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Blakemore 2018 DC Statement

Information about your investments in the A.F. Blakemore & Son Limited Staff Retirement Benefit Scheme (the Defined Contribution section) for the scheme year end 30 April 2018

The information given on this page provides you, the member, with further details regarding your investments in the Defined Contribution (DC) section of the Scheme.  These details are based on the most recent scheme year end of 30 April 2018 and therefore may not reflect the current strategy if any changes have been made since 30 April 2018.

This page will be updated on at least an annual basis, following every scheme year end.

Default arrangement

Members of the DC section of the Scheme who do not make an explicit choice regarding the investment of their funds use a “lifestyle” strategy as a default arrangement.

The objective of this lifestyle strategy is to protect a member’s investments the closer they get to their target retirement age by moving assets out of higher risk/reward investments in to less risky investments. 

As at 30 April 2018 the default arrangement, designed by the Trustees, uses three funds to apply a lifestyle strategy: ‘Global Alpha Growth’, ‘Active Long Gilt Plus’ and the ‘Cash Fund’.

The lifestyle strategy has two stages:

  • The Growth Stage - If a member is 5 or more years away from his or her chosen retirement date, their investment account is invested in the Global Alpha Growth Fund;
     
  • The Protection Stage - Over the 5 years before a member’s retirement age, their investment account is steadily switched into the Active Long Gilt Plus Fund and the Cash Fund (in the proportion 75:25) to help protect its purchasing power.

By investing in this manner, the Trustees expect to deliver growth over the member’s lifetime within the Scheme without excessive risk taking, with an increased focus in the years approaching retirement on reducing volatility to enable members to make financial plans for the period after retirement.  

The default strategy was last reviewed by the Trustees on 25 April 2017 and the Statement of Investment Principles for this strategy can be found below.  A further review is currently underway, whereby the Trustees are taking into consideration the way in which the Scheme’s membership has been taking benefits since the introduction of ‘Pension Flexibility’.  The Trustees have noted that, since 2015, members have taken their benefits in a variety of ways and at different ages and therefore decided that the lifestyle strategy should be reviewed.   Further details regarding any changes to the default strategy will be updated here in due course.

Charges and transaction costs

Default arrangement

The funds used under the default arrangement attract the following charges and transaction costs:

Full name Charges (% p.a.) Transaction costs (% p.a.) Total costs (% p.a.)
Global Alpha Growth 0.60 0.15 0.75
Active Long Gilt Plus 0.40 0.16 0.56
Cash 0.12 0.00 0.12

Other funds

The Trustees also make available a range of alternative funds which may be chosen by members as an alternative to the default arrangement and allow members to take a more tailored approach to managing their own pension investments.  The charges and transaction costs of these funds are set out as follows:

Fund name Charges (% p.a.) Transaction costs (% p.a.) Total costs (% p.a.)
Managed 0.42 0.16 0.58
Diversified Growth 1.02 0.64 1.66
Active Index-Linked Gilt Plus 0.38 0.03 0.41
Investment Grade Long Bond 0.28 0.03 0.31
Emerging Market Leading Companies 0.67 0.01 0.68
UK Equity Core 0.44 0.02 0.46

Value for money for members

The Trustees are satisfied in the funds’ yearly performance and overall ability to exceed their benchmarks (net of fees).  The funds offered to members are priced on a single-unit basis which will typically lead to a lesser charge on those funds compared to a bid/offer spread basis.  The Trustees also consider single-unit pricing to achieve a more transparent costing basis for the member.

The Trustees are therefore satisfied that the fund charges and costs set out above represent good value for money for members.

Illustrative effect of charges and costs on members’ pension pots

Here are two illustrative examples of the cumulative effect that the costs and charges of the default arrangement could have on two typical members’ pension pots.  These examples are shown in today’s money and do not need to be further adjusted for inflation.  They also assume that:

1. Contributions increase each year in line with salary inflation and start at 10% of pensionable earnings per scheme year (5% paid by the member and 5% paid by A.F. Blakemore & Son Ltd)
2. Inflation is assumed to be 2.5% each year
3. Values shown are estimates and not guaranteed
4. Growth rates have been used to calculate the pension pots before charges are deducted and these have been assumed as follows:

- Global Alpha: 4.2% above inflation
- Active Long Gilt Plus: 0.4% above inflation
- Cash Fund: 0.9% below inflation

Example 1: a new joiner aged 25 whose starting pot is assumed to be £0 and starting salary is assumed to be £15,000

Future number of years contributing Before charges deducted (£) After all charges deducted (£)
1 1,549 1,544
3 4,841 4,793
5 8,407 8,267
10 18,681 18,046
15 31,235 29,612
20 46,577 43,292
25 65,324 59,474
30 88,233 78,613
35 116,228 101,250
40 139,767 119,628

Example 2: a member aged 50 whose existing pot is valued at £35,000 and salary is assumed to be £25,000

Future number of years contributing Before charges deducted (£) After all charges deducted (£)
1 39,014 38,769
3 47,542 46,698
5 56,782 55,177
10 83,400 79,042
15 107,852 100,361

Statement of Investment Principles for the default arrangement

Investment Policy

The Trustees have appointed Baillie Gifford as investment manager.  The Trustees’ investment policy is to offer members of Defined Contribution Section the following range of funds:

Type of fund Name
UK equity Bailie Gifford UK Equity Core Fund
Global equity Bailie Gifford Global Alpha Fund
Emerging markets equity Bailie Gifford Emerging Markets Fund
Managed Bailie Gifford Managed Pension Fund
Diversified growth Bailie Gifford Diversified Growth Fund
Corporate bond Bailie Gifford Investment Grade Long Bond Fund
Annuity protection Bailie Gifford Active Index Linked Gilt Plus Fund
Deposit Bailie Gifford Cash Fund

The funds offered give a range of different risk and return characteristics so that members can construct an overall portfolio suitable to provide for their pensions at retirement.  Members are responsible for choosing their own investment strategy from the range of funds on offer.

An optional lifestyle facility is available as a default strategy for members who do not wish to choose their own investment strategy.  Under the lifestyle strategy, members’ investments are automatically changed as they approach their chosen retirement date to minimise the different investment risks.

The lifestyle strategy consists of the following three funds:

  • Baillie Gifford Global Alpha Pension Fund
  • Baillie Gifford Active Long Gilt Plus Fund
  • Baillie Gifford Cash Pension Fund

Under the lifestyle strategy, members who are more than five years from their chosen retirement date will be invested in the Baillie Gifford Global Alpha Pension Fund.  Over the five years before the chosen retirement date, members’ funds will be gradually moved to the Baillie Gifford Active Long Gilt Plus Fund.  Over the three-year period before the chosen retirement date, a proportion of the funds is switched into the Baillie Gifford Cash Pension Fund.  The aim is to broadly have 75% of the member’s funds in the Baillie Gifford Active Long Gilt Plus Fund and 25% in the Baillie Gifford Cash Pension Fund at retirement.

The Trustees believe it is in the best interests of members to be invested in equities when there is a long period to retirement then, when approaching retirement, to be invested in safer assets.  The funds are switched into gilts and cash which better reflect current annuity prices and the cash sum that most members take.

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