The Trustee is required to set out the charges incurred by members during the Scheme year in this Statement. As the Bank pays the DC fund annual management charges, platform expenses and all other administration expenses, the member borne charges are limited to the additional fund expenses incurred by the underlying fund managers in the day-to-day running of the funds for example, custodian fees, with the exception of some legacy AVCs funds (see below).
The Trustee endeavours to ensure that the additional fund expenses are below 0.20% per annum on each DC fund. As at 31 December 2023, the highest additional expenses of all DC funds that were available to members was for the Emerging Market Equities – active Fund, at 0.12% per annum (p.a.).
The Trustee is also required to disclose transaction cost figures. In the context of this statement, the transaction costs shown are those incurred when the Scheme’s fund managers buy and sell DC assets but are exclusive of any costs incurred when members invest in and switch between funds.
The transaction costs are borne by members. The charges and transaction costs have been supplied by Fidelity (the Scheme’s platform provider) and the legacy AVC providers. The charges and transaction cost information has been provided for the Scheme year for the default arrangements and self-select options (but not all of the legacy AVC funds – further details below).
When preparing this section of the Statement, including the illustrations, the Trustee has taken account of statutory guidance. All additional DC and AVC fund expenses and transaction cost figures shown in this section are over the Scheme year. Under the prescribed way in which transaction costs have been calculated it is possible for figures to be negative, where market movements are favourable between the time a trade is placed and it is executed. The Trustee has shown any negative figures in the tables for the year as provided, but for the costs and charges illustrations have used zero where a transaction cost is negative to give a more realistic projection (i.e. the Trustee would not expect transaction costs to be negative over the long-term).
The Trustee’s approach in detail
The default arrangement for most members with only a DC pension pot is the Flexible Income Strategy and for most members with Hybrid benefits the default arrangement is the Lump Sum Strategy. These default arrangements have been set up as targeted strategies (i.e. they automatically combine DC funds in proportions that vary according to the time to retirement age). This means that the level of charges and transaction costs will vary depending on how close members are to retirement and in which DC funds they are invested. Statutory guidance has been taken into account in the calculation of these numbers.
The Trustee notes there are no performance fees (charges based on fund’s return) attached to the default arrangements and therefore performance fees make up 0% of the of the average value of the assets held by that default arrangement. For the Scheme year, annualised charges and transaction costs are set out in the following tables.
Flexible Income Strategy (main default for members with only a DC pension pot) charges and transaction costs
Years to
retirement
Additional
fund expenses (p.a)
Transaction
costs
20 or more years to retirement
0.00%
0.05%
15 years to retirement
0.02%
0.14%
10 years to retirement
0.03%
0.23%
5 years to retirement
0.04%
0.28%
At retirement
0.03%
0.28%
Lump Sum Strategy (main default for members with Hybrid benefits) charges and transaction costs
Years to
retirement
Additional
fund expenses (p.a)
Transaction
costs
20 or more years to retirement
0.00%
0.05%
15 years to retirement
0.02%
0.14%
10 years to retirement
0.03%
0.23%
5 years to retirement
0.04%
0.28%
At retirement
0.02%
0.23%
For the Scheme Year, annualised charges and transaction costs for the legacy default arrangements are set out in the following tables. Charges are only shown at retirement and 5 years to retirement for the Cash Lifecycle as the strategy is closed to new members and all members invested are within 5 years of their target retirement age.
Annuity Purchase Strategy (legacy default arrangement: prior to 2018 named ‘Income Lifecycle’ and current Freechoice option) charges and transaction costs
Years to
retirement
Additional
fund expenses
Transaction
costs
20 or more years to retirement
0.00%
0.05%
15 years to retirement
0.02%
0.14%
10 years to retirement
0.03%
0.23%
5 years to retirement
0.02%
0.08%
At retirement
0.00%
-0.02%
Cash Lifecycle (legacy default arrangement) charges and transaction costs
Years to retirement
Additional fund expenses
Transaction costs
5 years to retirement
0.05%
0.31%
At retirement
0.00%
0.11%
Cash - active (default) fund (additional default arrangement)
Fund name
Additional fund expenses
Transaction costs
Cash - active (default)
0.00%
0.11%
With the exception of the legacy Cash Lifecycle Strategy, the default arrangements are also available as self-select options for members who want to use them. Members also have the choice to invest into any of the 18 DC funds available in the self-select range (known as “Freechoice”).
The level of charges for each self-select DC fund and the transaction costs over the Scheme Year are set out in the following table. The underlying DC funds used within the Flexible Income Strategy are shown in bold.
Self-select fund charges and transaction costs
Fund name
Additional fund expenses
Transaction costs
UK Equities - active
0.02%
0.14%
Diversified Assets - active
0.06%
0.40%
Shariah Law Equities - passive
0.00%
0.01%
Sustainable and Responsible Equities - active
0.00%
0.10%
Global Bonds - active
0.03%
0.27%
UK Equities - passive
0.00%
0.00%
Global Equities - passive
0.00%
0.05%
Property - active2
0.05%
0.17%
Fixed Annuity Tracker - passive
0.00%
-0.06%
Inflation Linked Annuity Tracker - passive
0.00%
0.04%
Cash - active
0.00%
0.05%
European (ex UK) Equities - passive
0.00%
0.11%
North American Equities - passive
0.00%
0.00%
Japanese Equities - passive
0.00%
0.03%
Asia Pacific (ex-Japan) Equities - passive
0.00%
0.01%
Global Equities - active1
0.08%
0.06%
Sterling Corporate Bonds - active
0.01%
0.00%
Emerging Markets Equities - active1
0.12%
0.05%
1The Trustee replaced the GW&K Emerging Markets Fund with the Robeco Emerging Stars Equity Fund within the Emerging Market Equities – active Fund. This fund also forms part of the Global Equities – active Fund. This change happened in Q4 2023. 2The Trustee agreed to restructure the Property – active Fund, which involved replacing the LGIM Managed Property Fund with the Invesco Global Real Estate Fund and adjusting the strategic allocations to the underlying component funds. An allocation to the Invesco Global Real Estate Fund began being built up in April 2022 and the LGIM Managed Property Fund was removed in November 2023. The Trustee continues to use cashflows to meet the target strategic allocation for the fund.
The Scheme also has two legacy lifecycle strategies which were previously available for members to select: Lifecycle 2 and Flexicycle. These strategies are closed to new members, but existing members have been permitted to remain invested. The Scheme previously had a further legacy lifecycle strategy, Capital Lifecycle, however no members remained invested over the Scheme year.
For the Scheme Year, annualised charges and transaction costs are set out below.
Lifecycle 2 (legacy Freechoice lifecyle) charges and transaction costs
Years to retirement
Additional fund expenses
Transaction costs
20 or more years to retirement
0.07%
0.15%
15 years to retirement
0.07%
0.15%
10 years to retirement
0.07%
0.15%
5 years to retirement
0.07%
0.15%
At retirement
0.00%
-0.02%
Members in Lifecycle 2 who are 20 or more years from retirement are invested in 60% Global Equities – active, 20% Property – active and 20% Diversified Assets – active. Members who are five years from retirement are then de-risked gradually so that at target retirement age, members are invested in 75% Fixed Annuity Tracker – passive and 25% Cash – active. As part of the annual Lifecyle review over the previous Scheme year, the Trustee agreed that members in Lifecycle 2 were to be automatically moved to a more appropriate default arrangement, unless they actively choose to opt out of the automatic switch and stay in Lifecycle 2. Given market conditions in 2022 and 2023, the Trustee agreed in June 2023 to retain members within 5 years of their target retirement in Lifecycle 2 due to their exposure to Fixed Annuity Tracker passive. This investment transfer was implemented in November 2023.
Flexicycle (legacy lifecycle strategy)
Flexicycle is a lifecycle strategy that allowed members to create an investment strategy by selecting their preferred growth and consolidation phase funds and the point at which their DC pension pot would switch between them.
There was also a choice of switching periods between these phases and a choice of at retirement DC fund allocation. The Trustee is therefore not able to disclose annualised charges and transaction costs for each possible combination in this Statement. The relevant charges and costs can be seen for the possible underlying funds with the options for the growth phase being the Global Equities – active, Global Equities – passive, Diversified Assets – active, Sustainable and Responsible Equities – active and Emerging Markets Equities – active Funds and the options for the consolidation phase being the Fixed Annuity Tracker – passive, Inflation Linked Annuity Tracker – passive, Diversified Assets – active and Cash – active Funds.
As well as the DC funds noted above, which contain the majority of the Scheme’s AVC assets, some members also had assets in one or more legacy AVC funds during the Scheme year.
The majority of the Scheme's legacy AVC assets are invested in ‘With-Profits’ funds. With-Profits returns are delivered through guaranteed annual and non-guaranteed terminal bonuses (guarantees only apply at contractual events, e.g. retirement) and these can be influenced by the asset allocation within the fund which is itself reflective of the strength of the provider, and therefore affects investment returns and bonus rates.
The Trustee, with its investment advisors, has sought to obtain details of the charges and transaction costs from the Scheme’s legacy AVC providers for the Scheme year. At the time of producing this statement, that process is still ongoing. Some data is currently outstanding from Phoenix Life and Aviva. The Trustee will continue to ask its legacy AVC providers on a regular basis to disclose details of the charges and transaction cost data with the intention of adding this into the next annual DC governance statement. In last year’s Statement, the following information was missing:
Phoenix Life With-Profits Fund the Net returns, Total Expense Ratio and transaction costs were not available.
The Trustee, with its investment advisors, continued to follow up with Phoenix Life but were unable to obtain the outstanding data. The Trustee continues to work with its investment advisors to collect outstanding data.
The charges shown for the AVC arrangements are the Total Expense Ratios (‘TER’) for the Scheme year (except where otherwise shown), which includes the annual AVC fund fees as these are not met by the Bank, unlike for the DC funds.
Aviva (ex Friends Life) AVC funds
TER1
Transaction costs
GM UK Equity Fund
0.38%
0.00%
GM Overseas Equity Fund
0.45%
0.07%
GM Property Fund
0.60%
0.14%
With-profits Fund
1.02%4
TBC
Standard Life AVC funds2
TER1
Transaction costs
Pension Millennium With Profits Fund
1.00%3
0.04%
Pension Millennium With Profits 2006 Fund
1.05%3
0.04%
Pension With Profits Fund
1.00%3
0.08%
Standard Life Managed Pension Fund
1.03%
0.15%
Prudential
TER1
Transaction costs
Prudential With-Profits Cash Accumulation Fund
n/a5
0.17%6
Prudential Global Equity
0.75%
0.18%6
Prudential Deposit
n/a6
0.00%6
Prudential Discretionary
0.75%
0.16%6
Prudential UK Equity
0.75%
0.28%6
Other AVC providers
TER1
Transaction costs
Aegon Cash Fund
0.61%
0.00%
Phoenix Life With-Profits Fund 7
TBC
TBC
Scottish Widows With-Profit Fund
0.9%-1.5%8
0.34%
1TER = Total Expense Ratio. The TER encompasses charges made to / by funds, typically including the Annual Management Charge, custody fees and other expenses. 2A Scheme-specific discount of 0.40% is applied annually. 3The Fund has no explicit fund management charge. The charge shown includes an allowance for the cost of guarantees and is the deduction Standard Life currently use, for illustrative purposes, in quotations. 4As at 31 December 2022. 5Charges on the Prudential With Profits and Deposit Fund are not explicit, they are accounted for in the bonus declared on the Fund. 6As at 30 June 2023. 7The Scheme’s investment advisors are working with the provider to confirm this cost over the Scheme year with the aim of including in next year’s statement. 8Scottish Widows has confirmed expenses do apply to the With-Profits fund, but that these vary based on regular premiums or single premiums and based on term length. The figure provided are for policies reaching maturity in 2019, however it is expected that impact for policies maturing in 2024 would be of a similar value.
View the Governance Statement
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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.
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.
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 and four funds from the Freechoice range.
