UTC (UK) Pension Scheme - Annual Report and Financial Statements (Including Chair's Statement)
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Registrar of Occupational and Personal Pension Schemes Registration Number 12001105
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
CONTENTS
2 to 3
Trustee and advisers
4 to 14
report
15 to 27
Statement regarding DC governance
28
Actuarial certificate
29 to 31
Independent a Pension Scheme
report to the Trustee of United Technologies Corporation (UK)
32
Fund account
33
Statement of net assets available for benefits
34 to 48
Notes to the financial statements
49
Independent a
statement about contributions to the Trustee of United
Technologies Corporation (UK) Pension Scheme
50
Summary of contributions
51 to 52
information
APPENDIX I
The UTC Common Investment Fund Report and Financial Statements
APPENDIX II
United Technologies Corporation (UK) Pension Scheme - Implementation Statement
APPENDIX III
United Technologies Corporation (UK) Pension Scheme - Statement of Investment Principles
1
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
TRUSTEE AND ADVISERS
Trustee
UTC Pension Trust Limited The directors of the Trustee company are as follows: G P Smart (Chairman) E M Egan * (Appointed with effect from 30 September 2024) G A Hawes I K Hayward * (Resigned with effect from 19 August 2024)
K E Levine A R Smith * J A Sullivan
* Member nominated directors
Secretary to the Trustee Directors
J C Beake
Principal employer
Ceesail Limited a wholly owned subsidiary of RTX Corporation (previously known as Raytheon Technologies Corporation)
Participating employers
Crompton Technology Group Limited (Until 30 September 2024) Goodrich Actuation Systems Limited (Until 30 September 2024) Goodrich Control Systems HS Marston Aerospace Limited Rosemount Aerospace Limited (Until 30 September 2024)
Actuary
O McCulloch FIA, Barnett Waddingham LLP
Scheme administrator
Gallagher Consultants (Administration & Investment) Limited (Formerly called Buck Consultants (Administration & Investment) Limited) Aptia UK Limited (in respect of the Goodrich section from 1 January 2024 until May 2024. Prior to 1 January 2024, the administrator was Mercer Limited)
Independent auditors
PricewaterhouseCoopers LLP
Bankers
Lloyds Bank Plc
Covenant advisers
Cardano Advisory Limited
Legal advisers
Shoosmiths LLP
Trustee Committees
Benefits Sub-Committee Goodrich Section Administration Transfer Sub-Committee Guaranteed Minimum Pension (GMP) Working Party
Investment custodians
Bank of New York Mellon
2
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
TRUSTEE AND ADVISERS
Investment adviser
Barnett Waddingham LLP Investment adviser to The UTC Common Investment Fund
Investment managers
UTC Pension Trust Limited Administrator to The UTC Common Investment Fund Aviva Investors Jersey Unit Trusts Management Limited BlackRock Investment Management (UK) Limited Insight Investment Management Legal & General Assurance (Pensions Management) Limited M & G Investment Management Limited (Until June 2024) Phoenix Life Limited Ruffer LLP Aviva Life & Pensions UK Limited Legal & General Assurance (Pensions Management) Limited Phoenix Life Limited Prudential Assurance Company Limited Scottish Widows Schroder Personal Wealth Limited Standard Life Assurance Limited
AVC providers
3
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
Introduction
The Trustee (UTC Pension Trust Limited) is pleased to present its report on the United Technologies Corporation (UK) Pension Scheme ("the Scheme") for the year ended 31 December 2024.
The Scheme was established on 2 January 2009 as a vehicle for consolidating a number of legacy pension arrangements which had existed through various UK based companies which are now within the RTX Corporation (previously known as Raytheon Technologies Corporation) group, and formerly within the United Technologies Corporation group. In accordance with HMRC requirements, the Scheme is registered under Chapter 2, Part 4 of the Finance Act 2004. As a consequence, any employee and employer contributions are normally eligible for tax relief and income and capital gains earned by the Scheme receive preferential tax treatment.
Closure of the Scheme to the future accrual of benefits
The Scheme is an occupational defined benefit pension scheme which is closed to new members and has been closed to the future accrual of benefits since 31 March 2020.
Transition from United Technologies Corporation to RTX Corporation
On 3 April 2020, United Technologies Corporation separated its overall activities into three separate businesses and on the same date merged with Raytheon Company to form Raytheon Technologies Corporation (now known as RTX Corporation). As a consequence of the above reorganisation, the Trustee negotiated a revised parent guarantee with Raytheon Technologies Corporation (now RTX) which was executed on 31 March 2020. This has been further updated by Deeds dated 1 February 2024 and 30 September 2024 between the Trustee and RTX.
Payments Deed
On 31 March 2020, a Payments Deed was executed setting out the contributions required to be paid by RTX Corporation to the Scheme. This Payments Deed was updated on 15 December 2022 following finalisation of the actuarial valuation at 31 December 2021 and has been further updated on 30 August 2023 by the .
Rule changes
There were three rule changes in the year which related to late retirement and permitted lump sum options.
Administration
In the previous year, the Trustee had taken the decision to consolidate the administration of all sections of the Scheme, and from June 2024, Gallagher Consultants (Administration & Investment) Limited have been the sole Administrator.
Trustee
The Trustee of the Scheme, appointed by the Principal Employer, is a company called UTC Pension Trust Limited . The directors of the Trustee have essentially the same responsibilities as if they were individual trustees.
4
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
The Trustee has responsibility for setting the strategy and for managing the Scheme and the directors usually meet at least four times a year for this purpose. Further or fewer meetings may be scheduled depending on matters requiring consideration by the Trustee during the year. All occupational pension schemes must implement arrangements that provide for at least one-third of the total number of directors of the Trustee company to be member-nominated. The arrangements for the nomination and selection must be proportionate, fair and transparent. The Articles of Association of the Trustee contain provisions for the appointment and removal of Trustee company directors and the board ordinarily comprises of six directors. Four of these individuals are appointed by Ceesail Limited, the Principal employer of the Scheme. The remaining two positions are filled by member nominated directors who are appointed in accordance with the nomination and selection procedures applicable under Section 242 of the Pensions Act 2004. A list of the directors is shown on page 2 of this report.
Trustee fees are shown in note 7 to the financial statements.
T
Membership
Changes in membership of the Scheme during the year were as follows:
Deferred Pensioners Pensioners
Dependants/ beneficiaries
Total
Membership as at 31 December 2023
3,575
4,283
808
8,666
Prior year adjustment
(11)
3
-
(8)
Adjusted membership as at 1 January 2024
3,564
4,286
808
8,658
Members retiring Death in deferment
(158)
158
- - - -
-
(18)
- -
(18)
Members leaving with refund/transfer out
(4)
(4)
Trivial commutations
(10)
(2)
(12)
Pensioners who died in the year New spouse and dependent pensions Dependent pensions ceasing in the year Data correction*
- -
(125)
(31) 100
(156)
-
100
1
17
8
26
Membership as at 31 December 2024
3,375
4,334
885
8,594
*During the process of consolidating the Scheme administration referred to above, a number of inaccuracies were discovered within the membership records which have been corrected.
5
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
Prior year adjustments primarily refer to members who have leave dates in the previous accounting year who are processed after the year end. Typically, this is leavers in December.
The above include 3 (2023: 6) members for whom the Scheme is in receipt of annuity insurance payments.
Transfer values
Cash equivalents paid during the year with respect to transfers have been calculated and verified in the manner prescribed by the Pensions Schemes Act 1993 and do not include any allowance for discretionary benefits.
Pension increases
Increases to pensions in payment in the period are dependent upon the rules of their legacy pension arrangement and when the benefits were accrued and the minimum and maximum rates of increase for each section are set out in the table below. Deferred pensions are increased in accordance with statutory requirements. None of the increases were discretionary.
Minimum level of increase
Maximum level of increase
Average level of increase
Section
Claverham
2.5%
5.0%
4.3%
Goodrich
3.0%
8.5%
4.8%
Haskel
2.5%
5.0%
4.0%
HMD
2.5%
5.0%
2.8%
HSIC
2.5%
5.0%
5.0%
H S Marston [IMI]
2.5%
5.0%
4.2%
H S Marston [Facsimile]
2.5%
5.0%
3.1%
Kidde
2.5%
5.0%
4.2%
Linde
3.0%
5.0%
4.2%
Otis
2.5%
5.0%
2.4%
Page
2.5%
5.0%
3.3%
Sutrak
2.5%
5.0%
4.0%
Member pensions comprise a number of elements. The minimum and maximum levels of pension increases relate to elements of pensions, not necessarily the entire pension in payment.
Deferred pensions are increased in line with statutory requirements and/or the rules applicable to members depending upon the section of the Scheme to which they relate.
6
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
Financial development of the Scheme
The financial statements have been prepared and audited in compliance with regulations made under section 41 (1) and (6) of the Pensions Act 1995.
Significant developments affecting the financial position of the Scheme during the year include:
The overall value decreased by £140.14m from £1,582.28m at 31 December 2023 to £1,442.14m at 31 December 2024, comprising:
o Negative return on investments £64.57m. o Reduction from dealing with members £75.57m.
Report on actuarial liabilities
promised retirement benefits.
Under section 222 of the Pensions Act 2004, every scheme is subject to the Statutory Funding Objective, which is to have sufficient and appropriate assets to cover its technical provisions, which represent the present value of benefits to which members are entitled based on pensionable service to the valuation date. This is assessed at least every three years using assumptions agreed between the Trustee and the employers and set out in the Statement of Funding Principles, a copy of which is available to members on request.
The latest valuation as at 31 December 2021 was prepared on a market related basis and was signed on 31 January 2023.
A summary of the funding position, in accordance with the Statutory Funding Objective, at the valuation date, was as follows:
Value of assets available to meet technical provisions
£2,535m £2,288m
Value of technical provisions
Past service surplus
£247m
Funding ratio
111%
At 31 December 2023, the Scheme Actuary estimated that the funding position was as follows;
Value of assets available to meet technical provisions
£1,562m £1,459m
Value of technical provisions
Past service surplus
£103m
Funding ratio
107%
Within the actuarial valuation as at 31 December 2021, Asset Backed Funding arrangements were valued at £376.8m. This had reduced to £220.0m as at 31 December 2023 following an assessment of the probability of the Trigger-off mechanism being activated over the period to June 2036. On a basis consistent with that adopted for the latest actuarial valuation, the funding ratio at 31 December 2023 would be 114%.
The next actuarial valuation is due as at 31 December 2024 and this is currently in progress. Until this valuation is concluded, no further data is available on the funding position at 31 December 2024.
The actuarial method used in the calculation of the technical provisions is the Projected Unit Method. The value of technical provisions is based on Pensionable Service to the valuation date and assumptions about various factors that will influence the Scheme in the future. The following significant actuarial assumptions have been used in the calculations:
7
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
Discount interest rate: Determined by taking into account market indicators of the returns available at the date of the valuation and the long-term strategic allocation of assets agreed by the Trustee after taking professional advice. The return on Government bonds will be taken as a suitable market index yield. expected to outperform Government bonds over the long term, an allowance will be made for this in the discount rate. The allowance is determined by the Trustee based on information provided by its professional advisers. The initial discount rate is the Bank of England gilt curve plus decreasing margin of 1.55% pa decreasing linearly to 0.70% pa in 2036 and thereafter remaining at 0.70% pa. Future Retail Price inflation: By looking at the cost of investing in Government bonds with payments linked to inflation compared to the cost of investing in Government bonds not linked to inflation, it is possible to arrive at a figure for the average market view of future price inflation. This will then be compared to the latest Treasury targets for inflation in the UK, when deriving the assumption to use. A deduction may be made for the inflation risk premium implicit within Government bonds. Future Consumer Price inflation: The Consumer Price Index (CPI) assumption will be based on the Retail Price Index (RPI) assumption less a deduction of 1.0% until 2030 to reflect the expected difference between RPI and CPI inflation over that period.
Pension increases: Derived from the term dependent rates for future retail prices and consumer price inflation allowing for the caps and floors on pension increases according to the provisions in the
Mortality: The rates of mortality assumed will reflect the latest reports published by the Continuous Mortality Investigation Bureau most relevant to the membership of the Scheme, with allowance for expected future improvements in longevity. This assumption may be adjusted on the advice of the Scheme Actuary or in the light of evidence relating to the actual mortality experience of the Scheme, the industry in which the members work, or the distribution of pension payment amounts.
For the period pre and post retirement, standard tables S3PMA with a scaling factor of 95% for males and S3PFA with a scaling factor of 100% for females was used.
RTX Corporation and the participating employers are required to pay or procure the payment of contributions to the Scheme, or to make such other payments as are from time to time required, by the most recent Schedule of Contributions and Payments Deed as amended from time to time.
As shown above, the actuarial valuation at 31 December 2021 revealed a funding surplus of £247m. Consequently, no deficit reducing contributions were payable for the year to 31 December 2024.
Under the Payments Deed 2023, which became effective from 30 August 2023, unless the Scheme funding level at 31 August (as estimated by the Scheme Actuary) is equal to or more than 110%, the Employers are required to pay contributions towards the Scheme expenses. In the year to 31 December 2024, this resulted in no such contributions being receivable because the funding level was greater than 110%. Employer contributions are also required under the Payments Deed 2023 to cover the cost of the risk and scheme-based Pension Protection Fund Levy payments where the Scheme funding level at 31 August (as estimated by the Scheme Actuary) is below 110%. Where the funding level is equal to or more than 110%, the Employers are required to pay contributions equal to the excess over £600,000 of the cost of the PPF Levy. In the year ended 31 December 2024, no such contributions were payable because the funding level was greater than 110% and the PPF Levy costs were below £600,000.
8
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
Contributions in respect of benefit augmentations requested by an employer and approved by the Trustee remain payable. No such contributions were requested in 2024.
Equalisation of Guaranteed Minimum Pension (GMP) liabilities
In October 2018, the High Court determined that benefits provided to members who had contracted out of the state second pension must be recalculated to reflect the equalisation of state pension ages between May 1990 and April 1997 between men and women. In November 2020, a further ruling by the High Court determined that transfers out of a scheme in respect of members who had contracted out of the state second pension must also be recalculated to reflect the equalisation of state pension ages between May 1990 and April 1997 between men and women. The Trustee is continuing to review, with its advisers, the implications of this ruling on the Scheme. As soon as this review is finalised and any liability quantified, a communication will be issued to affected members.
Virgin Media case
In June 2023, the High Court handed down a decision in the Virgin Media Ltd versus NTL Pension Trustees II Ltd case, which considered the implications of section 37 of the Pension Schemes Act 1993, which required that the rules of a salary-related contracted-out pension scheme cannot be altered, in relation to post April 1997 service, unless the actuary confirmed that the scheme would continue to satisfy the statutory standards. The High Court found that, where the required actuarial confirmation was not supplied, the effect of section 37 was to render the relevant amendment to any contracted-out right automatically void. It also held that references in the legislation included both past and future service rights and that the requirement for actuarial confirmation applied to all amendments to the rules of a contracted-out scheme. This decision was appealed to the Court of Appeal, and, in July 2024, the Court of Appeal upheld the decision of the High Court. The Trustee is monitoring the position and will consider the possible implications, if any, for the Scheme of the above with its advisers and what steps, if any, it wishes to take. It is not practicable, at present, to estimate the financial effect on the Scheme, if any, of the uncertainties in relation to the amount or timing of any outflow of resources, or the possibility of reimbursement of resources. In June 2025, the Government announced that they will introduce legislation to give affected pension schemes the ability to retrospectively obtain written actuarial confirmation that historic benefit changes met the necessary standards. The Government will provide further details on this in due course.
Investments
The Trustee has produced a Statement of Investment Principles dated 22 August 2023, as required by Section 35 of the Pensions Act 1995 and a copy is appended to this annual report and financial statements.
All Scheme investments are held within The CIF except for Asset Backed Funding arrangements, Insurance policies relating to Sutrak section members as detailed below and Additional AVCs . The day to day management and the safe custody of the Scheme's investments has been delegated by the Trustee to UTC Pension Trust Limited, 3 of this report. The CIF Administrator oversees the CIF on behalf of participating pension plans of RTX Corporation in the United Kingdom. The Statement of Investment Principles agreed by the Trustee of the Scheme determines the parameters within which the Administrator of the CIF must act in respect of the Scheme. n Investment Implementation Policy. The latest Investment Implementation Policy agreed between the Scheme and the CIF Administrator is dated 13 November 2024 and a copy is available on request.
9
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
In the event that more than one pension scheme participates from time to time in the CIF, the Trustee holds separately identifiable assets within the CIF rather than a single holding representing the total value of the combined asset classes. This gives the Scheme flexibility in the selection of asset classes.
The CIF report and financial statements for the year ended 31 December 2024 are appended to this annual report and financial statements.
Throughout 2024 and as at 31 December 2024 the Scheme was the only current participating pension scheme within the CIF.
The investment managers are remunerated through unit pricing or on an invoice basis, based on the value of investments under their management. Where unit pricing results in charges that are greater than amounts agreed between the Scheme and the manager, rebates are received as cash or additional unit holdings. Investment manager fees are reviewed on a periodic basis by the CIF Administrator. In June 2016, the Scheme entered into Asset Backed Funding (ABF) arrangements which involved the investment, through two Special Purpose Vehicles (SPV), in two unsecured, interest-bearing loan notes with an aggregate value of £320m. The ABF/SPV arrangements are held directly by the Scheme and are, therefore, not held or managed within the CIF and are not included in the benchmark asset allocations. The ABF/SPV arrangements were designed with - direct cash flows to the Scheme in certain circumstances. The Trigger-off mechanism is activated when the funding level of the Scheme is equal to or exceeds 95% on an actuarial buy-out basis. The valuation of the ABF/SPV arrangements recognises the expected economic benefit the Scheme derives from the related cash flows. The cash flows largely reflect the profile of payments associated with the loan notes, namely the annual coupon/interest under the loan notes and the bullet (re)payment of £320m at the end of the arrangements in June 2036. The valuation of the ABF/SPV arrangements is dependent upon the probability of the Trigger-off mechanism being activated/deactivated over the period to June 2036. The fair value of the arrangements as at 31 December 2024 amounted to £206.6m. Subsequent to the year end, the Actuary advised that the estimated funding level at 31 December 2024 had exceeded 95%. All the parties to the arrangements agreed that the income and cash flows due to the Scheme in May 2025 would to be paid in full and that the terms of the arrangements would be re-reviewed in detail during 2025.
former defined contribution investments in respect of the Sutrak section are held and managed
by Phoenix Life Limited outside the CIF.
AVC arrangements are managed by the providers shown on page 3 of this report outside the CIF.
investments and considers them to be appropriate relative to the reasons for holding each class of investments. Further details of investments are set out in the notes to the financial statements and in the CIF report and financial statements.
Significant movements of assets between managers and strategies during the year were as follows;
£11.0m was transferred from BlackRock Diversified Growth Fund to BlackRock Secure Income Fund in satisfaction of the final call on the Secure Income Fund.
The remaining balance of the M&G Property Fund (£7.0m) was surrendered in June 2024 with the proceeds being retained for cashflow purposes.
Amounts of £21.0m and £17.0m respectively were transferred from Insight Buy & Maintain portfolio and Legal & General Regional Equity Fund to Insight LDI portfolio as a rebalancing exercise.
10
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
Regular, quarterly distributions from investment managers amounting to £33.4m were received in the year from Insight (£21.7m), Legal & General Secure Income Fund (£4.8m), Aviva Secure Income Fund (£2.8m), BlackRock Secure Income Fund (£3.9m) and M&G Property Fund (£0.2m). These monies were required and retained for cashflow purposes.
The Scheme's investments are made in accordance with The Occupational Pension Schemes (Investment) Regulations 2005.
Custodians
The CIF Administrator is responsible for appointing and replacing custodians. Bank of New York Mellon has been the overall custodian since November 2009.
The Trustee is satisfied that the CIF has controls in place to ensure that the investment management and the custody are adequately controlled.
Investment performance
The returns in respect of the Scheme assets held within the CIF have been as follows:
Year to 31 December 2024 - 5.10% decrease. 3 years to 31 December 2024 (annualised) - 13.63% decrease. 5 years to 31 December 2024 (annualised) - 5.35% decrease.
The Asset Backed Funding arrangements decreased in value by 6.09% from £220.0m to £206.6m during the year.
Market volatility
As noted in this report, the and segregated investment in bonds values in order
There are currently no concerns regarding the Scheme funding level, its ability to meet the payment of benefits to members, or its ability to continue as a going concern.
The Trustee continues to monitor the situation and is well placed to take any further action as required.
Employer related investments
At 31 December 2024, there were no holdings of assets that were indirectly invested in RTX, the ultimate parent of the principal employer of the Scheme (2023; less than 0.01% through pooled investment vehicles with BlackRock).
Environmental, Social and Governance considerations
material impact on the companies, governments and other organisations that issue or otherwise support the assets in which the Scheme invests. In turn, ESG issues can be expected to have a material financial impact on the returns provided by those assets.
11
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
The Trustee delegates responsibility for day-to-day decisions on the selection of investments to its investment managers. The Trustee has an expectation that the investment managers will consider ESG issues in selecting securities and other investments or on such matters in a way that is expected to improve the long-term return on the associated assets. In choosing investment managers, the Trustee and its advisers take the following factors into account in the selection, retention and realisation of investments: Selection of investments: assessment of the investment managers' ESG integration credentials and capabilities, including stewardship. Retention of investments: developing a process to monitor ESG considerations on an ongoing basis by regularly seeking information on the responsible investing policies and practices of the investment managers. Realisation of investments: requesting information from investment managers about how ESG considerations are taken into account in decisions to realise investments.
The Trustee also takes these factors into account as part of its investment process to determine a benchmark
The Trustee does not currently impose any specific restrictions on the investment managers with regard to ESG issues but will review this position from time to time. The Trustee receives information from the investment managers on their approach to selecting investments and engaging with issuers with reference to ESG issues.
climate change, the Trustee takes the view that this falls within its general approach to ESG issues. The Trustee will continue to monitor market developments in this area in conjunction with its investment adviser. The Taskforce on Climate-R reflected in legislation applying to UK pension schemes and the Scheme has prepared a report outlining its approach to TCFD. This report is available on the Trustee website which can be found at https://online.flippingbook.com/view/667561390/
Investment Management
The investment management agreements put in place by the Trustee specify how rights attaching to the Scheme's segregated investments are acted upon. This includes active voting participation and a requirement to consider environmental, social and governance (ESG) and ethical factors when making investment decisions. The Trustee has less influence over the underlying investments within pooled investment vehicles held by the Scheme but reviews the managers' policies and statements of compliance in respect of these matters.
to: Financially material considerations and non-financial matters taken into account in the selection, retention and realisation of investments.
Rights (including voting rights) attaching to the investments and undertaking engagement activities in respect of investments.
The following matters: how
12
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
how
how the Trustee monitors portfolio turnover costs incurred by the asset manager, and how it defines and monitors targeted portfolio turnover or turnover range; and
the duration of the arrangement with the asset manager.
Implementation Statement
In conjunction with the Scheme investment adviser the Trustee has prepared an Implementation Statement covering, amongst other matters, the voting and engagement policies and the actions of investment fund managers used by the Scheme. A copy of this Implementation Statement is provided at Appendix II to the Annual Report and forms an integral part hereof.
Statement of t
The t
financial statements
The financial statements, which are prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including the Financial Reporting Standard applicable in the UK and Republic of Ireland e. Pension scheme regulations require, and the trustee is responsible for ensuring, that those financial statements: show a true and fair view of the financial transactions of the scheme during the scheme year and of the amount and disposition at the end of the scheme year of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the scheme year; and contain the information specified in Regulation 3A of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, including making a statement whether the financial statements have been prepared in accordance with the relevant financial reporting framework applicable to occupational pension schemes. In discharging these responsibilities, the trustee is responsible for selecting suitable accounting policies, to be applied consistently, making any estimates and judgements on a prudent and reasonable basis, and for ensuring that the financial statements are prepared on a going concern basis unless it is inappropriate to presume that the scheme will continue as a going concern.
The trustee is also responsible for making available certain other information about the scheme in the form of an annual report.
The trustee has a general responsibility for ensuring that accounting records are kept and for taking such steps as are reasonably open to it to safeguard the assets of the scheme and to prevent and detect fraud and other irregularities, including the maintenance of an appropriate system of internal control.
13
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
The trustee is also responsible for the maintenance and integrity of the FlippingBook website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The t
The trustee is responsible under pensions legislation for preparing, and from time to time reviewing and if necessary revising, a schedule of contributions showing the rates of contributions payable to the scheme by or on behalf of employers and the active members of the scheme and the dates on or before which such contributions are to be paid. The trustee is also responsible for keeping records in respect of contributions received in respect of any active member of the scheme and for adopting risk-based processes to monitor whether contributions that fall due to be paid are paid into the scheme in accordance with the schedule of contributions.
Where breaches of the schedule occur, the trustee is required by the Pensions Acts 1995 and 2004 to consider making reports to the Pensions Regulator and to members.
Member information
Member information, including contact details, is set out on pages 51 and 52.
Approval
The
on pages 4 to 14 was approved by the Trustee board and signed on behalf of the
board:
.................................................................................. Trustee Director
Date:
14
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
STATEMENT REGARDING DC GOVERNANCE
require the Trustee to include an annual statement regarding governance of money purchase
benefits in the annual report.
Money Purchase Benefits
During the Scheme year, the Scheme has contained the following money purchase benefits:
Benefits
transferred into the United Technologies Corporation
In addition, the Scheme provides a number of benefits to members which are subject to an underpin. There is a possibility that these underpin benefits could, in the appropriate circumstances and at certain times, be money purchase benefits. These benefits may be summarised as follows:
Some TACC Benefits are subject to a Guaranteed Minimum Pension (GMP) underpin, so that the
of the TACC Benefits for an individual member is greater than the GMP, this benefit will be money purchase in nature. In these circumstances, the benefits will be treated in the same way as other TACC Benefits, and the comments below about TACC Benefits will apply equally to these benefits. The Scheme also has a number of AVC policies with six providers. The vast majority of the assets are held with three providers. As some of the TACC benefits are determined to have been money purchase in nature during the Scheme year these AVC policies are subject to extra reporting which we have included in this Statement. We have taken a proportionate approach and reported on those AVC providers that hold the vast majority of assets.
TACC Benefits
As noted above, TACC Benefits are any benefits which were transferred into Goodrich on a money purchase basis and subsequently transferred to the Scheme on a money purchase basis on 1 June 2016.
TACC Benefits are invested in the Scottish Widows AVC policy applicable to the Goodrich Section of the Scheme. Members with TACC Benefits are able to choose from the same range of investments that apply to those who have made AVCs to Goodrich or to the Goodrich Section of the Scheme. This means that they may invest in the Lifestyle Investment Option or may self-select their funds from the range available under the policy. There is no default arrangement applying to TACC Benefits for the purposes of the Administration Regulations. As there is no default arrangement, the requirement for a Statement of Investment Principles (SIP) prepared in accordance with regulation 2A of The Occupational Pension Scheme (Investment) Regulations 2005 does not apply. The Scheme is not being used as a qualifying scheme for automatic enrolment purposes.
However, as the majority of members of the AVC policy invest using the Lifestyle Investment Option, further details of this option are provided below.
75% in the SW Aquila 50/50 Global Equity Index CS1 Fund; and 25% in the SW Mercer Diversified Growth CS1 Fund.
15
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
STATEMENT REGARDING DC GOVERNANCE
The SW Aquila 50/50 Global Equity Index CS1 Fund invests primarily in equities, both in the UK and overseas markets. The fund has approximately 50% invested in UK company shares. The remaining 50% is split equally between investments in US, Europe (excluding the UK) and Far East companies. The fund aims to provide returns consistent with the markets in which it invests and provides broad exposure to countries around the world. The SW Mercer Diversified Growth Fund invests in a broad range of asset classes with a focus on passively managed instruments, the aim of which is to outperform cash by 3.5% over the long-term with reduced volatility when compared to global equity markets.
Sterling Liquidity CSW Fund in accordance with the following table:
Prior to Selected Retirement Age
SW Aquila 50/50 Global Equity Index CS1
SW Mercer Diversified Growth Fund CS1
SW BlackRock Sterling Liquidity CSW
%
%
%
More than 10 years
75 75 65 55 45 35 25 15
25 25 35 45 55 55 50 45 40 30 15
0 0 0 0 0
10 years 9 years 8 years 7 years 6 years 5 years 4 years 3 years 2 years 1 year
10 25 40 55 70 85
5 0 0 0
Less than 1 year
0
100
The SW BlackRock Sterling Liquidity CSW Fund is a money market fund, which aims to achieve an investment return in line with the Bank of England Sterling Overnight Index Average.
without excessive risk taking, and with an increased focus over the final ten years of reducing volatility to enable members approaching retirement to make financial plans for the period after retirement. The Trustee considers this approach to be in the best interests of relevant members and beneficiaries.
Asset Allocation
We have provided further details in the table below of the underlying asset allocation of the Lifestyle Investment Option. We have provided this information in line with statutory guidance.
Within the Lifestyle Investment Option, the underlying assets change over time. Asset allocations are shown for members aged 25, 45, 55 and 1 day before retirement age, all assuming retirement at age 65.
16
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
STATEMENT REGARDING DC GOVERNANCE
Allocation (%) 1 day before retirement age (65)
Allocation (%) 25-year-old
Allocation (%) 45-year-old
Allocation (%) 55-year-old
Asset Class
Cash
1.7 8.7
1.7 8.7
1.7 8.7
100.0
Bonds
0.0 0.0 0.0 0.0 0.0 0.0 0.0
Listed Equities Private Equity Infrastructure
86.9
86.9
86.9
0.0 1.0 0.0 0.0 2.0
0.0 1.0 0.0 0.0 2.0
0.0 1.0 0.0 0.0 2.0
Property/Real Estate Private Debt/Credit
Other
Processing scheme transactions
The Trustee has a specific duty to ensure that core financial transactions (including the transfer of member assets into and out of the Scheme, transfers between different investments within the Scheme and payments to and in respect of members) relating to money purchase benefits are processed promptly and accurately.
TACC Benefits
Goodrich Section of the Scheme and its investment manager Scottish Widows.
The administrator of the Goodrich Section of the Scheme at the start of the reporting period was Mercer Limited who sold their administration business to Aptia UK Limited with effect from January 2024. Due to concerns
AVCs invested with Scottish Widows) to Gallagher Consultants (Administration & Investment) Limited (formerly called Buck Consultants (Administration & Investment) Limited
administration which was completed in May 2024.
The Trustee has reviewed the processes and controls implemented by those organisations and considers them to be suitably designed to achieve its objectives. The Trustee has also agreed service levels with Gallagher (as well as Mercer/Aptia prior to May 2024) & Scottish Widows, both in terms of timeliness and accuracy, and reporting of performance against those service levels. In addition, Gallagher (Aptia prior to May 2024) provides additional oversight of the services provided by Scottish Widows through regular meetings and its quarterly reporting. The service level agreement (SLA) in place with the administrators covers the investment of contributions, payments into and out of the Scheme and responses to general member enquiries. During the Scheme year, core financial transactions encompassed:
Scottish Widows: o
investment switches SLA of 3 Business Days; and o payments out of the Scheme (i.e. transfer-out or retirement payment) - SLA of 5 Business Days. o A summary of Scottish Widows performance against SLAs is summarised in the table below:
17
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
STATEMENT REGARDING DC GOVERNANCE
Monthly SLA Performance
Core Financial Transaction
Jan 24
Feb 24
Mar 24
Apr 24
May 24
Jul 24
Aug 24
Sep 24
Nov 24
Dec 24
Jun 24
Oct 24
Investment Switches Payments Out
-
-
-
-
-
-
-
-
-
-
-
-
100% 100% 100% 100% 100%
100%
100% 100% 50%
75%
100% 100%
Aptia: o
Death payments SLA of 3 Business Days. o Retirement SLA of 13 Business Days; and o Transfer out of the Scheme - SLA of 15 Business Days. o Aptia achieved an SLA performance of 100% up to 31 May 2024 for all items except transfers out of the Scheme where 95% of tasks were completed within SLA.
Gallagher o
Death payments SLA of 5 Business Days. o Retirement SLA of 7 Business Days; and o Transfer out of the Scheme - SLA of 10 Business Days. o
in May 2024 is summarised in the table
below:
Quarterly SLA Performance
Core Financial Transaction
Q3 24
Q4 24
Death Payments
59%
59%
Retirement Payments
58%%
45%
Transfers Out
76%
62%
Gallagher (previously Aptia) provides quarterly reports to detail the service performance in each of these areas, relative to the SLAs in place. The Trustee monitors compliance with these service levels as well as any complaints raised by members or issues identified in terms of the accuracy of core financial transactions during dedicated Benefit Sub-Committee meetings, as well as regular Trustee meetings.
AVCs
Scottish Widows. The Trustee has agreed service levels with Scottish Widows, both in terms of timeliness and accuracy against those service levels, covering the processing of contributions, investment of contributions, payments out of the Scheme and responses to general member enquiries. Scottish Widows (via Aptia prior to May 2024 & Gallagher from May 2024 onwards) provide quarterly reports to detail the service performance in each of these areas, relative to the service level agreements in place. The Trustee monitors compliance with the service levels alongside that of TACC benefits at regular Benefit Sub-Committee and Trustee meetings.
18
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
STATEMENT REGARDING DC GOVERNANCE
In relation to AVCs held with Legal & General, the Trustee has delegated administrative oversight to Gallagher who report back to the Trustee on its performance against SLAs part of its quarterly reporting to both the Benefits Sub- s performance against SLAs relating to AVCs is provided in the table below:
Quarterly SLA Performance
Q1 24
Q2 24
Q3 24
Q4 24
67%
100%
54%
0%
administrator reports back to the Trustee with any specific issues relating to the administration of the separate AVC policies.
Issues occurring during the year
to Gallagher in May 2024. To oversee the transition, the Trustee set up an Administration Transfer Sub- Committee who overall were satisfied that the transfer was carried out smoothly.
Following the transfer, Gallagher raised with the Trustee that Aptia had failed to transfer historic member
hese
the Scheme year, which have fallen well short of agreed SLAs and resulted in increased member complaints over the period. The Trustee has taken t
A recovery plan is now in place with Gallagher to both improve ongoing servicing and clear the backlog of outstanding tasks. The Trustee is currently paying Gallagher reduced fees until Gallagher improves its service levels to acceptable levels. Gallagher are required to attend weekly check- update on progress and of discussion resolutions to outstanding cases. The Trustee has appointed its advisers Barnett Waddingham to carry out spot checks on core financial transactions to further monitor the accuracy of core financial transactions.
Assessment
Overall, the Trustee believes that the measures described above enable it to effectively monitor the promptness and accuracy of the core financial transactions the above issues into consideration, the Trustee is confident that it has robust controls relating to the processing of core financial transactions but acknowledges that performance levels during the reporting period fell short of expectations. The Trustee believes that it has taken appropriate steps to ensure core financial transactions are processed promptly and correctly, with an aim to return to expected service levels at the earliest opportunity, ensuring that that the Administration Regulations will be met.
Charges and transaction costs
The Administration Regulations require the Trustee to make an assessment of charges and transaction costs borne by members in respect of money purchase benefits and the extent to which those charges and costs represent good value for money for members.
19
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2024
STATEMENT REGARDING DC GOVERNANCE
TACC Benefits
The Trustee makes available a range of seven investment funds which may be chosen by members as an alternative to the Lifestyle Investment Option. These funds allow members to take a more tailored approach to managing their own pension investments. Three comprise the Lifestyle Investment Option. These funds attract annual investment management charges as shown in the table below.
Investment Strategy/Fund
Expense ratio
Transaction Costs Incurred During Scheme Year 0.014% - 0.130%
Average Transaction Costs*
Lifestyle Investment Option
0.307% - 0.341%
0.014% - 0.128%
SW Mercer Diversified Growth CS1 SW Threadneedle Pension Property CS1 SW BlackRock 50/50 Global Equity Index CS1 SW BlackRock World ex UK Equity Index CS1
0.420%
0.187%
0.207%
0.900%
-0.047%
0.053%
0.243%
0.061%
0.032%
0.235%
0.020%
-0.009%
SW BlackRock Sterling Liquidity CSW
0.250%
0.014%
0.014%
SW BlackRock Over 15 Years UK Gilt Index CSW SW BlackRock UK Equity Index CSW
0.244%
0.000%
-0.003%
0.243%
0.049%
0.051%
* Covering a five-year period as per statutory guidance. In certain circumstances the methodology used for calculating transaction costs (known as slippage) can lead to negative costs being reported. This can be, for example, where other market activity pushes the price of the asset being traded down, whilst the transaction was in progress, resulting in the asset being purchased for a lower price than when the trade was initiated.
Illustrative examples of the cumulative effect over time of the application of charges, based on the assumptions detailed therein, are provided under the heading
Other AVC policies
There are five other AVC providers in addition to Scottish Widows mentioned above. The two other main providers are Legal and General and Standard Life. These providers cover the vast majority of members and assets. The three other AVC providers, Prudential, Phoenix Life and Aviva, were unable to provide the necessary information on member-borne cost and charges and subsequently we only report on those provided by Legal & General and Standard Life in this section The Trustee will work with Prudential, Phoenix Life and Aviva with a view to disclosing this information in the 2025 Scheme Year DC Governance Statement.
Legal and General
Investment Fund
Expense ratio
Transaction Costs Incurred During Scheme Year
Average Transaction Costs*
Global Equity 70:30 Index Over 15 years Gilts Index
0.219% 0.100% 0.263% 0.183% 0.100% 0.222% 0.125% 1.533%
0.024% 0.052% 0.029% 0.016% 0.051% 0.021% 0.068% -0.010%
0.024% 0.099% 0.032% 0.016% 0.114% 0.030% 0.033% -0.192%
Multi Asset
UK Equity Index
Over 5-year Index Linked Gilts World (ex UK) Equity Index
Cash
Managed Property
Global Equity Market Weights 30:70 GBP 75% Hedged
0.225%
0.047%
0.054%
20
Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94Made with FlippingBook Publishing Software