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Statement of Investment Principles

September 2023



1.1 Under the provisions of the Pensions Act 1995 and the Pensions Act 2004 (“the Acts”), trustees are required to prepare a statement of the principles governing investment decisions. This document contains that statement for the Prudential Staff Pension Scheme (“the Scheme”) Defined Benefit Section.

1.2 In preparing this document, the Trustee has consulted the Principal Employer and has sought written advice from the Scheme's Investment Consultant and the Scheme Actuary. It is the Trustee’s intention to review this document annually or sooner following any material change in the asset or liability position of the Scheme.

1.3 This document has been drafted in the light of the Myners' Principles (attached as Appendix A) and specifically Myners' recommendations relating to the content of statements of investment principles.

1.4 The ultimate power and responsibility for deciding investment policy lies with the Trustee. However, the Trustee consults with the Principal Employer on changes in investment policy.

1.5 In preparing this document the Trustee has had regard to the requirements of the Acts concerning diversification and suitability of investments, and the Trustee will consider those requirements on any review of this document or any change in investment policy.

Scheme details

1.6 The Scheme operates for the exclusive purpose of providing retirement benefits and death benefits to eligible participants and beneficiaries. The Defined Benefit section provides benefits linked to salary and length of service.

The Scheme is a registered pension scheme under Finance Act 2004.

Financial Services and Markets Act

1.7 In accordance with the Financial Services and Markets Act 2000, the Trustee sets general investment policy, but delegates the responsibility for selection of specific investments to the appointed Investment Managers and Insurance Company or Companies. The Trustee endeavours to appoint Investment Managers capable of providing the skill and expertise necessary to manage the investments of the Scheme competently.

AVC arrangements

1.8 Members are entitled to pay additional voluntary contributions (“AVCs”) to enhance their benefits at retirement. At retirement, or on earlier death, the accumulated value of a member's AVCs is used to provide additional benefits in accordance with Scheme rules and HMRC requirements.

1.9 Members of the Scheme can choose to make AVCs in to two types of arrangements – either the ‘in-house’ arrangement or to a ‘commercial’ arrangement. The Scheme’s Trust Deed and Rules do not permit certain members to pay more than 15% of their earnings (up to a certain limit) in any tax year to the in-house arrangement. Contributions above any limit that applies would need to be paid to the commercial arrangement.

In-house arrangement

1.10 AVCs are invested with the assets of the DB Section of the Scheme, which are managed by the Trustee of the Scheme. Under the in-house arrangement, the Trustee applies both annual and final bonuses with advice from the scheme actuary to the member’s AVC account. Annual bonuses have usually been set to be similar to short-term investment returns on cash. A notional portfolio is used to set final bonuses with the aim that, over the long term, members making AVCs to the in-house arrangement can benefit from the higher returns that are expected, but not guaranteed, to come from equity investments. To protect members from the volatility of the notional portfolio, the Trustee applies some ‘smoothing’. The principles followed by the Trustee when determining bonuses are reviewed on a regular basis.

1.11 At retirement, the account balance from a member’s AVC account is made available to the member to convert to an annuity. The in-house arrangement allows a member to choose to either buy an annuity from within the Scheme (internal annuity) or through the Open Market. Conversion rates for the internal annuity are set by the Trustee, and the pension is paid from the Scheme alongside their pension from the DB Section of the Scheme.

1.12 Subject to HMRC limits and Scheme limits, the member could also use their AVC account as part of their tax-free cash lump sum at retirement.

1.13 Some members have been awarded benefits similar to those purchased with AVCs as a result of a transfer into the Scheme from another retirement benefit scheme. The arrangements for these money purchase transfers in are substantially the same as described for in house AVCs.

Commercial arrangement

1.14 The member decides how to invest their AVCs in a variety of investment funds through a policy issued by Prudential. The accumulated commercial AVCs are held separately from the Scheme’s main assets and managed by the providers of those funds, rather than by the Trustee of the Scheme. Investment returns depend on the performance of the funds.

1.15 Under the commercial arrangement, a member cannot purchase an internal annuity, but can purchase an annuity through the open market or choose to use their AVC account as part of their tax-free cash lump sum at retirement.

Division of responsibilities


2.1 The Trustee has ultimate responsibility for decision-making on investment matters. The Trustee’s investment responsibilities include:

  • Reviewing the suitability of the investment policy following the results of each actuarial review, and/or asset liability study in consultation with the Investment Consultant and Scheme Actuary
  • Assessing the quality of the performance and processes of the Investment Managers by means of regular, but no less than annual, reviews of the investment results and other information in consultation with the Investment Consultant
  • Using its powers to ensure security, quality, liquidity and profitability of the portfolio as a whole.
  • Strategically allocating the assets and the cash flow of the Scheme between investment mandates and making periodic adjustments to the portfolio allocations
  • Considering potential new asset classes for use within the Scheme
  • Consulting with the Principal Employer when reviewing investment policy issues
  • Appointing, monitoring and dismissing professional advisers
  • Appointing and dismissing Investment Managers
  • Monitoring compliance with the Statement of Investment Principles
  • Reviewing, at least annually, the content of the Statement of Investment Principles and modifying it if deemed appropriate, in consultation with the Principal Employer and with written advice from the Investment Consultant and the Scheme Actuary.
  • Having regard to the need for diversification and suitability of investments.

2.2 The Trustee aims to obtain and consider written advice on investments (including investments held where there is no investment manager with discretion to select securities (e.g. pooled funds where the Investment Manager Agreement (IMA) specifies exact funds, holdings of the Principal Employer’s Group shares etc) on a regular basis, in order to comply with Section 36 of the Pensions Act.

2.3 Decisions affecting the Scheme's investment strategy are taken in consultation with the Principal Employer and with appropriate advice from the Scheme Actuary, Investment Consultant and, where appropriate, the Trustee’s other advisers.

Investment Managers

2.4 Investment Managers’ responsibilities include:

  • Implementing changes in the asset mix and selecting securities within each asset class, but within any guidelines given by the Trustee, in respect of “active” mandates.
  • Closely matching the Scheme’s liability proxy and undertaking other transactions as directed by the Trustee for the Scheme’s “passive” liability matching mandate.
  • Informing the Trustee of any material changes in the internal objectives and guidelines of any pooled funds used by the Scheme and managed by the Investment Manager or an associated company.

2.5 The Investment Managers are remunerated by a combination of ad valorem fees and performance fees as considered appropriate by the Trustee. The overall level of the expected fee, as well as alignment of interest with the Scheme, has been considered when selecting the respective fee structures.


2.6 The Trustee has appointed Custodians for its directly held assets. For pooled funds in which the Trustee invests, custodial duties are undertaken by the appointee of the relevant Investment Manager. The principal responsibilities of the Trustee’s Custodians are:

  • The safekeeping of the assets of the Scheme
  • Processing the settlement of transactions
  • Providing the Trustee with statements of the assets and associated cashflows
  • Processing dividends and tax reclaims in a timely manner
  • Dealing with corporate actions
  • Performance measurement.

2.7 The Custodians are paid through a combination of transaction based fees and ad-valorem fees. This is consistent with market practice.

Investment Consultant

2.8 The role of the Investment Consultant is to give advice to the Trustee in the following areas:

  • The development of a clear investment strategy for the Scheme
  • Any asset-liability modelling process
  • The construction of a strategic asset allocation benchmark given the liabilities of the Scheme and the risk and return objectives of the Trustee
  • The construction of an overall investment management structure that meets the objectives of the Trustee
  • The regular updating of the Statement of Investment Principles
  • The selection and appointment of appropriate investment management organisations
  • The Investment Consultant's current views of the Investment Managers employed by the Scheme
  • Potential new areas or tools of investment
  • Commentary on investment performance and risk taken by the Investment Managers
  • Monitoring and assisting with the implementation activities carried out by the Investment Managers
  • General advice in respect of the Scheme's investment activities.

2.9 Where they have not been otherwise set or agreed, fees will be calculated with reference to the time spent on, the importance, complexity and urgency of, and the value of the knowledge and skills applied in the context of, any particular assignment.

Scheme Actuary

2.10 The Scheme Actuary’s responsibilities, as they relate to investment matters, include:

  • Liaising with the Investment Consultant on the suitability of the Scheme’s investment strategy given the financial characteristics of the Scheme
  • Assessing the solvency position of the Scheme (on various measures) and advising on the appropriate response to any shortfall
  • Performing the triennial (or more frequently as required) valuations and advising on the appropriate contribution levels.

2.11 Where they have not been otherwise set or agreed, fees will be calculated with reference to the time spent on, the importance, complexity and urgency of, and the value of the knowledge and skills applied in the context of, any particular assignment.

2.12 The advisers to the Trustee are listed in Appendix B.

The Scheme’s Investment Objectives

Investment Objectives

3.1 The long term objectives for the Defined Benefit Section of the Scheme that the Trustee’s investment policy aims to deliver are as follows:

 i) To provide a high degree of security so that members’ benefits can be paid in full as and when they fall due.

 ii) In addition, and to the extent that this is not expected to compromise the first objective, to seek sufficient investment returns so as to fund discretionary increases to current and future pensions in payment in line with the Principal Employer’s policy (currently RPI subject to a maximum of 2.5% pa). In seeking this investment return, the Trustee will have regard to the impact of the associated risk and likely sustainability of guaranteed benefits and future prospective discretionary increases for the various generations of Scheme members.

3.2 Individual investment objectives have been set for each of the Investment Managers, consistent with this overall investment objective, as detailed in Appendix C. Each Investment Manager has agreed to manage its portfolio with a view to attaining the particular objective set for it and in accordance with any restrictions on its activities set by the Trustee for that mandate.

Investment Policy

3.3 The Trustee’s Policy is to seek to achieve the objectives by investing in a combination of bonds and other instruments including derivatives, which aim to provide a close link to the liabilities of the Scheme and a portfolio of return-seeking assets, which aim to provide growth above liabilities at an acceptable level of risk.

3.4 Investment in derivative instruments may be made only if they:

 a. contribute to a reduction of risks; or

 b. facilitate efficient portfolio management (including the reduction of cost or the generation of additional capital or income with an acceptable level of risk), and any such investment must be made and managed so as to avoid excessive risk exposure to a single counterparty and to other derivative operations.

3.5 The assets of the Scheme must be properly diversified in such a way as to avoid excessive reliance on any particular asset, issuer or group of undertakings and so as to avoid accumulations of risk in the portfolio as a whole. Investments in assets issued by the same issuer or by issuers belonging to the same group must not expose the Scheme to excessive risk concentration.

3.6 The assets of the Scheme must consist predominantly of investments admitted to trading on regulated markets and investments in assets which are not admitted to trading on such markets must in any event be kept to a prudent level.

3.7 The Trustee must not borrow money or act as guarantor for the purpose of providing liquidity (unless it is temporary).

3.8 The Investment Managers on behalf of the Trustee may borrow money but only on a short-term basis to facilitate the completion of transactions. The Trustee may borrow money on a temporary basis only.


3.9 The Trustee has taken and will continue to take advice from both the Scheme Actuary and the Investment Consultant to ensure the assets held to support the liabilities are appropriate. The Trustee will continue to monitor, and take advice on, the investment strategy on an ongoing basis.


3.10 The Trustee has implemented a process whereby the Scheme’s liability hedging manager will ensure that there is sufficient cash available on a quarterly basis to meet outgoings. The Trustee reviews the effectiveness of this process through the quarterly monitoring reports that it receives. The Trustee’s policy is that there should be sufficient investments in liquid or readily realisable assets to meet unexpected cashflow requirements in the majority of foreseeable circumstances so that, where possible, realisation of assets will not disrupt the Scheme's overall investment policy. This includes the potential need to provide collateral for any swap contracts that the Scheme may hold.

3.11 The Trustee has delegated responsibility for the selection, retention and realisation of investments to the Investment Managers, within certain guidelines and restrictions in accordance with the Investment Policy stated above.

Strategic asset allocation

4.1 The Scheme’s strategic asset allocation is set having made an assessment of all the major asset classes, including alternative asset classes.

4.2 In setting the investment policy, the Trustee has regard to the influence that the policy will have on the Scheme’s solvency position on the various measures monitored by the Trustee.

4.3 The strategic asset allocation of the Scheme is driven by the financial characteristics of the Scheme which, inter alia, include:

  • the duration of the liabilities
  • the sensitivity of the value of the liabilities to future inflation
  • the risk tolerance of the Trustee and Principal Employer
  • the Principal Employer’s policy in relation to discretionary increases to pensions in payment.

4.4 The Trustee’s investment policy is formed at a high level by considering the division between assets that provide a broad economic match to the Scheme’s liabilities (“matching assets”) and those that do not provide such a match, but are expected to produce superior performance to the matching assets over the long term (“growth assets”).

4.5 The overall benchmark and asset ranges specified are designed to ensure that the Scheme’s investments are adequately diversified and suitable for the Scheme given the liability profile. In this regard, the Trustee has consulted with the Principal Employer and taken written advice from the Scheme Actuary and the Investment Consultant.

Rates of return

4.6 In establishing its investment policy, the Trustee has regard to the historical and expected future rates of return earned on the various classes of asset available to the Scheme for investment.

Investment Manager structure

5.1 The Trustee employs a diverse range of Investment Managers with differing investment objectives and investment approaches. The Trustee considers a variety of factors in establishing the Investment Manager structure it pursues, in particular:

  • the expected level of added value (namely, outperformance of the benchmark) of each Investment Manager and of the Investment Manager structure in aggregate
  • the degree to which the Investment Managers’ approaches to investment differ, and therefore the extent to which they can expect to offset one another in periods of poor performance
  • the overall level of fees that are likely to be paid
  • the time and expertise required to monitor the Investment Managers.

5.2 The Investment Manager structure currently employed is comprised of “active” and “passive” mandates

  • passive mandates will provide returns close to broad market indices but may employ active management techniques that seek to add generally modest amounts of additional return above those indices in a risk controlled manner
  • active mandates seek to add meaningful value relative to market indices and will take additional risk to do so.

5.3 The Trustee expects the Investment Managers to achieve their objectives in the majority of periods under consideration. Investment Managers should demonstrate that the skill they each exercise in managing the Scheme’s assets and the process that they each follow is consistent with their respective objectives. The current Investment Manager structure and a summary of the mandates are attached in Appendix C.

Corporate governance and Socially Responsible Investment

6.1 Although the Trustee has delegated responsibility for selection, retention and realisation of investments to the Investment Managers, within certain guidelines and restrictions the Trustee recognises its responsibilities as a shareholder and believes that good corporate governance enhances shareholder value. In exercising its fiduciary duty the Trustee’s focus is explicitly on financially material considerations including where ESG and climate change factors have a financially material impact.

6.2 The Trustee considers a range of sustainable investment factors, such as, but not limited to, those arising from Environmental, Social and Governance (“ESG”) considerations, including climate change, in the context of a broader risk management framework. The degree to which these factors are relevant to any given strategy is a function of time horizon, investment style, philosophy and particular exposures which the Trustee takes into account in the assessment.

6.3 Where relevant, the Trustee may take into account non-financial considerations in designing and implementing the investment strategy, including (but not limited to) the views of members and beneficiaries of the Scheme.

6.4 The Trustee has reviewed in detail and will continue to periodically review the policies operated by each of the Investment Managers in respect of corporate governance issues and in respect of ESG issues to the extent such policies are relevant in respect of each Investment Manager’s mandate. Where an investment manager’s processes are deemed insufficient by the Trustee and the investment manager does not take steps to improve their approach, the investment manager’s position in the portfolio may be reviewed and/or a decision may be taken not to proceed with an investment.

6.5 Having been satisfied as to the policies of each of the Investment Managers on these issues, the policy of the Trustee is that:

  • Corporate governance issues and the exercise of rights attaching to investments, including voting, be delegated to the Investment Managers as an integral part of the investment management function; voting rights will be exercised whenever practicable with the objective of preserving and enhancing shareholder value
  • Whilst noting that there may be limitations for each investment manager and asset strategy, the Trustee expects the Investment Managers to have ESG processes that align with Trustee expectations for the investment characteristics of the strategy.

6.6 The Trustee expects the Investment Managers to report regularly on votes cast and other relevant matters including capital structure of investee companies, actual and potential conflicts, other stakeholders and the ESG impact of underlying holdings, noting in particular those cases where resolutions have not been supported, on other shareholder actions and on any ESG issues arising from the operation of the portfolio.

6.7 When considering its policy in relation to stewardship including engagement and voting, the Trustee expects the Investment Managers to address broad ESG considerations taking into account the nature of the assets held under the relevant investment mandate but has identified climate change and diversity & inclusion as key areas of focus for the Trustee. The Trustee assesses that ESG risks, and in particular climate change, pose a financial risk to the Scheme and that focussing on these issues is ultimately consistent with the Trustee’s fiduciary duties and the financial security of its members.

6.8 Whilst the Trustee’s policy is to delegate a number of stewardship activities to the Investment Managers, the Trustee recognises that the responsibility for these activities remains with the Trustee. The Trustee incorporates an assessment of how well the Investment Managers exercise these responsibilities as part of its overall assessment of their performance.

Investment Manager arrangements

7.1 Alignment between a manager’s management of the Scheme’s assets and the Trustee’s policies and objective are a fundamental part of the appointment process of a new manager. Before investing, the Trustee will seek to understand the manager’s approach to sustainable investment (including engagement). When investing in a pooled investment vehicle, the Trustee will ensure the investment objectives and guidelines of the vehicle are consistent with its own objectives. Where segregated mandates are used, the Trustee will use its discretion, where appropriate, to set explicit guidelines within the Investment Management Agreement to ensure consistency with its own policies.

7.2 To maintain alignment, managers will be provided with the most recent version of the Scheme’s Statement of Investment Principles, on an annual basis and will be required to explicitly confirm that the Scheme’s assets are managed in line with the Trustee’s policies as outlined in that statement.

7.3 Should the Trustee’s monitoring process reveal that a manager’s portfolio is not aligned with the Trustee’s policies, the Trustee will engage with the manager further to encourage alignment. This monitoring process includes specific consideration of the sustainable investment/ESG characteristic of the portfolio and managers’ engagement activities. If, following engagement, it is the view of the Trustee that the degree of alignment remains unsatisfactory, the manager will be terminated and replaced.

7.4 For most of the Scheme’s investments, the Trustee expects the investment managers to invest with a medium to long time horizon, and to use their engagement activity to drive improved performance over these periods. The Trustee invests in certain strategies where such engagement is not deemed appropriate, due to the nature of the strategy and/or the investment time horizon underlying decision making. The appropriateness of the Scheme’s allocation to such mandates will be determined in the context of the Scheme’s overall objectives.

7.5 The Trustee appoints its investment managers with an expectation of a long-term partnership, which encourages active ownership of the Scheme’s assets. When assessing a manager’s performance, the focus is on longer-term outcomes, and the Trustee would not expect to terminate a manager’s appointment based purely on short term performance. However, a manager’s appointment could be terminated within a shorter timeframe due to other factors such as a significant change in business structure or the investment team.

7.6 Managers are paid an ad valorem fee, in line with normal market practice, for a given scope of services which includes consideration of long-term factors and engagement.

7.7 Where available the Trustee will review the costs incurred in managing the Scheme’s assets annually, which includes the costs associated with portfolio turnover. In assessing the appropriateness of the portfolio turnover costs at an individual manager level, where relevant the Trustee will have regard to the actual portfolio turnover and how this compares with the expected turnover range for that mandate.

Monitoring Investment Managers


8.1 The Trustee reviews the Scheme’s Investment Managers from time to time, considering the results of its monitoring of performance and process and the Investment Manager's compliance with the requirements of the Pensions Act concerning diversification and suitability.

8.2 The independent Performance Measurer provides quarterly updates of performance to assist in the reviews of the Scheme's and Investment Managers' performance against the benchmarks.

8.3 The Trustee and its agents hold meetings with each Investment Manager to satisfy themselves that the Manager continues to carry out its work competently and has the appropriate knowledge and experience to manage the investments of the Scheme.

Selection and de-selection criteria

8.4 The Trustee has identified the criteria by which Investment Managers may be selected or deselected. These criteria include:

  • Past Performance
  • Quality of the Investment Process
  • Role Suitability
    • level of fees
    • reputation of the Manager
    • familiarity with the mandate
    • internal objectives and restrictions of any pooled funds
  • Service
    • reporting
    • administration
  • Team
    • the individual fund managers working for the Scheme.

8.5 These criteria are not exhaustive and the Trustee retains discretion to select and de-select Investment Managers for any reason it deems appropriate.

Risk Management


9.1 The Trustee recognises a number of risks involved in the investment of the assets of the Scheme:

a. Solvency risk and mismatching risk - Are measured through a qualitative and quantitative assessment of the expected development of the liabilities relative to the current and alternative investment policies. They are addressed through the asset allocation strategy and through actuarial valuations and asset liability models.

b. Manager risk - Is measured by the expected deviation of the Investment Manager’s risk and return relative to the Investment Policy. It is addressed through the diversification of the Scheme’s assets across Investment Managers, the management of performance objectives set out in Appendix C, the ongoing monitoring of the Investment Managers through independent advice and the negotiation of suitable Investment Management Agreements. In assessing the overall level of investment manager risk, the Trustee is also mindful of the concentration of manager risk within the Scheme, which is monitored regularly and managed using the approaches set out above.

c. Liquidity risk - Is measured by the level of cashflow required by the Scheme over a specified period. To address this, the Trustee has implemented a process whereby the Scheme’s liability hedging manager will ensure that there is sufficient cash available on a quarterly basis to meet outgoings. The Trustee reviews the implementation of this process through the quarterly monitoring reports that it receives.

d. Political risk - Is measured by the level of concentration of any one market leading to the risk of an adverse influence on investment values arising from political intervention. It is managed by regular reviews of the actual investments relative to policy and through regular assessment of the levels of diversification within the existing policy and by the diversification of the assets across many countries.

e. Principal Employer risk - Is measured by the level of ability and willingness of the Principal Employer to support the continuation of the Scheme and to make good any current or future deficit. It is managed by assessing the interaction between the Scheme and the Principal Employer’s business, as measured by a number of factors, including the creditworthiness of the sponsor and the size of the pension liability relative to the financial strength of the Principal Employer.

f. Inappropriate investments - Addressed through constraints on the use of derivatives, gearing, specific asset limits and other restrictions.

g. Currency risk - Is measured by the level of overseas investment and the translation effect of currencies leading to the risk of an adverse influence on investment values. It is managed by monitoring the extent of such overseas assets and hedging foreign currency exposure as appropriate.

h. Custodian risk - Is measured by assessing the credit-worthiness of the custodian bank and the ability of the organisation to settle trades on time and provide secure safekeeping of the assets under custody. It is managed by monitoring the custodian’s activities and discussing the performance of the custodian with the investment managers when appropriate. For pooled assets, the investment managers are expected to ensure that the custody arrangements comply with their internal control procedures.

i. Counterparty risk – Is measured by reference to the credit quality of counterparties and the issuers of the assets owned by the Scheme. It is managed through the Investment Manager guidelines with respect to cash management and derivatives usage. The Scheme’s assets must be properly diversified in such a way as to avoid excessive reliance on a particular asset, issuer or group of undertakings and so as to avoid accumulations of risk in the portfolio as a whole. Investments in assets issued by the same issuer or by issuers belonging to the same group must not expose the Scheme to excessive risk concentration.

j. Leverage risk – the risk that changes to market conditions could lead to the Scheme needing to post additional collateral at short notice in order to maintain the Scheme’s liability hedging arrangements. This is measured by reference to the level of collateral available in the Scheme’s LDI portfolio to support the hedge. It is managed through the guidelines provided to the Scheme’s Investment Manager and the monitoring of the LDI portfolio undertaken by the Trustee.

k. Longevity risk – Is measured by reference to the expected impact on Scheme funding of members living longer than expected. It is managed through allowing prudently for future changes in mortality in the Scheme’s funding basis and a longevity hedge contract with Pacific Life Re using a Guernsey-based captive insurer, Scafell Insurance IC Ltd.

l. Environmental, Social and Governance (ESG) risk – is measured by reference to the Trustee’s assessment of the policies operated by the Scheme’s investment managers and the expected impact of portfolio holdings. It is managed by the Trustee engaging with the Scheme’s managers where appropriate to try to ensure that their policies are in line with the Trustee’s approach.

9.2 These measures do not render the investment policy free of risk. Rather, the measures endeavour to balance the need for risk management and the need to allow the Investment Managers sufficient flexibility to manage the assets in such a way as to achieve the required performance target.

9.3 The Trustee continues to monitor these risks, with the assistance of the Investment Consultant and any other risks that may arise and may add to this list any new significant risk categories.

Myners’ Principles

In 2000, the Government commissioned Paul Myners to investigate the factors which were distorting the investment decision-making of UK institutions. As a result of this review, it was recommended that UK pension funds adopt investment principles (called the Myners Principles) as best practice. These investment principles have since been amended and are detailed as follows:


Best practice guidance

The high level principles will be the accepted code of best practice throughout the industry in investment decision-making and governance. It is expected that trust boards will report against these on a voluntary ‘comply or explain’ basis.

Best practice guidance is intended to help trustees to apply the principles effectively. Trustees are not expected to implement every element of best practice. Rather trustees may use best practice examples where appropriate to help demonstrate whether compliance has been achieved.

Principle 1: Effective decision-making

  • Trustees should ensure that decisions are taken by persons or organisations with the skills, knowledge, advice and resources necessary to take them effectively and monitor their implementation.

  • Trustees should have sufficient expertise to be able to evaluate and challenge the advice they receive, and manage conflicts of interest.

  • The board has appropriate skills for, and is run in a way that facilitates, effective decision-making.

  • There are sufficient internal resources and access to external resources for trustees and Boards to make effective decisions.

  • It is good practice to have an investment subcommittee, to provide the appropriate focus and skills on investment decision-making.

  • There is an investment business plan and progress is regularly evaluated.

  • Consider remuneration of trustees.

  • Pay particular attention to managing and contracting with external advisers (including advice on strategic asset allocation, investment management and actuarial issues).

Principle 2: Clear objectives

  • Trustees should set out an overall investment objective(s) for the fund that takes account of the scheme’s liabilities, the strength of the sponsor covenant and the attitude to risk of both the trustees and the sponsor, and clearly communicate these to advisers and investment managers.

  • Benchmarks and objectives are in place for the funding and investment of the scheme.

  • Fund managers have clear written mandates covering scheme expectations, which include clear time horizons for performance measurement and evaluation.

  • Trustees consider as appropriate, given the size of fund, a range of asset classes, active or passive management styles and the impact of investment management costs when formulating objectives and mandates.

  • Consider the strength of the sponsor covenant.

Principle 3: Risk and liabilities

  • In setting and reviewing their investment strategy, trustees should take account of the form and structure of liabilities.

These include the strength of the sponsor covenant, the risk of sponsor default and longevity risk.

  • Trustees have a clear policy on willingness to accept underperformance due to market conditions.

  • Trustees take into account the risks associated with their liabilities valuation and management.

  • Trustees analyse factors affecting long-term performance and receive advice on how these impact on the scheme and its liabilities.

  • Trustees have a legal requirement to establish and operate internal controls.

  • Trustees consider whether the investment strategy is consistent with the scheme sponsor’s objectives and ability to pay.

Principle 4: Performance assessment

  • Trustees should arrange for the formal measurement of the performance of the investments, investment managers and advisers.

  • Trustees should also periodically make a formal policy assessment of their own effectiveness as a decision-making body and report on this to scheme members.

  • There is a formal policy and process for assessing individual performance of trustees and managers.

  • Trustees can demonstrate an effective contribution and commitment to the role (for example measured by participation at meetings).

  • The chairman addresses the results of the performance evaluation.

  • State how performance evaluations have been conducted.

  • When selecting external advisers take into account relevant factors, including past performance and price.

Principle 5: Responsible ownership

  • Trustees should adopt, or ensure their investment managers adopt, the Institutional Shareholders’ Committee Statement of Principles on the responsibilities of shareholders and agents.

  • A statement of the scheme’s policy on responsible ownership should be included in the Statement of Investment Principles.

Trustees should report periodically to members on the discharge of such responsibilities.

  • Policies regarding responsible ownership are disclosed to scheme members in the annual report and accounts or in the Statement of Investment Principles.

  • Trustees consider the potential for engagement to add value when formulating investment strategy and selecting investment managers.

  • Trustees ensure that investment managers have an explicit strategy, setting out the circumstances in which they will intervene in a company.

  • Trustees ensure that investment consultants adopt the ISC’s Statement of Practice relating to consultants.

Principle 6: Transparency and reporting

  • Trustees should act in a transparent manner, communicating with stakeholders on issues relating to their management of investment, its governance and risks, including performance against stated objectives.

Trustees should provide regular communication to members in the form they consider most appropriate.

  • Reporting ensures that:

    – the scheme operates transparently and enhances accountability to scheme members; and

  • best practice provides a basis for the continuing improvement of governance standards.

Current advisers and Investment Managers (September 2023)

Scheme Actuary:

Neil Wharmby FIA (Towers Watson Limited)

Investment Consultant:

Towers Watson Limited

Investment Managers:

Companies Financing Fund

M&G Investment Management Ltd

Bond managers

M&G Investment Management Ltd

Structured Credit

Orchard Global Asset Management (S) Pte Ltd

Real Estate Debt

Greenoak Europe Secured Lending GP S.À.R.L

Secured Income Assets

M&G Investment Management Ltd

BlackRock Advisors UK Limited

Greencoat Capital LLP

Distressed credit

M&G Investment Management Ltd

Cash manager

BlackRock Advisors UK Limited

Longevity hedge

Scafell Insurance IC Ltd (cell provider/manager: Artex Risk Solutions (Guernsey) Ltd) and Pacific Life Re

Performance Measurer:

JP Morgan


Segregated funds:

Pooled funds:

JP Morgan

Investment Manager appointed


XPS Pensions Group PLC


Mayer Brown International LLP



Principal Employer:

The Prudential Assurance Company Limited


Prudential Staff Pensions Limited

Benchmark Investment Manager structure (September 2023)


The managers should achieve the principal objective in the majority of periods under consideration. It is not expected that the managers (other than the passive manager) will achieve this target in every period. However, the managers should demonstrate that the skill that they exercise on the portfolio is consistent with this target given the levels of risk adopted.

Performance and risk targets are shown below.

Investment Managers




Manager performance target (net of fees unless stated otherwise)

% of assets benchmark

Matching assets

M&G Investment Management Ltd

UK corporate bonds

100% iBoxx Sterling Non-gilt Index

+0.75% pa over rolling three-year periods (gross)


M&G Investment Management Ltd

Buy & Maintain corporate bonds


To capture the “credit risk premium” available in credit markets by investing in a diversified portfolio of permitted bonds

M&G Investment Management Ltd

Senior ABS Fund

3-month GBP SONIA

To outperform 3-month GBP SONIA over any three year period

M&G Investment Management Ltd

High Grade ABS Fund

3-month GBP SONIA

3-month GBP SONIA +1-3%

M&G Investment Management Ltd

Active index-linked gilts


+ 0.75% pa over rolling three- year periods (gross)


M&G Investment Management Ltd

Active fixed gilts


+ 0.5% pa over rolling three-year periods (gross)

M&G Investment Management Ltd

Liability matching (bonds and swaps)





3-month GBP SONIA

To maximize current income consistent with preservation of principal and liquidity

Scafell Insurance IC Ltd and Pacific Life Re

Longevity hedge contracts



M&G Investment Management Ltd

Secured Income Assets


Long Dated Assets Portfolio: To achieve a long term and predictable level of inflation-linked income of 2.25% in excess of gilts

Secured Property Income Fund: To achieve a return of RPI+3% pa over medium to long term

Secured Income Lease Fund: To achieve a return of RPI+1% pa over medium to long term


BlackRock Advisors Limited

Secured Income Assets


To achieve a net total return of 10 year Gilts + 2-3% annualised through an investment cycle

Greencost Capital LLP

Secured Income Assets


To achieve a total return of 6-7.5% pa on an unlevered basis gross of fees

Growth assets - Active mandates

M&G Investment Management Ltd

Multi-strategy credit

6-month GBP SONIA

1-month GBP SONIA +3-5% pa over a cycle (gross)


M&G Investment Management Ltd

Distressed credit

6-month GBP SONIA

IRR of 15% pa (gross)


Orchard Global Asset Management (S) Pte Ltd

Structured credit

180-Day SOFR

IRR of 10% pa


Greenoak Europe Secured Lending GP S.À.R.L

Real estate debt

3-month Euribor

+8% pa


Current benchmark allocation (September 2023)

Asset allocation

Based on advice from the Scheme Actuary and the Investment Consultant, the Trustee considers that the following distribution of assets represents a suitable overall asset allocation benchmark for the Defined Benefit section of the Scheme.


Growth assets


Distressed credit

Illiquid credit

Multi-strategy credit

Real estate debt





Matching assets*




*matching assets includes fixed interest gilts, index-linked gilts, corporate bonds, secure income assets, cash and swaps.

The Trustee has agreed to a policy whereby 100% of the Scheme’s guaranteed benefit liability cashflows and the affordable level of discretionary increases will be matched with assets expected to generate an equivalent level of income with a high degree of certainty.

The matching assets are managed such that the combination of physical bonds, secure income assets, cash and swaps has economic characteristics that are broadly related to the benefits payable under the Rules of the Scheme.