Governance Statement

Covering the period from 1 January 2021 to 31 December 2021 (the “Scheme Year”) and relates only to DC benefits (including additional voluntary contributions (“AVCs”) and the DC benefits of hybrid members) in the Scheme.

The Trustee of the HSBC Bank (UK) Pension Scheme (the “Scheme”) is required to produce a yearly statement (which is signed by the Chair of the Trustee) to describe how these governance requirements have been met in relation to:

  • the default investment options (including the main default options in which members are invested and other “legacy” funds also classed as default arrangements);
  • the requirements for processing financial transactions;
  • the charges and transaction costs borne by members;
  • an illustration of the cumulative effect of these costs and charges;
  • a ‘value for members’ assessment; and
  • Trustee knowledge and understanding.

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There are 4 key areas in the Governance Statement:

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Default investment strategy 

The Trustee has made available a range of investment funds for members. Each member is responsible for specifying one or more funds for the investment of their account, having regard to their attitude to the risks involved. If a member does not choose an investment option, their account will be invested into the default option applicable to them, which is managed as a “lifecycle” strategy (ie it automatically combines investments in proportions that vary according to the time to retirement age). The lifecycles are 100% invested in equities until twenty years from a member’s target retirement age from which point they transition gradually into less risky assets appropriate to the outcome targeted.

Member Charges 

The Trustee is required to set out the charges incurred by members over the period covered by this statement. As the sponsoring employer pays the Annual Management Charge (AMC), platform expenses and administration expenses, member charges are limited to the additional fund expenses incurred by the underlying managers in the day-to-day running of the funds.

Value for money for members 

The Trustee carried out a value for members’ assessment, looking back over the Scheme year to 31 December 2019. The Trustee is required to assess the extent to which member borne charges and transaction costs for the Scheme Year represent good value for members.

Illustration of charges and disclosures costs 

The Sponsoring employer currently pays the AMC platform expenses and administration costs. Additional expenses (“AE”) are covered by members and are those costs incurred in the management of the underlying funds which are, by nature, flexible and therefore fall outside of the AMC. The Trustee has provided an illustration of the impact of the charges and costs on members pension pots for the default options as and four funds from the Freechoice range.