of the law relating to pensions and trusts and the principles relating to investment the assets of occupational pension schemes.

The Trustees have measures in place to comply with the legal and regulatory requirements regarding conversance and knowledge and understanding. With the combined knowledge and understanding of the trustees, together with available advice from their financial adviser RB Financial Planning Ltd and scheme administrator Aegon, enables them to properly exercise their functions.

James Mcllveen - On behalf of the Trustees of the AJ Power Ltd No.1 R&DBS

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