Implementation Statement for the Federated Pension Scheme for Imperial College- Covering 1 April 2019 to 31 March 2020
This statement has been prepared by the Trustees of the Federated Pension Scheme for Imperial College (the “Scheme”) to comply with the requirements of The Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 and The Occupational Pension Schemes (Investment Regulations) 2005. The Scheme is a defined benefit pension scheme which is closed to new members and has no active members.
This Statement is required to:
(i) set out how, and the extent to which, in the opinion of the Trustees, the stewardship policy (as described in Regulation 2(3)(c) of the Investment Regulations) in the Scheme’s Statement of Investment Principles (“SIP”) has been followed during the year, and
(ii) include a description of the voting behaviour during the year by, and on behalf of, trustees (including the most significant votes cast by trustees or on their behalf) and state any use of the services of a proxy voter during that year.
This Statement should be read in conjunction with the SIP which was produced on 26 September 2019 in accordance with The Pension Protection Fund (Pensionable Service) and Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification) Regulations 2018 and the subsequent amendment in The Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2019.
The Trustees confirm that the most recent SIP was produced to cover:
- the trustees’ policy on financially material considerations, including how those considerations are taken into account in the selection, retention and realisation of investments
- the extent (if at all) non-financial matters are taken into account in the selection, retention and realisation of investments; and
- the trustees’ stewardship activities (for example, how they exercise voting rights and what engagement activities they undertake).
As part of these SIP updates, the College was consulted and confirmed it was comfortable with the changes.
2. Investment Objectives and activity
The objective of the Scheme is, as follows:
- To achieve, over the long term, an investment return on the Scheme’s assets which is consistent with the assumptions made by the Trustees in determining the funding of the Scheme;
- To ensure that sufficient liquid assets are available to meet benefit payments as they fall due; and
- To consider the interests of the Employer in relation to the size and volatility of the Employer’s contribution requirements.
There have been no changes to the investment strategy, as set out in the SIP.
3. ESG, Stewardship and Climate Change
The Scheme’s SIP includes the Trustees’ policy on Environmental, Social and Governance (“ESG”) factors, stewardship and climate change. This policy sets out the Trustees’ beliefs on ESG and climate change, and the processes followed by the Trustees in relation to voting rights and stewardship. This was reviewed in September 2019 and subsequently in September 2020.
The Scheme’s assets are held with Legal & General Investment Management “LGIM”, the “asset manager”. Assets are solely held in cash and government- and corporate-issued bonds (as detailed below).
- L&G Investment Grade Corporate Bond Over 15 Year Index Fund
- L&G Under 15 Year Index-Linked Gilts Index Fund
- L&G Over 5 Year Index-Linked Gilts Index Fund
- L&G Sterling Liquidity Fund
4. Voting and Engagement
All of the Trustees’ holdings are within pooled funds, and as noted above, voting rights do not apply to them. Nevertheless, the Trustees’ policy acknowledges the importance of stewardship and includes a commitment from the Trustees to engage with their asset manager in relation to its processes for monitoring the Scheme’s investments and engaging with relevant people in relation to those investments. The Trustees have confirmed with LGIM that there had been no significant voting opportunities in respect of these assets over the period.
Their policy also requires the asset manager to be a signatory of the UN Principles of Responsible and of the UK Stewardship Code, which the Trustees can confirm was the case for the relevant Scheme year.
The Trustees have received reports from the Scheme’s asset manager regarding engagement and voting and have concluded that the Trustees’ stewardship policy as set out in the SIP has been followed during the year. Whilst there are limited opportunities within corporate bonds and Gilts, the Trustees are aware of LGIM’s engagement and voting activities in equities and appreciate their track record in this area.
It should be noted that this is the first year in which the requirements apply, that TPR’s guidance remains limited and industry practice is at a very early stage of development and, in light of this, it may be expected that the content of this Statement will develop over time. In particular it is noted that the Trustees are required to produce a more substantial commentary on engagement and voting at their manager in advance of 1 October 2021, although the asset classes being held by the Trustee necessarily limits what is applicable here.