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.
Overall, the Trustee believes that members of the Scheme are receiving good value for the charges and transaction costs that they incur as the assessment showed that members benefited from well-designed default investment strategies and a range of investment options as well as very low charges, amongst other benefits as summarised above.
Value for money for members
The Trustee reviews all member-borne charges annually (including transaction costs where available), with the aim of ensuring that members are obtaining value for money given the circumstances of the Scheme. The most recent value for members review took place on 25 May 2023. The assessment was completed taking account of the Pensions Regulator’s Code of Practice No.13 (Governance and administration of occupational trust-based schemes providing money purchase benefits) and accompanying guidance. Because there is no legal definition of ‘good value’, determination is subjective. The Trustee notes that value for money does not necessarily mean the lowest fee, and the overall quality of the benefit received by members was also considered in this assessment.
The assessment was undertaken with assistance from the Trustee’s DC advisor and involved a wide assessment of value considering the key elements of the Scheme and agreeing relevant value ratings for each area, in addition to looking at the value attributable to member-borne costs and charges.
Trustees assessment of value relating to member borne charges and transaction costs
The Bank pays the administration and DC fund management charges, so the member-borne charges are limited to additional DC fund expenses and transaction costs for the DC funds, which the assessment found compares very favourably to other DC schemes.
The Trustee’s investment advisors have confirmed that the additional expenses paid by members for the DC funds are competitive for the types of funds available to members. Members pay significantly less than members in other schemes as they only pay the additional expenses element for the DC funds. The Trustee also assesses the value of the total charges of the investment options (including charges met by the Bank) and found these to also be very competitive compared to other DC schemes.
In carrying out the value assessment, the Trustee also considered the wider benefits members receive from the Scheme, which include:
- the oversight and governance of the Trustee, including ensuring the Scheme is compliant with relevant legislation, and holding regular meetings to monitor the Scheme and address any material issues that may impact members;
- the design of the default arrangements and how this reflects the interests of the membership as a whole;
- the range of investment options and strategies;
- the quality of communications delivered to members;
- the quality of support services such as the Scheme website where members can access DC fund information online; and
- the efficiency of administration processes and the extent to which the administrator met or exceeded its service level standards.
The following table sets out the summary of how the Trustee has assessed value.
|
Area |
Assessment |
Commentary |
|
Charges |
Very Good |
The costs borne by members for investment are very competitive compared to similar schemes. Fees are considered as part of any investment changes, with discounts negotiated where possible. Members benefit from only paying additional expenses and other costs being covered by the Bank. |
|
Scheme Administration |
Good |
The agreed service levels for achieving a task are generally shorter than the standard levels in the market place, and these are achieved in the majority of cases for members with DC benefits. The Trustee reviewed monthly performance reporting on key processes, transactions and complaints. Any issues and anomalies identified were followed up with the administrator for explanation. The Trustee held weekly service meetings as well as monthly meetings with the administrator to review and assess service performance, discuss issues, and progress on project related activity. Any issues identified by the PSE as part of its oversight were raised with the administrators immediately and steps were taken to resolve the issue. From May 2022, Equiniti replaced WTW as the Scheme administrator for members with Hybrid and DB benefits. The move to Equiniti is expected to lead to improvements in the quality of service received by members with Hybrid benefits over the longer term. Average performance against SLAs by Equiniti has improved considerably and remained consistently above the agreed target over 2023. For DC only members, SLAs dipped just below the target level (95%) over Q2 and Q3, but the overall average for 2023 was 96%. |
|
Scheme Management and Governance |
Very Good |
The Trustee demonstrated a high level of commitment to the effective operation of the Scheme through ongoing training. The Board regularly monitors member outcomes and activities through the quarterly dashboard, and regularly communicates with members on key relevant issues. The Board meets on a regular basis, with training undertaken ahead of meetings, and attends away days to focus more specifically on key areas of the Scheme. During 2023, the Trustee reviewed all governance documents for the Scheme to help bring them to life for members and create a consistent look and feel, including the 2022 Annual Chair’s Statement and a Summary of the 2022 TCFD report, both of which were published in 2023. |
|
Communications |
Very Good |
Communications are of a very good standard. Over the Scheme year the Trustee has issued over 400,000 nudges to members, in addition to the annual newsletter, a mid- career MOT and a mini survey to understand how the Trustee could provide more support to help members to understand their investment options. The new Myth- busting podcast and Savings campaigns were well received by members, and have been further promoted by the Bank to employees.
|
|
At Retirement |
Very Good |
The Trustee has progressed with developing its offering for members who wish to drawdown their benefits and has chosen LifeSight as the post-retirement master trust provider. Members continue to be signposted to their retirement options, with support available in the form of retirement seminars/webinars. The Trustee monitors member behaviour at retirement regularly, to review when DC only members are retiring relative to their Target Retirement Age and their benefit choices. |
|
Default arrangement |
Very Good |
Different defaults are available to different cohorts of members, recognising their different requirements. |
|
Self-select investment range |
Very Good |
The Scheme offers a good range of DC funds covering all the main asset classes with active and passive options and the option to invest in targeted strategies designed for members who plan to use their DC pension pot to provide a flexible income (e.g. income drawdown), or for annuity purchase or a cash lump sum (reflecting the three broad choices members have at retirement). |
|
Scheme design |
Very Good |
The Scheme’s employer contributions are generous compared to the UK market generally, and the banking sector. In October 2023 members received a targeted communication reminding them of the matching communications available to them. |
There are a small number of members invested in a relatively large number of legacy AVC arrangements. These legacy AVCs only account for a small proportion (less than 0.1%) of the total DC assets within the Scheme and these investment options are no longer open to contributions. Therefore, the Trustee has taken a proportionate approach to reviewing them, compared to the other DC benefits within the Scheme.
The Trustee carries out regular reviews (at least every 3 years) of its legacy AVC arrangements with the last review undertaken during the Scheme Year being on 10 June 2021. This review highlighted no material concerns with the AVC arrangements and confirmed it would be in member’s best interests to remain with these providers rather than be transferred into an alternative arrangement as this would result in a loss of guarantees or high exit charges.
The Trustee continues to close ‘empty’ legacy AVC policies and remove funds with no remaining members as and when these are identified. As members in these AVC arrangements have fewer investment choices and pay higher fees in comparison to the main DC assets, the Trustee will continue to communicate with members to make them aware that they might benefit from moving their AVC assets to funds in the main DC investment platform with Fidelity.
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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 during the Scheme Year in this Statement. As the sponsoring employer pays the DC investment 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 managers in the day-to-day running of the funds (for example, custodian fees etc), with the exception of some legacy AVCs funds
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 and four funds from the Freechoice range.