Volex Executive Pension Scheme ("the Scheme")
Governance statement for the Scheme's defined contribution arrangements
1 August 2017 to 31 July 2018
1. Introduction
1.1. This statement has been prepared by the Scheme's trustee ("the Trustee") to report on compliance with
governance standards introduced under The Occupational Pension Schemes (Charges and Governance)
Regulations 2015.
1.2. These governance standards relate to defined contribution (DC) benefits, also commonly referred to as
money purchase benefits.
2. The Scheme's Design
2.1. The Scheme's DC arrangements comprise:
2.1.1. The DC Section:
2.1.1.1. The DC Section was set up to receive transferred in benefits only on a defined contribution
basis. The DC Section has never accepted ongoing contributions. The DC Section investments
are invested through Aegon UK plc which also provides some communication services.
Administration is provided by Barnett Waddingham LLP.
2.1.1.2. All assets sit in the Aegon Money Purchase Plan Fund which attracts with-profits bonuses. No
other investment options are available.
2.1.1.3. As at 31 July 2018 there was £260,838 held by 49 members within the DC Section. The Trustee
is working to discharge all benefits within the DC Section as soon as possible. By 31 December
2018 the number of members with preserved benefits had reduced to 26 with £155,000
remaining in the DC Section. Of those 26 members, 19 are now past normal retirement age
and the Trustee is working to settle these retirement benefits in the next Scheme year. The
Trustee will also be engaging with the remaining 7 members who have all reached an age
where they could put retierment benefits into payment in order to discharge the remaining
benefits through a combination of retirement benefits and individual transfers out.
2.1.2. Additional Voluntary Contributions relating to the Defined Benefit Section ("DB AVCs") which are
provided through bundled providers (i.e. administration and investment management services are
provided through a single policy) with:
2.1.2.1. Aviva
2.1.2.2. Clerical Medical Investment Group ("Clerical Medical")
2.1.2.3. Equitable Life Assurance Society ("Equitable Life")
2.1.2.4. Scottish Widows, and
2.1.2.5. Standard Life Assurance Group ("Standard Life")
2.2. To put the governance arrangements around the DB AVCs into context, as at 31 July 2018:
2.2.1. Three members held £6,995 of DB AVCs with Aviva,
Volex Executive Pension Scheme DC Governance Statement — 1 August 2017 to 31 July 2018
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2.2.2. Three members held £113,920 of DB AVCs with Clerical Medical,
2.2.3. Two members held £6,175 of DB AVCs with Equitable Life,
2.2.4. One member held £5,281 of DB AVCs with Scottish Widows, and
2.2.5. Two members held £17,053 of DB AVCs with Standard Life.
2.3. The Scheme is closed to new members and has also been closed to contributions since 1 April 2003.
2.4. The Scheme is not being used as a qualifying scheme for auto-enrolment by any organisation.
3. Default arrangement
3.1. The Scheme has no default (investment) arrangements for the purposes of the Regulations.
3.2. The Scheme is not being used as a qualifying scheme for auto-enrolment purposes and no new contributions
are being paid into the Scheme.
3.3. Members do not have the option to move assets attributable to their own DC fund into alternative
investment options.
4. Core financial transactions
4.1. The governance standards require the Trustee to ensure that 'core financial transactions' are processed
promptly and accurately.
4.2. For this purpose, the Scheme's core financial transactions comprise:
4.2.1. transfers out of the Scheme
4.2.2. payments out of the Scheme
4.2.3. investment switches within the Scheme (for DB AVCs only)
No contributions or transfers into the DC Section, or in respect of the DB AVCs, are accepted.
Controls in place
4.3. These transactions are processed by the Scheme administrator, Barnett Waddingham LLP, and the
Scheme's investment managers on behalf of the Trustee. These transactions involve liaison between
Aegon/the DB AVC providers and the Scheme's administrator to ensure payments are made in a timely
manner.
4.4. If any issues arose with Aegon or any of the DB AVC providers Barnett Waddingham would report these to
the Trustee through the administration reports.
4.5. Barnett Waddingham work to Service Level Agreements (SLAB) in place with Barnett Waddingham. Barnett
Waddingham undertakes to ensure that the core financial transactions are processed within the SLAB set
out below:
Core financial transaction Service Level Agreement
Retirement payments 5 working days
Other cash handling 5 working days
4.6. Aegon and the DB AVC providers work to internal service targets.
4.7. The controls in place in relation to the accuracy of core financial transactions are:
Volex Executive Pension Scheme DC Governance Statement —1 August 2017 to 31 July 2018
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4.7.1. Due to the work the Trustee is undertaking to discharge all benefits from the DC Section, all
transactions from the DC Section, and also DB AVCs, are reported to the Trustee and reviewed at
the next Trustee's meeting following payment.
4.7.2. Barnett Waddingham operates the Trustee's bank account with RBS. Barnett Waddingham receives
monthly statements which are reconciled against Barnett Waddingham's cash handling
administration system. Payments from the Trustee's bank account are processed via Barnett
Waddingham's cash handling system and are checked and authorised by two individuals.
4.7.3. The Scheme is subject to an annual audit of financial statements.
4.7.4. The administrator's processes are subject to internal controls procedures.
4.7.5. Barnett Waddingham also publishes an annual Assurance Report on Internal Controls which is
externally audited. There were no significant concerns reported.
4.8. During the scheme year, Barnett Waddingham provided the Trustee with one administration report that
includes cash flow monitoring, individual listing of member transactions and identifies any issues arising
regarding administration accuracy.
4.9. The Trustee believes that these measures enabled them to monitor the promptness and accuracy of core
financial transactions.
Issues occurring during the scheme year
4.10. The Trustee believes that core financial transactions were processed promptly and accurately during the
scheme year and no significant issues occurred.
5. Charges and transaction costs
5.1. Members bear charges deducted from the funds in which their DC benefits are invested. The charges differ
between the investment funds available across the Scheme.
Charges in relation to the DC Section
5.2. Aegon states that the annual management charge applicable to the Aegon Money Purchase Plan Fund is
1.0% p.a.
5.3. In addition to the charges above, transaction costs may be incurred in the day-to-day operation of the
investment funds, e.g. in relation to an investment fund's trades and switching between investment funds.
Transaction costs in particular will vary significantly depending on a fund's investment remit and on the
market environment.
5.4. The Trustee requested details of any transaction costs within the Aegon Money Purchase Plan Fund from
Aegon. Aegon stated it could "confirm that transactions costs do not apply to the investment under this
contract".
5.5. The Aegon Money Purchase Plan Fund is a with-profits fund which attracts an annual bonus. The Trustee
believes that any costs are reflected in the level of annual bonus applied by Aegon.
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Charges in relation to the DB AVCs
5.6. The costs of the investment, administration and communication services provided by Aviva, Clerical
Meidcal, Equitable Life, Scottish Widows and Old Mutual, through the AVCs, are met by the members
through the charges levied by the providers.
Investment Fund
Total Expense Ratio (TER)
Aviva Aviva Life & Pensions UK Limited Secure Growth Fund
(ex L&M)
Aviva has stated that it is unable to disclose any cost information
regarding the fund, although this is a with-profits fund and the
Trustee believes that any costs are reflected in the level of annual bonus applied — the Trustee will contine to press Aviva for full
disclosure of the charges and transaction cost information
All funds 1.0% p.a. Transaction cost disclosures are set out below
Clerical Medical International Growth
Gilt & Fixed
UK Growth (L)
Balanced (L)
Retirement (L) Non-Equity (L)
Halifax (L)
Cautious (L)
(L) = part of a Lifestyle strategy
Equitable Life International
Pelican
With-Profits
0.75% p.a. 0.75% p.a.
1.50% p.a. (including cost of guarantees)
Transaction cost disclosures are set out below
Scottish Widows Pension Fund Deposit Account
Scottish Widows has stated that it is unable to disclose any cost information regarding the fund, although this is a deposit account
which attracts an interest rate of 0.01% AER and any charges are
reflected in the interest rate applied - the Trustee will continue to
press Scottish Widows for full disclosure of the charges and
transaction cost information
Standard Life Standard Life Managed Fund
Pension Millennium With Profits Fund Pension With Profits Fund
1.02% p.a.
For with-profits funds Standard Life states that there is no explicit
fund management charge or additional expenses — costs are
reflected in calculation of policy values and bonuses applied
Transaction cost disclosures are set out below
Additional transaction costs
5.7. In addition to the charges above, transaction costs are incurred in the day-to-day operation of the
investment funds, e.g. in relation to an investment fund's trades and switching between investment funds.
Transaction costs in particular will vary significantly depending on a fund's investment remit and on the
market environment. The Trustee asked for information on transaction costs for the Scheme.
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5.8. The Trustee approached Aviva for details of any transaction costs incurred by members in the Scheme year.
Aviva was unable to provide any information. The Trustee will continue to press Aviva to provide this
information.
5.9. The Trustee approached Clerical Medical for details of any transaction costs incurred by members in the
Scheme year. Clerical Medical could only provide details of transaction costs for the period 1 October 2017
to 30 September 2018, which are detailed in the following table.
Reporting Period
Fund Identifier Fund Name
Transaction
Start End Notes
Costs
(in bps)
GB0002041258
Clerical Medical Gilt Obps 01/10/2017 30/09/2018 Transaction costs calculated using
& Fixed Interest slippage methodology.
Pension
GB0002040953 Clerical Medical 27bps
01/10/2017 30/09/2018 Transaction costs calculated using
International
slippage methodology.
Growth Pension
GB0002039955 Clerical Medical 16bps 01/10/2017 30/09/2018 Transaction costs calculated using
Balanced Pension slippage methodology.
GB0002024197
Clerical Medical
16bps 01/10/2017 30/09/2018 Transaction costs calculated using
Cautious Pension slippage methodology.
GB0008525916
Clerical Medical 8bps 01/10/2017 30/09/2018 Transaction costs calculated using
Non-Equity Pension slippage methodology.
GB0002677531
Clerical Medical Obps 01/10/2017 30/09/2018 There are no transaction costs as this
Halifax Pension fund holds cash only.
GB0002109626 Clerical Medical
Managed
Retirement
Protection Pension
-2bps 01/10/2017 30/09/2018 Transaction costs calculated using the
slippage methodology. For this fund the
application of slippage methodology is
giving rise to a negative transaction cost
figure.
Definitions:
Reporting Period
Start/End
Where possible the identifier used will be the ISIN.
The fund name held by SW.
This is the total transaction cost figure for the fund (i.e. for Buy & Sell transactions and Lending & Borrowing
transactions). For lower level detail we can provide the industry standard Defined Contributions Pensions
Template (DCPT) on request.
Date of the first and last day to which the data refers. Data for the most recent calculated reporting period is
provided. This period will vary by fund.
Fund Identifier
Fund Name
Transaction costs
(in bps)
Volex Executive Pension Scheme DC Governance Statement-1 August 2017 to 31 July 2018
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Notes Any relevant supporting information such as calculation methodology used or additional information on
holdings.
5.10. The Trustee approached Equitable Life for details of any transaction costs incurred by members in the
Scheme year. Equitable Life has provided details of the transaction costs incurred within the Scheme funds
available to members for the period 1 July 2017 to 30 June 2018 which are detailed in the following table:
Disclosure of Fund Costs (including transaction costs in compliance with FCA PS 17/20)
Equitable Life Fund Annual Underlying Annualised OEIC Net Stocklending Equitable Life Equitable Life
Fund (Citi Management Open Ended Reporting Transaction %pa [2] Fund Fund Total
Code) Charge %pa Investment Period Cost %pa [1] Transaction Charges
Company Cost %pa [3] Impact %pa
"OEIC" Held [4]
(ISIN
Number)
With-Profits 1.00 N/A 30/06/2018 N/A 0.0025 0.010581 1.01 Fund [5]
Unit-Linked Pension
Pelican 0.75 Aberdeen UK 30/06/2018 0.001810 0 0.000061 0.75 (EU26) Equity
Enhanced
Index
Fund(GBOOBR
J L8531)
International 0.75 Aberdeen 30/06/2018 0.000468 0 0.000060 0.75
(EU31) World Equity
Enhanced
Index
Fund(GBOOBR
JL7Z68)
Notes: [11 The costs to date are not calculated on the full arrival price slippage methodology, instead using industry supplied expected
spreads for each asset category. The With-Profit Fund does not invest in OEICs but in direct assets.
[2] The costs suffered by the fund are disclosed but not the income received.
[3] This is the cost incurred on the Fund when it purchases or sells the underlying asset (OEIC) as the price may include a
dilution adjustment. The purpose of dilution is to ensure the OEIC is not impacted by large investments or disinvestments. [4] The total charges impact to policyholders on each Equitable Life Fund (With-Profit and Unit-Linked) of costs at both Fund
and underlying OEIC level and includes the annual management charge.
[5] This excludes the 0.5% for cost of guarantees.
5.11. Within the Equitable Life With-Profits Fund, whilst these transactions costs are reflected before returns are
applied to members' Policy Values, at normal retirement age or earlier death members' benefits are subject
to an underpin of the Guaranteed Value which increases each year by a guaranteed amount each year and
is applied regardless of any underlying transaction costs incurred.
5.12. The Trustee approached Scottish Widows for details of any transaction costs incurred by members in the
Scheme year. Scottish Widows was unable to provide any information. The Trustee will continue to press
Scottish Widows to provide this information.
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5.13. The Trustee approached Standard Life for details of any transaction costs incurred by members in the
Scheme year. Standard Life could only provide details of transaction costs for the period 1 July 2017 to 30
June 2018, which are detailed in the following table.
Standard
Life Fund
Name Period
Aggregation
of
Transaction
Costs (%)
Transaction
Costs for
Buy and Sell
Transactions
(%)
Transaction
Costs for
Lending and
Borrowing
Transactions
(%)
Explicit
Transaction
Taxes (%)
Explicit
Fees
and
Charges
(%)
Implicit
Costs (%)
Indirect
Transaction
Costs (%)
Standard
Life
Managed 01/07/2017
Pension to
Fund 30/06/2018 0.000994 0.000994 0 0 0 0.000202 0.000793
Standard
Life
Pension
Millennium
With 01/07/2017
Profits to
Fund 30/06/2018 0.00104 0.00104 0 0 0 0.000539 0.000501
Standard
Life
Pension
With 01/07/2017
Profits to
Fund 30/06/2018 0.000468 0.000468 0 0 0 0.000273 0.000194
Transaction costs are represented using the new PRIIPS methodology from Annex VI 21 from the PRIIPs Regulatory Technical Standards
Annexes which is based upon spread-based calculations for each asset class. Transaction costs for 2018 data onwards calculated in
accordance with the slippage methodology required per COBS 19.84R will be available later in 2018. External DCPTs not available.
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6. Cost & Charge Illustrative Example
6.1 The Trustee has produced an illustration in line with February 2018 guidance from the Department for
Work & Pensions entitled "Cost and charge reporting: guidance for trustees and managers of occupational
schemes". The illustration is set out below, and is designed to cater for a representative cross-section of
the membership of the Scheme. Within the illustration, a savings pot has been projected twice; firstly to
allow for the assumed investment return gross of the costs and charges of the fund the member is invested
in and then again, but adjusted for the cumulative effect of the costs and charges of the fund.
6.2 To determine the parameters used in these illustrations, the Trustee has analysed the DC Section
membership data relevant to the reporting period of this statement and ensured that the illustration takes
into account the following:
• That as all members are solely invested in the Aegon Money Purchase Plan Fund, this fund represents
the estimated real investment returns members may receive and the costs and charges they will incur.
• Representative pot sizes — given the size of the Scheme, the median pot size for all members invested
in the Aegon Money Purchase Plan Fund who have not yet reached normal retirement age is deemed
appropriate.
• The approximate duration that the youngest member using the Aegon Money Purchase Plan Fund
would take to reach Normal Retirement Age (65).
6.3 The Scheme is closed to contributions, therefore, the illustrations do not take account of future
contributions.
6.4 The Trustee has determined not to include any illustrations for DB AVCs as it would be disproportionately
burdensome given the very small amounts of money held in the DB AVC arrangements.
6.5 The Aegon Money Purchase Plan Fund. This is the investment fund used by all members of the DC
Section.
Years of Age: 59 membership Starting pot size: £1,295
Before After charges
charges
1 £1,287 £1,274 3 £1,271 £1,234 5 £1,256 £1,195
6.6 Returns within the Aegon Money Purchase Plan Fund are actually acheived by annual bonuses applied by
Aegon. These annual bonuses reflect charges incurred witin the Fund.
Notes to costs and charge illustrative examples
1. Projected pension pot values are shown in today's terms, and do not need to be reduced further for the
effect of future inflation. It is for this reason some funds show negative real growth.
2. Inflation is assumed to be 2.5% each year
3. No further contributions are assumed to be paid
4. Values shown are estimates and are not guaranteed
5. The projected growth rates used is 1.87% p.a. which is the projected growth rate stated by Aegon for
this fund.
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7. Value for members
7.1. Regulations require the Trustee to assess the extent to which the charges and transaction costs borne by
members represent good value.
7.2. In relation to the Scheme's DC arrangements, the member-borne charges relate to:
7.1.1 investment services for the DC Section
7.1.2 some communication services for the DC Section
7.1.3 Aviva, Clerical Medical, Equitable Life, Scottish Widows and Standard Life's administration,
investment and communication services for the DB AVCs
7.3. All other charges in relation to the Scheme are met by the Sponsoring Employer.
7.4. An annual value for members' assessment was undertaken as at 31 July 2018.
7.1.4 The assessment considered in relation to investment services:
7.1.4.1 the range of investment options available and the design of the default
7.1.4.2 the arrangements for monitoring the performance of the investment funds
7.1.4.3 the governance arrangements
7.1.5 The assessment considered in relation to communication services:
7.1.5.1 the pre-retirement communications provided to members
7.1.5.2 the at/post-retirement communications provided to members
7.1.6 In relation to DB AVCs with Aviva, Clerical Medical, Equitable Life, Scottish Widows and Standard
Life the Trustee also considered:
7.1.6.1 the administration services
7.4.1. Whether other options might be available in the market.
7.5. The Trustee concluded that the Scheme offers reasonable value in relation to the charges and transaction
costs borne by members.
7.6. That being said, the Trustee is already working to discharge all the benefits within the DC Section as set
out in section 2.1.1.3 of this Statement.
7.7. In reaching this conclusion, the Trustee recognised:
7.7.1. low cost does not necessarily mean better value.
7.7.2. FCA regulated advisers and investment managers have been appointed to the Scheme.
7.7.3. the investments of the DC Section are set up on a with-profits basis with no alternative investment
options.
7.7.4. from the 2016 Pension Charges Survey published by The Pension Regulator and Government Social
Research, in October 2017 the comparative mean charge for a non-qualifying scheme sits broadly
in line with the charge applicable within the DC Section.
7.8. The following areas could be considered to detract value for members and the Trustee will be taking steps
to address these areas in the coming year, where appropriate:
7.8.1. the security and liquidity of assets, and any protections available have not been formally recorded
7.8.2. the bonus rates applied within the with-profits funds have not been regularly monitored
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7.8.3. communications provided by Aegon to support members are limited, in particular a Statutory
Money Purchase Illustrations have not been provided to members of the DC Section
7.8.4. the frequency of the monitoring of the AVCs - the Trustee will consider a proportionate and
pragmatic approach for the size of AVCs
7.9. The assessment considered just those services for which members bear or share the costs. Factors that
were not considered but that add value include:
7.9.1. The services fully paid for by the Sponsoring Employer, e.g. the administration and communication
services of the DC Section, and the services of legal advisers, consultants and auditors
8. Trustee knowledge and understanding
8.1. Volex Executive Pension Scheme Trustee Limited is the Corporate Trustee of the Scheme and comprises
three directors.
8.2. The Trustee consults externally with its professional advisers, Barnett Waddingham LLP and Addleshaw
Goddard LLP, as and when required, for example on consultancy, governance and legal matters. These
professional advisers alert the Trustee on relevant changes to pension legislation and trust law.
8.3. The Trustee is required to be conversant with the Scheme's main documents, and have appropriate
knowledge and understanding of the law relating to pensions and trusts, the funding of occupational
schemes and investment of scheme assets to enable them to properly exercise their functions.
8.4. The Trustee addresses the requirements through a combination of training at Trustee's meetings and
taking professional advice.
Trust documentation and policies
8.5. The Trustee has reviewed the following Trust documents and policies, and in doing so ensured they were
conversant with the documents:
8.5.1. The Trust Deed & Rules in order to identify what Deed of Amendments are required to ensure DC
benefits can be administered properly within the Scheme.
Trustee training
8.6. The Directors of the Corporate Trustee maintain a log of the training they have undertaken as Trustees.
8.7. The Trustee Directors have received training on:
8.7.1. The legal structure of the DC Section benefits
8.7.2. The governance requirements in respect of DC benefits, including training on the requirements to
meet the statutory minimum governance standards - identifying costs and charges incurred by
members and assessing the extent to which these provide value and producing illustrations on the
costs of those charges
8.7.3. Disclosure requirements around DC benefits
8.7.4. General Data Protection Regulations requirements
8.7.5. Investment considerations
8.8. If any knowledge gaps are identified, these are covered by the Trustee consulting externally with its
professional advisers.
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Access to professional advice
8.9. The Trustee consults with professional advisers as and when required, for example on consultancy,
governance and legal matters. Its professional advisers alert the Trustee, and where appropriate provide
training, on relevant changes to pension and trust law.
8.10. During the period covered by this statement, the Trustee took professional advice on:
8.10.1.The legal structure of the DC Section
8.10.2.The type of the investment funds held with Aegon
8.10.3.The extent to which the DC Section can be adequately administered under the existing provisions of
the Trust Deed and Rules
8.10.4.The options and processes to discharge members benefits within the DC Section
8.10.5.Tracing the addresses of members within the DC Section
8.10.6.Liaision with the Pensions Regualtor regarding the fact that the Trustee had not complied with the
statutory minimum governance standards around DC benefits in respect of previous reporting
periods (i.e. reporting periods prior to the 2017/18 Scheme year covered by this governance
statement)
8.10.7.Complying with all the statutory minimum governance standards and reporting requirements
applicable to the Scheme
8.10.8.Collation of the charges and transactions costs and completion of an assessment of the extent to
which those charges provided value to members
Assessment
8.11. The Trustee consider that its combined knowledge, skills and understanding together with the advice which
is available to it from its advisers enables it to properly exercise its trustee functions in relation to the
Scheme.
Mike Anderson, Chair of the Trustee Date
Volex Executive Pension Scheme DC Governance Statement — 1 August 2017 to 31 July 2018
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