csc computer sciences ltd pension scheme (“the plan ......registered in england, no 10039449 |...

CSC Pension Trustees Limited

Registered in England, No 10039449 | Registered Office: Royal Pavilion, Wellesley Road, Aldershot, Hampshire,

GU11 1PZ, United Kingdom

CSC Computer Sciences Ltd Pension Scheme (“the Plan”)

Chair’s Statement of DC Governance for the period from 1 July 2018 to 30 June 2019

I am pleased to present the Trustee’s statement of governance, covering the period 1 July

2018 to 30 June 2019 covering the money purchase benefits in the Plan. This statement

describes how the Trustee seeks to ensure that the Plan is well-managed and delivers

excellent services to members. The statement examines four key areas of the Trustee’s

governance, namely:

The investment strategy relating to the Plan’s default arrangement;

The processing of core financial transactions;

Charges and transaction costs within the Plan including the pounds and pence

illustration of the compounding effect of charges; and

The Trustee’s compliance with the statutory knowledge and understanding

requirements.

In doing so, we provide the various statutory disclosures required by the Occupational

Pension Schemes (Charges and Governance) Regulations 2015.

Monitoring the overall quality of the Plan arrangements is a complex task that the Trustee takes

seriously. The Trustee is supported in this process, as well as the day-to-day business of

running the Plan, by Willis Towers Watson (the provider of administration and communications

services for the Plan), Premier Pensions (Plan Secretary) and Mercer Limited (an independent

advisor, covering governance, investment advice and wider Defined Contribution (‘DC’)

matters).

The Plan’s Default investment strategy

The Statement of Investment Principles (SIP)

The SIP sets out the aims and objectives of the Plan’s investment strategy. In particular, it

covers the Trustee’s investment policy for the Money Purchase assets, including objectives,

risk and expected return and the design of the default investment strategy.

A copy of the latest agreed SIP dated 29 January 2020 is attached as an appendix.

The performance of all the funds, including those underlying the default investment strategy,

is reviewed by the Trustee each quarter.

The default investment strategy

The current default investment strategy is a lifestyle arrangement, which is invested as follows:

Asset allocation during

accumulation phase

CSC Multi-Asset Default Fund, which invests

75% LGIM* Global Equity Fixed Weight 30:70 Index Fund

(75% GBP currency hedging for overseas funds)

25% LGIM* Diversified Fund




Consolidation phase start

date 8 years before Target Retirement Age

Asset allocation at end of

consolidation phase

75% CSC Diversified Growth Fund (which invests 100%

in the LGIM Diversified Fund) and 25% CSC Targeting

Cash Fund (which invests 100% in the LGIM Sterling

Liquidity Fund)

*LGIM = Legal & General Investment Management

A formal review of the investment strategy of the default arrangement was undertaken in

August 2019. The following formed part of this review:

The performance of the default investment strategy against the objectives and aims

contained in the Statement of Investment Principles.

The design of the growth phase and de-risking phase of the default investment strategy.

The at-retirement allocation in the default.

The self-select fund range including the alternative lifestyle strategies that are available

to members.

Implementation considerations.

The Trustee is currently considering the recommendations put forward by its investment

adviser in this review in order to determine next steps. However, at this stage no changes have

been made. If any changes are agreed, the Trustee Directors will communicate with members

well in advance. Details of any changes made will be included in next year’s Chair’s Statement.

Other investment strategies

In addition to the default lifestyle arrangement, members have the option to select from two

additional lifestyle strategies, one suitable for a member wishing to target an annuity purchase

at retirement and one suitable for a member wishing to use their individual member account to

provide one or more cash lump sums. Full details are included in the SIP.

Other funds that regulations require to be treated as default arrangements

There is one additional fund (the CSC All Shares Adventurous Fund (Active)) that is

deemed to be a “default arrangement” due to a previous mapping exercise carried out

by the Trustee and where members have not subsequently re-affirmed the investment

selection.

Whilst this fund is not part of the Plan’s default investment strategy, the Trustee administers

the fund as technically constituting a default arrangement and in line with the governance

requirements that relate to such arrangements, including an annual cap on charges (excluding

transaction costs) of 0.75% of assets and the duty to review the fund at least every three years.

The Trustee is taking legal advice on whether any other funds may also constitute a default

arrangement.




Processing core financial transactions

The Trustee has a specific duty to ensure that core financial transactions in relation to money

purchase benefits are processed promptly and accurately. The Pensions Regulator lists core

financial transactions as including:

Receipt and investment of contributions

Transfer of member assets into and out of the Plan

Transfers between different investments within the Plan

Payments to and in respect of members

During the last Plan year the Trustee ensured the core financial transactions of the Plan were

processed promptly and accurately by:

Appointing a professional third party administrator, Willis Towers Watson, to undertake

all administration and record keeping duties. As part of that model, Willis Towers

Watson undertakes a daily reconciliation of all bank transactions. They also have a

system of authorised signatories in force to control payments from the Trustee’s bank

account. No banking errors were identified for the year in question.

Having an agreement with their administration service provider (Willis Towers Watson)

committing them to Plan specific service level agreements (“SLAs”) and having the

service provider report on their performance quarterly against the SLAs above. SLAs

relating to core financial transactions included:

Event SLA (days)

Deaths 5

Retirement Settlements 5

Transfer Out Completion 5

Transfer In Completion 10

Pension Sharing 5

Investment Decision 5

The SLA performance over the year was 91% in Q3 2018, 90% in Q4 2018, 93% in Q1

2019 and 91% in Q2 2019. The Trustee views this as marginally disappointing

performance, as it was below the target 95%, which was achieved in the 2017/18 Plan

year. However, the level of member complaints has been low and monthly processes

have been completed in a timely and accurate manner. In addition, the administrators

have confirmed that no statutory deadlines relating to core financial transactions have

been breached

Ensuring that appropriate internal controls are in place with Willis Towers Watson by

receiving and reviewing AAF01/06 audit reports. The latest report for the year to 30

September 2018, which was shared with the Trustee in December 2018, confirmed that

the administrator’s description of their control procedures covering their administration

and governance activities was fairly presented and that controls were suitably

designed. There were four exceptions noted by the auditor in sampling the




effectiveness of those controls; however, these exceptions were minor and would not

be considered to have a direct impact on the Plan.

o A number of the internal controls rely on the administrator and payroll systems

in place that perform tasks automatically. In addition, there are a number of

manual checks carried out by the administrator; these include:

Contributions due are agreed to the cash received into the trustee

bank account each monthly.

Monthly reconciliations between the contribution remittance and the

schedule of contribution or payment schedule are performed by the

Cash Management team for completeness.

Initial pension payment calculations and allocation of funds for

drawdown are independently reviewed within the administration team

for accuracy.

Forecast payments using prior month data are used as a sense check

for the current month.

Actual pension payments are reconciled to payments payable monthly

by the Payroll team.

Member payments and the allocation of funds for drawdown are

reviewed for completeness and accuracy by a senior administrator or

team leader.

A number of payments receive a second level review. These include

plan payments over £100,000 and payments where there is more than

one payment for the same member in the same period.

Lump sum payment calculations are reviewed and authorised by

designated personnel in accordance with authorisation rules.

Furthermore, the following controls are in place to ensure core financial transactions are

processed promptly and accurately:

The Company play a key role in ensuring core financial transactions are processed

promptly and accurately. The Company agree a monthly timetable for the contribution

process with Willis Towers Watson each year, which sets the planned dates for

contribution payments, interface delivery, reconciliation of queries and the investment

with the fund managers. The Company also have internal controls around its

contribution payment process and its engagement with the Willis Towers Watson




interface team over the monthly reconciliation of queries does ensure any necessary

adjustments are made for subsequent data/contribution records.

Based on the above, the Trustee is satisfied that the requirement to process core financial

transactions promptly and accurately has been met during the year in relation to the money

purchase benefits provided by the Plan.

AVC arrangements

The Scheme does not receive any new member contributions into the AVC arrangements with

LGIM, SEI and Equitable Life (now with Utmost Life and Pensions).

Members can switch their non Equitable Life funds using the investment tool on Mercer

OneView. Mercer trades with LGIM for investments, fund sales and switches using the industry

standard Via Nova straight through processing method, enabling full automation of the

instruction to LGIM, the return of the trade details from LGIM, the update of the member record

following completion of the trade and the reconciliation of the unit holdings between Mercer

and LGIM systems. SEI are unable to trade using straight through processing, as they require

instructions to be sent by fax. The confirmation of trade details is returned to Mercer by email

and are updated manually. Mercer have controls within their systems to ensure that the trades

are progressed and completed timely, with a monthly unit reconciliation being completed to

ensure that all trades have been completed correctly.

As the holdings with Equitable Life are invested in a ‘With Profits’ non-unitised fund there is no

Straight Through Processing or unit reconciliation and sales/closures of member policies are

placed manually. Mercer’s leaver processing functionality will indicate where an Equitable Life

policy needs to be sold for a member, and the member settlement can only be completed once

the sale details have been updated.

Charges, transaction costs and value for money

The Trustee is required to report on the charges and transaction costs experienced by

members for the fund choice available and assess the extent to which the charges and costs

represent good value for members. The charge a member pays is split between investment

charges and administration charges. These charges are set out below.

In relation to transaction costs, we note that when buying and selling investments, transaction

costs can be incurred. Transaction costs are not explicitly deducted from a fund but are

captured in its investment performance (in other words, the higher the transaction costs, the

lower the returns produced by a fund). The Financial Conduct Authority (“FCA”) has provided

guidance (in Policy Statement 17/20) to investment managers regarding calculations and

disclosures of transaction costs. Due to the way in which transaction costs are required to be

calculated, they can be negative or positive in nature; a negative figure is effectively a gain (on

average) from trading activity, whilst a positive figure is effectively a cost from trading activity.

The tables below shows the total expense ratio (TER) and the total transaction costs for each

of the funds underlying the Plan’s default investment arrangements and self select funds. The

overall charge being deducted from a member’s fund, if in the default investment




arrangements, will reflect the member’s allocations in each of the underlying funds. In addition,

the administration costs will depend on the member’s fund value.

Charges

Administration

Since January 2015, the Plan has been responsible for meeting its running costs, other than

investment advisory and annuity purchase services, which continue to be met by the Company.

To cover these costs, an administration charge is deducted from every individual member

account (IMA). The charge ranges from 0.08% to 0.14% per annum depending on the value

of the IMA (this charging structure was implemented on 31 March 2018; previously a flat rate

of 0.1% of IMA applied). 25% of the relevant annual charge is deducted each quarter from the

IMA. The Company keeps the charge under review.

Investment

The constituent investment funds that make up the default investment option along with

associated charges are set out in the table below:

Fund name Total Expense Ratio (% of account value per annum)

Transaction costs for year to 30 June 2019 (p.a.)*

CSC Multi Asset Default 0.146% 0.00%

CSC Diversified Growth 0.30% -0.06%

CSC Targeting Cash 0.085% -0.02%

* for the CSC Multi Asset Default, a proportion of the costs of each of the underlying funds has been used to calculate overall

blended costs

Allowing for the weightings of the underlying funds in accordance with the agreed phasing

matrix, the TER charge profile for the lifestyle strategy ranges from 0.146% p.a. during the

accumulation phase up to circa 0.246% p.a. [i.e. blended from 75% at 0.30% and 25% at

0.085%] at retirement.

As noted earlier in this Statement, there is one fund that is deemed to be “default arrangement”

due to a previous mapping exercise carried out by the Trustee and where members have not

subsequently re-affirmed the investment selection. These charges in respect of that fund have

been listed below for completeness:


Transaction costs for year to 30 June 2019 (p.a.)

CSC All Shares Adventurous Fund (Active)

0.65%* 0.38%

Factoring in administration costs, the fee for the CSC All Shares Adventurous Fund (Active)

(including administration costs) would range from 0.73% p.a. to 0.79% p.a. depending on the

member’s pot size. The Trustee is currently in the process of determining whether any




members are subject to fees in excess of the charge cap. If this is found to be the case, then

the Trustee will work with the Company to take any remedial action required in terms of the

charge cap for the CSC All Shares Adventurous Fund (Active).

The Trustee also makes available two additional lifestyle strategies and a range of risk-graded

self-select funds which may be chosen by members. These strategies and funds allow

members to take a more tailored approach to managing their own pension investments. The

fees and transaction costs relating to these investments are set out in the table below.



CSC All Share Adventurous 0.095% 0.03%

CSC All Share Adventurous (Active) 0.650% 0.38%

CSC Multi Asset Adventurous (Active) 0.830% 0.34%

CSC Multi Asset Default 0.146% 0.00%

CSC Multi Asset Moderate 0.126% -0.01%

CSC Multi Asset Moderate (Active) 0.780% 0.24%

CSC Diversified Growth 0.300% -0.06%

CSC Targeting Drawdown 0.350% -0.05%

CSC Targeting Annuity 0.050% 0.02%

CSC Targeting Cash 0.085% -0.02%

* for the CSC Multi Asset Default and CSC Multi Asset Moderate a proportion of the costs of each of the underlying funds has

been used to calculate overall blended costs

Based on the proportions held in the underlying funds, the TER charges for the two

additional lifestyle investment strategies available are 0.06% p.a. to 0.08% p.a. at

retirement. The TER is 0.146% p.a. in the growth phase of both additional lifestyle

strategies.

The self-select funds have TER charges ranging from 0.05% p.a. to 0.83% p.a.

AVC arrangements

Equitable Life data presented below has been produced as at 30 June 2019.




Fund Name

Fund Annual Management

Charge (% p.a.)

Annual Reporting

Period

OEIC Net Transaction

cost (% p.a.)

Stocklending (% p.a.)

Equitable Life Fund

Transaction Cost (%

p.a.)

Equitable Life Fund

Total Charges Impact (% p.a.)

With-Profits Fund

1.00 30/6/2019 n/a 0.00391 0.063229 1.07

Charges and costs relating to the LGIM AVCs within the Plan are set out below.



Aggressive 0.65% 0.38%

Balanced 0.10% -0.02%

Global Equity (60:40) Index 0.085% -0.02%

Fixed Interest Gilts (Over 15 Years) 0.07% -0.26%

Sterling Non-Gilts (Over 15 Years) 0.085% 0.02%

Liquidity 0.085% -0.02%

Adventurous Core (SMS) 0.07% -0.02%

Balanced Core (SMS) 0.07% -0.02%

Global Equity (30:70) Index (SMS) 0.095% 0.02%

Sterling Non-Gilts (SMS) 0.07% -0.02%

Index-Linked Gilts (Over 5 Years) (SMS)

0.07% 0.03

Diversified (SMS) 0.30% -0.06

* for the Balanced and Balanced Core a proportion of the costs of each of the underlying funds has been used to calculate

overall blended cost

Impact of costs and charges on pot size

The Trustee has prepared the following illustrative examples of the cumulative effect of costs

and charges on members’ investments over time. In doing, so we have had regard to guidance

produced by the Department of Work and Pensions. Please note that these are illustrative

examples which should help you understand the impact on your savings of investment

management and administration charges and transaction costs. Remember that the Trustee

regularly monitors the level of charges to ensure they provide value for money.




Projected Pension pot in today’s money (£’s)

We assume an initial pot size of £67,800 which is based on the average pot size in the Plan

using data as at 30 June 2018.

CSC Multi Asset Default

Fund CSC Diversified

Growth CSC Targeting Cash

Years Before

charges

After all charges +

costs deducted

Before charges

After all charges +

costs deducted

Before charges

After all charges +

costs deducted

1 75,376 75,183 74,787 74,428 73,200 73,040

3 90,882 90,233 88,913 87,728 83,755 83,249 5 106,875 105,671 103,245 101,087 93,995 93,106 10 149,081 146,096 139,994 134,799 118,272 116,326

15 194,669 189,200 178,093 168,901 140,770 137,630 20 243,912 235,294 217,593 203,396 161,621 157,159 25 297,101 284,574 258,546 238,510 180,944 175,062

30 354,552 337,269 301,005 274,064 198,853 191,473 40 483,638 453,755 390,662 346,712 230,831 220,592 47 586,600 545,047 457,389 398,779 250,491 238,267

CSC Multi Asset

Adventurous (Active) CSC Targeting Annuity

Years Before

charges

After all charges +

costs deducted

Before charges

After all charges +

costs deducted

1 75,671 75,110 73,875 73,718 3 91,882 89,991 85,922 85,417 5 108,738 105,224 97,834 96,934

10 153,870 144,973 127,038 124,995 15 203,627 187,144 155,432 152,003 20 258,482 232,016 183,041 177,987

25 318,956 279,750 209,886 202,987 30 385,628 330,507 235,988 227,252

40 540,162 441,926 286,044 273,128 47 667,744 528,462 319,449 303,248

Notes

1. The projected pension pot values are shown in today's terms, and do not need to be reduced further for the effect of future inflation.

2. The assumed real terms investment returns (i.e. after allowing for future inflation) and

assumed charges and costs for each of the funds illustrated are as follows:




CSC Multi Asset

Default Fund

CSC Diversified

Growth

CSC Targeting

Cash

CSC Multi Asset Adventurous

(Active)

CSC Targeting Annuity

Assumed real-terms investment

return*:

1.55% 0.72% -1.51% 1.97% -0.56%

Assumed future

charges: 0.146% 0.300% 0.085% 0.830% 0.050%

Assumed future

transaction costs**:

0.004% -0.075% -0.010% 0.170% -0.040%

* accumulation rate assumed in SMPI projections plus transaction costs minus the inflation rate (2.5%), gross of

transaction costs. **based on average aggregate transaction cost information for the years to 30 June 2018 and 30 June 2019. A negative figure represents a positive transaction cost.

3. Initial salary is assumed to be £46,900.

4. Future inflation is assumed to be 2.5% each year.

5. The illustration assumes that further contributions will continue to be paid in. The figures show

an assumed contribution of 13.8% (representing both your and your employer’s contribution, including tax relief) and increasing in line with assumed earnings inflation of 2.5% each year. 13.8% represents the approximate total average contribution rate paid as at June 2018. Contributions are assumed to be paid half way through the year on average.

6. The timeframe shown reflects the approximate length of time that the youngest Plan member

has to save until they reach the Plan’s normal pension age.

7. This is not a personal illustration. The values shown are illustrations and are not guaranteed.

Actual values could be significantly higher or lower than those shown in the illustrations.

Value for money

The Trustee is committed to ensuring that members receive value for money (i.e. that the costs

and charges provide good value in relation to the benefits and services provided) and so

consider this on an on-going basis. The Trustee has concluded, following receipt of a report

from their independent Defined Contribution adviser, that the Plan offers good value, relative

to peers and alternative arrangements, in relation to member-borne deductions.

The value for money assessment considered the following:

Annual management charges

Net of cost performance

Administration service levels

Transaction costs where available.




The value for money assessment concluded that the Plan’s money purchase benefits, services

and options represent good value for money for members as:

Members have access to a variety of well-designed investment options which the

Trustee regularly monitors and updates and which should meet the membership’s

different returns/risks and income preferences.

Members have access to institutional-priced investment fund management at

charges which are competitive. Generally, the charges were found to be below the

average of their peer group and fund performance has been in line with the

Trustee’s expectations for the majority of Plan assets. However, performance has

been disappointing on the three actively managed SEI funds over recent years.

The Trustee is closely monitoring performance of these funds and met with SEI in

August 2019 to discuss.

Members receive a comprehensive and high-quality administration service with on-

line access to their accounts. Administration performance is reviewed by the

Trustee on a quarterly basis. Service has been marginally behind expectations for

the year. However, the level of member complaints has been low and monthly

processes have been completed in a timely and accurate manner.

Members receive good communication material and a high level of governance and

Trustee oversight.

In relation to transaction costs, the Trustee notes a number of challenges to assess

these costs:

o No industry-wide benchmarks for transaction costs exist.

o The methodology leads to some curious results, most notably “negative”

transaction costs.

o Explicit transaction costs are already taken into account when investment

returns are reporting, so any assessment must also be mindful of the return side

of the costs.

AVC arrangements

As mentioned, the Plan’s assets also include an investment in Equitable Life’s With-Profits

fund. By their nature, the charging structure of With-Profits policies is not transparent - for

example, investment returns are partially earned in the form of discretionary bonuses

calculated by Equitable Life. The Trustee does not believe that it is proportionate to undertake

a market review of price and performance of these funds. Switching away from the current

policy will result in members losing a guaranteed investment return which could not be

replicated elsewhere.

The Trustee also recognises that assessing value for money on a With-Profits fund is directly

related to the individual’s attitude towards, and capacity for, investment risk. A higher return

may be possible in another investment vehicle, but an individual may find comfort in the fact

that their fund will achieve at least the guaranteed investment return in the With-Profits fund.




The Trustee notes that the Equitable Life With-Profits fund is currently subject to a proposed

transition to Utmost Life and Pensions. As part of these proposals the assets will be

disinvested from the With-Profits fund and invested in unit linked fund with Utmost Life and

Pensions with members receiving a significant uplift in value to compensate for the loss of

guarantee. The Trustee is currently monitoring the progress of these proposals and will take

advice on the suitability of where these funds will be reinvested, assuming the proposals go

ahead.

The Plan also has a number of Additional Voluntary Contribution (AVC) arrangements in the

Defined Benefit section and SMS section with underlying funds managed by LGIM and SEI. A

number of the AVC funds are broadly equivalent to the previous arrangements in the Money

Purchase section (prior to the changes in 2017) with a small number of additional funds

managed by Legal & General. The Trustee plans to review the Plan’s AVC arrangements over

the next year with the intention to harmonise the arrangements with the current Money

Purchase section. However, the performance of the AVC funds with LGIM has been line with

expectations and prices appear to be competitively priced and comparable to the Money

Purchase section fees. The SEI AVC fund has the same underlying fund as the CSC All Share

Adventurous Fund in the Money Purchase section and this has been assessed in the main

Value assessment noted above.

Maintaining the Trustee’s knowledge and understanding (TKU)

Requirements

In accordance with section 247 of the Pensions Act 2004, the Trustee Directors are required

to maintain an appropriate level of knowledge and understanding which, together with

professional advice that is available to them, enables them to properly exercise their functions

and duties in relation to the Plan.

The Trustee Directors are also required to explain how their combined knowledge and

understanding, together with the advice which is available to them, enables them properly to

exercise their functions as trustees of the Plan.

The Trustee Directors must also be conversant with the Plan’s own documentation, including

the trust deed and rules and statement of investment principles. The Trustee Directors must

also be conversant with any other document recording current policy relating to the

administration of the Plan generally. The Pensions Regulator interprets ‘conversant’ as having

a working knowledge of those documents such that the Trustee Directors are able to use them

effectively when they are required to do so in the course of carrying out their duties on behalf

of the Trustee. In addition, Trustee Directors are also required to have a knowledge and

understanding of the law relating to trusts and pensions.

How the Trustee Directors have met these requirements

New Trustee Directors are expected to complete the Pension Regulator’s Trustee Toolkit

within three months of their appointment. All current trustees have completed or are making

good progress in completing the Pension Regulator’s Trustee Toolkit.




The Trustee assesses its training needs annually in light of their business plan priorities and

with regard to the statutory requirements. Following the introduction of a new committee

structure at the beginning of 2019, each committee chair will also now discuss training

requirements with the Plan Secretary when agreeing each meeting agenda. In addition, the

Trustee’s advisers also suggest training sessions they feel would be beneficial the Trustee’s

knowledge and understanding.

A number of training sessions were undertaken during the year to ensure the Trustee was up

to date with the latest developments in pension law and industry trends. Training session items

included:

Environmental, Social and Governance (‘ESG’) factors as they relate to the Plan’s

investment arrangements presented by the Plan’s Investment Consultant. This

training item was designed to assist the Trustee in developing their beliefs for the

Statement of Investment Principles updates required from October 2019.

The Trustee also received and considered a current topics paper on a quarterly basis

from the Plan’s DC Consultant, covering such items as industry trends and important

legislative requirements relating to DC plans.

Training in relation to innovation in the DC investment space, including new areas DC

plans are now investing.

Training related to the new DWP requirements on disclosure to members with

particular focus on the new SIP requirements.

Training relating to cyber security from their auditors.

The Trustee undertook a number of additional activities during the year that involved giving

detailed consideration to pensions and trust law, the Plan’s governing documents and

investment principles. This allowed them to exercise their knowledge and understanding and

to further strengthen their capabilities. These included:

Balance of Powers training from their legal advisers.

Discretions/member compliant training from their legal advisers.

The Statement of Investment Principles was updated just after year end to reflect the

new requirements relating to the Trustee’s policies on financial material

consideration, including Environmental, Social and Governance factors. The final

Statement was signed on 23 September 2019 and published online as required by

legislation

In addition to the above, the Plan’s legal advisers regularly attend Trustee meetings (either in

person or by conference call) and provide ongoing support to the Trustee Directors in relation

to legal matters and the interpretation of the Plan’s documentation. In the previous Plan year,

the Trustee (in conjunction with their legal adviser) successfully completed a project to update




the Trust Deed & Rules of the Plan, which including training on key provisions in the Trust

Deed and Rules.

The Trustee secretariat function is outsourced to professional advisers. Consequently, the

Trustee’s agendas and sub-committee agendas are prepared by professional advisers who do

so with a view to ensuring compliance and best practice.

There were no board effectiveness surveys undertaken during the year. However, this is

informally picked up between the Chair of Trustee and Trustee Secretary when discussing

each quarterly board meeting agenda. A formal review of Trustee performance is scheduled

for 2020.

The Trustee Directors believe they have a good range of different skillsets and expertise. The

Trustee’s combined knowledge and understanding complements this and, together with the

advice available to them from a range of appointed professional advisers, gives them a broad

base of knowledge and experience in order to identify and analyse issues, and recognise

where further advice may be required, so as to properly exercise their functions as a Trustee

of the Plan.

Following the resignation of the Scheme’s sole Member Nominated Trustee Director (“MND”)

in January 2020, the Scheme currently has no MNDs. To ensure compliance with the Pension

Regulator’s requirements on MND representation, the Trustee Board is in the process of

contacting all members to advertise the Scheme’s MND vacancies.

Taking account of actions taken individually and as a Trustee body, together with the

professional advice available to them, the Trustee considers they are able to exercise their

function as Trustee appropriately.

The Chair’s Statement regarding money purchase benefits governance was approved by the

Trustee on 23 January 2020 and signed on its behalf by:

……………………………………………………. Date: 29 January 2020

Mark Greenhalgh

CSC Pension Trustees Ltd - Chair

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Appendix 1

CSC Computer Sciences Ltd Pension Scheme – Money

Purchase section

Statement of Investment Principles

1. Introduction

1.1 The purpose of this Statement of Investment Principles (“the Statement”) is to document

the principles and policies governing decisions about the investment of the assets of the

CSC Computer Sciences Ltd Pension Scheme – Money Purchase section (“the

Scheme”). This statement has been prepared by the Trustee of the Scheme (“the

Trustee”). It sets out the Trustee’s policy for complying with

− The Pensions Act 1995, as amended by the Pensions Act 2004;

− The Occupational Pension Schemes (Investment) Regulations 2005, as amended

by the Occupational Pension Schemes (Charges and Governance) Regulations

2015; and,

− Subsequent legislation.

1.2 The Trustee has consulted CSC Computer Sciences Ltd (“the Company”) on the

Statement, and the Trustee has received written advice from the Scheme’s investment

consultants, Mercer Limited (“Mercer”), which is regulated by the Financial Conduct

Authority (“FCA”) in relation to investment services.

1.3 The Trustee maintains an Investment Policy Implementation Document (“IPID”), which

contains more detail on the Scheme’s investment arrangements. This document, whilst

complementing the Statement, does not form part of the Statement and therefore the

principal employer is not consulted in relation to changes to this document.

1.4 A copy of this Statement will be sent to the Scheme’s investment managers. The

Trustee is committed to review the Statement at least once every three years and without

delay upon a material change to the Scheme or the Company.

1.5 This Statement covers the Money Purchase Section and the Additional Voluntary

Contribution arrangements for the Final Salary and the Segregated SMS Section only.

A separate Statement of Investment Principles has been prepared in respect of the

Defined Benefit arrangements for the Final Salary Section and the Segregated SMS

Section.

2. Objectives of the Scheme

2

The Trustee recognises that individual members have differing investment needs and

that these may change during the course of a member’s working life. The Trustee also

recognises that members have different attitudes to risk. The Trustee believes that

members should be allowed to make their own investment decisions based on their

individual circumstances.

In order to encompass these factors the Trustee has agreed the following objectives:

− To make available a range of CSC labelled investment options that should enable

members to tailor their own investment strategy to meet their own individual needs.

− To offer funds which allow diversification of risk and long-term capital growth.

− To provide a default investment option for members who do not make their own

investment decisions. This is designed to be broadly appropriate for the needs of the

majority of the membership.

The Trustee undertakes to review the Scheme’s fund choices offered to members and

the investment manager arrangements on a regular basis.

3. Investment Policies

The Trustee has made available a range of individual self-select fund options for

investment in addition to the default investment option. A range of asset classes has

been made available, including: equities, diversified growth funds, a number of blended

multi-asset funds, money market investments, gilts and pre-retirement (annuity

targeting) funds. It is the Trustee’s policy to offer both active and passive management

options to members where appropriate, depending on asset class.

In selecting assets, the Trustee considers the liquidity of the investments in the context

of the likely needs of members. All assets are daily dealing and therefore should be

realisable based on member demand. In addition, assets are mainly invested on

regulated markets.

The Trustee’s policy in relation to the balance between the different kinds of investment

is set out in the ‘Investment Options’ section. Further details of the funds and lifestyle

strategies used in the Scheme are set out in the IPID. Members also have the option to

combine the funds in any proportion in order to determine the expected return on a

member’s assets and should relate to the member’s own risk appetite and tolerances.

The Trustee’s policy in relation to expected return is to make funds available to members

that are spread across the expected risk/return spectrum. Each fund used in the

Scheme has an associated benchmark or target return which the Trustee views as the

expected return. The expected return targeted by each is shown in the IPID. This

includes assets that target long term growth in real terms and assets that are expected

to be less risky and more defensive in nature.

3

The Trustee recognises that “risk” in the context of a defined contribution pension plan

is multi-faceted. In broad terms, it’s regarded as the likelihood of failing to achieve the

objectives set out in the previous section and have, on the advice of Mercer, taken

several measures which are set out in this Statement to mitigate these risks, so far as is

possible. The list below is not exhaustive but covers the main risks that the Trustee

considers and how they are managed.

Risk How it is managed How it is measured

Inflation Risk

The real value (i.e. post inflation)

value of members’ accounts

decreases.

The Trustee provides members

with a range of funds, across

various asset classes, with the

majority expected to keep pace

with inflation (with the exception

of the money market and fixed

interest bond funds).

Members are able to set their

own investment allocations, in

line with their risk tolerances.

Considering the real

returns (i.e. return

above inflation) of

the funds, with

positive values

indicating returns

that have kept pace

with inflation.

Pension Conversion

Risk

Member’s investments do not

match how they would like to

use their pots in retirement.

The Trustee makes available

three lifestyling strategies for

DC members, each targeting

either cash, drawdown or

annuity.

Lifestyle strategies

automatically switch member

assets as they approach

retirement into investments that

are expected to be less volatile

relative to how they wish to

access their pension savings.

These lifestyling strategies

increase the proportion of

assets that more closely match

the chosen retirement

destination as members

approach retirement. This aims

to reduce the risk of a

substantial fall in the purchasing

power of their accumulated

savings near retirement.

Considering the

returns of the funds

used within the

switching phase of

the lifestyle strategy

both in absolute

terms as well as

relative to inflation,

cash or annuity

prices (depending on

their selected

retirement

destination).

Market Risk

The value of securities, including

equities and interest bearing

The Trustee provides members

with a range of funds, across

various asset classes. Members

Monitoring the

performance of

4

assets, can go down as well as

up. are able to set their own

investment strategy in line with

their risk tolerances.

For the multi-asset funds which

are targeting non-market

benchmarks (e.g. CSC

Targeting Drawdown and CSC

Diversified Growth funds), this

is delegated to investment

managers.

investment funds on

a quarterly basis.

Counterparty Risk

A counterparty, either an

underlying holding or pooled

arrangement, cannot meet its

obligation.

Delegated to investment

managers.

Members are able to set their

own investment allocations, in

line with their risk tolerances.

Monitoring the

performance of

investment funds on

a quarterly basis.

Currency Risk

The value of an investment in

the member’s base currency

may change as a result of

fluctuating foreign exchange

rates.

The Trustee provides diversified

investment options that invest in

local as well as overseas

markets and currencies.


managers.

Monitoring the

performance of

investment funds on

a quarterly basis.

Consideration to the

movements in

foreign currencies

relative to pound

sterling

Operational Risk

A lack of robust internal

processes, people and systems.

Trustee considers manager

research which includes

operational aspects from their

investment consultant.


ratings of investment

strategies from their

investment

consultant and

monitoring these on

a quarterly basis.

Liquidity Risk

Assets may not be readily

marketable when required.

The Trustee accesses daily

dealt and daily priced pooled

funds.

The pricing and

dealing terms of the

funds underlying the

unit-linked insurance

contract

Environmental, Social

and Governance Risk

ESG factors can have a

significant effect on the

performance of the investments

The Trustee’s policy on ESG

risks is set out in Section 4 of

this Statement.

Section 4 of this

Statement also

covers how the

Trustee monitors the

extent to which

5

held by the Scheme e.g.

extreme weather events, poor

governance.

managers integrate

ESG factors and

active ownership into

their core processes.

Manager Skill / Alpha

Risk

Returns from active investment

management may not meet

expectations, leading to lower

than expected returns to

members.

The Trustee makes available a

number of actively managed

funds to DC members where

they deem appropriate; for

example, multi-asset funds with

Legal & General and SEI.

The performance of these funds

is monitored by the Trustee and

their investment consultant.

The investment consultant also

provides manager ratings which

examine the forward looking

expectations of the fund

meeting objectives (where the

funds are researched).

The Trustee

considers the ratings

of investment


investment

consultant during the

selection process.

Trustee monitors

performance and

rating of funds on an

ongoing basis

relative to the fund’s

benchmark and

stated

targets/objective

The risks identified in the above table are considered by the Trustee to be ‘financially

material considerations’. The Trustee believes the appropriate time horizon for which to

assess these considerations within should be viewed at a member level. This will be

dependent on the member’s age and their selected retirement age. It is for this reason

that a number of lifestyle options have been made available to members.

Member views on non-financial matters are not taken into account in the selection,

retention and realisation of investments.

4. Responsible Investment and Corporate Governance

The Trustee believes that environmental, social and corporate governance (“ESG”)

factors may have a material impact on investment risk and return outcomes. The

Trustee also recognises that long-term sustainability issues, including climate change,

present risks and opportunities that increasingly require explicit consideration. Details

on how these are considered are set out in separately in the Trustee’s ESG Beliefs

Statement.

Having considered its fiduciary duty, the Trustee has delegated the evaluation of ESG

factors, including climate change considerations, and exercising voting rights and

stewardship obligations attached to the investments, to the appointed investment

managers in accordance with their own corporate governance policies and current best

practice, including the UK Corporate Governance Code and the UK Stewardship Code.

6

The Trustee considers how ESG, climate change and stewardship is integrated within

investment processes when appointing new managers and monitoring existing

managers. These issues are monitored by the Trustee which takes advice from the

investment consultant’s assessment of how the fund managers incorporate ESG.

Monitoring is undertaken on a regular basis and is documented at least annually to

assess the effectiveness of applied approaches.

The Trustee has not set any investment restrictions on the appointed investment

managers in relation to particular products or activities, but may consider this in future.

Equity managers who are FCA registered are expected to report on their adherence to

the UK Stewardship Code on an annual basis.

5. Investment Options

5.1 The Trustee offers the a range of investment options to the members. The Trustee

believes that this range of options is suitable for meeting the investment objective and

risk considerations detailed in Sections 2 and 3 respectively.

5.2 The range of investment options available includes three lifestyle investment options.

The Lifestyle options involve investments being switched gradually over an individual’s

lifetime in the Scheme from assets that target long term real growth (e.g. equities) to

assets that are considered less risky and in line with how the members wishes to take

their retirement savings (e.g. cash, bonds, diversified growth funds). If members wish

to do this, then they will also need to select their target retirement age.

5.3 Where members do not choose their investment option when joining the Scheme (or

when there is a later need to make a choice), the Trustee will invest their contributions

in the default lifestyle option, the CSC Targeting Drawdown Lifestyle Option (set out

below and detailed in section 6).

5.4 The Trustees have also made available a pre-design range of growth funds with various

expected risk levels as self-select options. In addition, The Trustee offers all members

the choice of three funds that helps prepare for how a member wishes to access their

benefits at retirement.

5.5 Further details of the funds available and their objectives are set out in the IPID.

6. Default Option – Statement of Investment Principles

The Trustee recognises that many members may not wish or feel able to make

investment decisions. As such, the Trustee has made available a default investment

arrangement.

The default investment arrangement, which is the CSC Targeting Drawdown Lifestyle

Option, has two phases: the accumulation phase and the consolidation phase. When a

member is younger, their account is invested in funds that aim for long-term growth

(accumulation phase) in excess of inflation. To counter the greater impact on member

7

outcomes of investment risk as a member’s savings grow, the default strategy seeks to

reduce investment risk (by increasing the allocation to a diversified range of assets) as

the member approaches retirement.

6.1 Aims and Objectives

The aims of the default option, and the ways in which the Trustee seeks to achieve these

aims are detailed below:

- To generate returns in excess of inflation during the growth phase of the strategy

whilst managing downside risk.

The default option’s growth phase invests in the CSC Multi Asset Default fund

comprised of holdings of 75% in global equities and 25% in a diversified growth fund.

These investments are expected to provide long-term growth above inflation with

some downside protection.

- To provide a strategy that reduces investment risk for members as they approach

retirement.

As a member’s account grows, investment risk will have a greater impact on member

outcomes. Therefore, the Trustee believes that a strategy that seeks to reduce

investment risk as the member approaches retirement is appropriate.

The CSC Targeting Drawdown Lifestyle Option therefore aims to reduce volatility

near retirement via automated switches over a 7-year period to a member’s selected

retirement date. Investments are gradually switched from growth-oriented assets

(largely global equities) into a combination of a diversified growth fund (which has an

allocation consisting of traditional and alternative assets) and a cash fund for capital

preservation purposes.

- To provide exposure at retirement to assets that are broadly appropriate for an

individual planning to use their savings in the Scheme to invest in an income

drawdown product and to take a 25% tax-free cash lump sum at retirement.

At the member’s selected retirement date, 75% of the member’s assets will be

invested in a diversified growth fund and 25% in a cash fund.

6.2 Policies in relation to the default option

The Trustee’s policies in relation to the default option are:

- A range of asset classes are included within the default investment option (within the

blended funds used), including: developed market equities, emerging market

equities, money market investments and diversified growth funds. All funds are daily-

dealt pooled investment arrangements, with assets mainly invested on regulated

8

markets. It is the Trustee’s policy to utilise both active and passive management

within the default investment option, depending on the asset class.

- The pooled funds are commingled investment vehicles. The selection, retention and

realisation of securities within the pooled funds are delegated to the manager in line

with the mandates of the funds.

- In designing the default, the Trustee has explicitly considered the trade-off between

risk and expected returns. Risk is not considered in isolation, but in conjunction with

the expected investment returns and outcomes for members. The Trustee took

advice from their investment consultant when deciding on this asset allocation. The

asset allocation is consistent with the expected amount of risk that is appropriate

given the age of a member and when they expect to retire.

- In selecting assets, the Trustee considers the liquidity of the investments in the

context of the likely needs of members. All assets are daily dealing and therefore

should be realisable based on member demand. In addition, assets are mainly

invested on regulated markets.

- The Trustee has also taken into account the needs of members with regards to

security, quality, liquidity and profitability of a member’s portfolio as a whole. The

Trustee has designed the default option taking account of the assets in the default.

- The default option manages investment risks and other risks through a strategic

asset allocation consisting of equities, diversified growth funds and cash. Risk is not

considered in isolation, but in conjunction with expected investment returns and

outcomes for members.

- The Trustee has considered risks from a number of perspectives. The list below is

not exhaustive but covers the main risks that the Trustee considers and how they

are managed.

Risk How it is managed How it is measured

Inflation Risk

The real value (i.e. post inflation)

value of members’ accounts

decreases.

During the growth phase

of the default investment

option the Trustee invests

in a diversified range of

assets which are likely to

grow in real terms.

Considering the real

returns (i.e. return above

inflation) of the funds, with

positive values indicating

returns that have kept

pace with inflation.

Pension Conversion

Risk

Member’s investments do not

match how they would like to

use their pots in retirement.

The default investment

option is a lifestyling

strategy which targets

flexible access income

Considering the returns of

the funds used within the

switching phase of the

lifestyle strategy both in

absolute terms as well as

9

drawdown as a retirement

destination.

The Trustee believes that

a strategy targeting

drawdown also minimises

the overall pension

conversion risk for the

relevant members

accessing pots in a

different manner (annuity

or cash).

relative to inflation (the

retirement destination).

As part of the triennial

default strategy review,

the Trustee ensures the

default destination

remains appropriate.

Market Risk

The value of securities, including

equities and interest bearing

assets, can go down as well as

up.

The default investment

strategy is set with the

intention of diversifying

this risk to reach a level of

risk deemed appropriate

for the relevant members

by the Trustee.

For the diversified growth

funds which are targeting

non-market benchmarks

this is delegated to

investment managers.

Monitoring the

performance of the default

investment strategy on a

quarterly basis.

Counterparty Risk

A counterparty, either an

underlying holding or pooled

arrangement, cannot meet its

obligation.


managers.

Members are able to set

their own investment

allocations, in line with

their risk tolerances.

Monitoring the

performance of investment

funds on a quarterly basis.

Currency Risk

The value of an investment in

the member’s base currency

may change as a result of

fluctuating foreign exchange

rates.

A large proportion of

equity allocation of the

default investment option

is currency hedged.

Within the diversified

growth fund the currency

risk management is

delegated to investment

manager.

Investment strategy is set

with the intention of

diversifying this risk to

The Trustee reviews the

level of currency hedging

used in the equity portfolio

as part of the triennial

default strategy review.

Monitoring the

performance of investment

funds on a quarterly basis.


movements in foreign

currencies relative to

pound sterling provided by

10

reach a level of risk

deemed appropriate for

the relevant members by

the Trustee.

the investment consultant

as part of quarterly

investment monitoring

reports.

Operational Risk

A lack of robust internal

proceses, people and systems.

Outsourced this to the


Trustee considers

manager research which

includes operational

aspects from their





investment consultant and

monitoring these on a

quarterly basis.

Liquidity Risk

Assets may not be readily

marketable when required.

The Trustee accesses

daily dealt and daily

priced pooled funds.

In line with the main

Scheme.

Environmental, Social

and Governance Risk

ESG factors can have a

significant effect on the

performance of the investments

held by the Scheme e.g.

extreme weather events, poor

governance.

In line with the Scheme.

The Trustee’s policy on

ESG risks is set out in

Section 4 of this

Statement.

In line with the main

Scheme.

Manager Skill / Alpha

Risk

Returns from active investment

management may not meet

expectations, leading to lower

than expected returns to

members.

The performance of active

funds within the default is

monitored by the Trustee

and their investment

consultant. The

investment consultant

also provides manager

ratings which examine the

forward looking

expectations of the fund

meeting objectives.

The Trustee considers the



investment consultant

during the selection

process.

Trustee monitors

performance and rating of

funds on an ongoing basis

relative to the fund’s

benchmark and stated

targets/objective

- The risks identified in the above table are considered by the Trustee to be ‘financially

material considerations’. The Trustee believes the appropriate time horizon for which

to assess these considerations within should be viewed at a member level. This will

be dependent on the member’s age and their selected retirement age. It is for this

reason that a number of lifestyle options have been made available to members.

11

- Member views on non-financial matters are not taken into account in the selection,

retention and realisation of investments.

- If members wish to, they can opt to choose their own investment options from a wide

range at any time including two other lifestyle strategies. Members are supported by

clear communications in the form of an investment guide regarding the aims of the

default option and the access to alternative funds, albeit the Trustee will not provide

advice to members on their individual choice of investment options.

6.3 Suitability of Default Investment Strategy

Based on its understanding of the Scheme’s membership, the Trustee believes that the

above objectives and policies reflect members’ best interests. The rationale

underpinning this belief is as follows:

- The Trustee believes that most members save into a pension scheme to achieve an

income in retirement. However, the Trustee also believes that members will utilise

the flexibility now available to them at retirement. The targeting of income drawdown

at retirement is aligned with both these beliefs. This does not mean that default

members have to take their benefits in this format at retirement - it merely determines

the investment strategy that will be in place pre-retirement.

- Based on Scheme experience to date, almost all members withdraw tax-free cash

at retirement. The use of the Cash fund within the default option addresses that

requirement.

- Members seeking an adequate income in retirement will likely need to achieve real

investment returns for most of their period as pension savers. The use of a fund with

significant weightings in global equities during the accumulation phase addresses

that requirement.

The Trustee intends to monitor members’ decisions and other inputs from time to time

to ensure that the default option remains suited to their needs. A strategic review will

take place at least triennially, or after significant changes to the Scheme’s demographic,

if sooner.

7. Additional self-select default

In accordance with the Occupational Pension Schemes (Charges and Governance)

Regulations 2015, the Trustee has identified an additional investment option, the CSC

All Shares Adventurous Fund (Active), which should be treated as a ‘default

arrangement’ (as defined by these regulations) in addition to the current default

investment option (as detailed in section 6). This fund has been identified as a ‘default

arrangement’ as member contributions have been automatically directed to replacement

funds without members having instructed the Trustee where their savings and future

contributions are to be invested. Details of the aims, objectives and policies in relation

to this fund are set out in the table below.

12

Fund Trustee’s policies

CSC All Shares

Adventurous

Fund

Trustee’s Aims and Objectives

To provide members with a fund that:

− provides broad exposure to global equity by investing in UK

equity and overseas equity; and

− is actively managed and seeks to outperform its benchmark

return of the relevant UK and overseas indices by 1.5% p.a.

over rolling three year periods.

Types of investment primarily held

This fund invests entirely in equities.

Expected return

The expected return will be in line with that of the fund’s target which

is to outperform its benchmark (38% FTSE All Share Index/62% MSCI

World Index) by 1.5% p.a. over rolling three year periods.

Other policies

Policies relating to risk, realisation of assets and financially material

considerations are consistent with those set out in section 3 of this

Statement.

8. Switching

Members are responsible for reviewing their investment choices in light of their own

circumstances.

Members may redirect future contributions or transfer their accumulated account

between funds at any time prior to setting up their retirement benefits.

There are no administrative charges for switching, but members may incur transaction

costs on selling and buying units.

9. Additional Voluntary Contribution (‘AVC’) arrangements

The Scheme permits members to provide additional benefits for themselves through the

defined contribution investment options available by paying AVCs.

Segregated CSC Section – Final Salary Section

Members have the option of a number of funds with Legal & General Investment

Management (‘LGIM’) and a SEI actively managed fund. Further details of the funds

available are set out in the IPID.

The Equitable Life’s With-Profits Fund was withdrawn as an investment option following

Equitable Life’s closure to new business on 8 December 2000. In March 2002, a bulk

surrender was agreed with Equitable Life on behalf of all members aged under 45

(except for members who explicitly elected to retain their with-profits policies) and

members over age 45 who explicitly elected to surrender. Therefore, some funds remain

13

invested, but no future contributions are directed to the With Profits Fund under normal

circumstances. These contributions are not part of the investment options referred to in

the Scheme’s IPID.

Segregated SMS Section

Members have the option of a number of funds with LGIM. Further details of the funds

available are set out in the IPID.

10. Monitoring the Investment Manager

10.1 The investment managers provide details of performance of the relevant funds in which

the Scheme invests.

10.2 Mercer is retained as investment consultant to assist the Trustee in fulfilling its

responsibility for monitoring the investment managers.

11. Investment Adviser Fee Structures

11.1 A full fee breakdown of Manager and Investment Consultant fee scales can be found in

the Scheme’s IPID.

12. Compliance with this Statement and Review of this Statement

We, the Trustee and Mercer, our consultant who has been appointed by the Trustee,

each have distinct duties that are designed to ensure compliance with this Statement.

These are:

The Trustee will review this Statement at least once every three years, or more

frequently if required, upon a material change to the Scheme or the Company.

Mercer will provide the advice needed to allow us to review and update this

Statement.

As part of the service provided by LGIM and SEI (the “managers”), they meet, when

required, with the Trustee to review their performance, at which time they will also

provide written reports specific to the Scheme’s investments. On an annual basis, each

manager confirms their compliance with the Statement together with an annual

disclosure report on internal controls. Additionally, the managers will supply the Trustee

with a general written report about the overall performance of the underlying funds on a

quarterly basis.

January 2020

14

Signed on behalf of the Trustee of the CSC Computer Sciences Ltd Pension Scheme

Name: Mark Greenhalgh (Chair of Trustees)

Date: 29 January 2020

csc computer sciences ltd pension scheme (“the plan ......registered in england, no 10039449 |...

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