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The funding strategy of the Scheme assumes growth asset investment returns for non- pensioners and protection asset investment returns for pensioners. Therefore the current growth/protection split of the Scheme’s assets (6 0%/40%) is close to the non- pensioner/pensioner liability split and is likely to remain reasonable in the short to medium term.
Any decision to change the asset allocation would need to have regard to the effect that this might have on the Parent Guarantee provided by Carrier Global Corporation.
Following finalisation of the Scheme’s actuarial valuation at 31 st December 2019, the Trustee and Company have agreed to a 60%/40% split between growth and protection assets for the time being. The Trustee continues to obtain advice from its investment consultants regarding scope for de-risking the Scheme further.
3.
Risk Management and Measurement
There are various risks to which any pension scheme is exposed. The Trustee’s policy on risk management is as follows:
The primary risk upon which the Trustee focuses is that arising through a mismatch between the Scheme ’s assets and its liabilities.
The Trustee recognises that whilst increasing risk increases potential returns over a long period, it also increases the risk of a shortfall in returns relative to those required to provide the Scheme’s liabilities as well as producing more short-term volatility in the Scheme ’s funding position. The Trustee has taken advice on the matter and (in light of the objectives noted previously) considered carefully the implications of adopting different levels of risk. The Trustee recognises the risks that may arise from the lack of diversification of investments. Subject to managing the risk from a mismatch of assets and liabilities, the Trustee aims to ensure the asset allocation policy in place results in an adequately diversified portfolio. The documents governing the manager appointments include a number of guidelines which, among other things, are designed to ensure that only suitable investments are held by the Scheme. The managers are prevented from investing in asset classes outside of their mandate without the Trustee’s prior consent. Arrangements are in place to monitor the Scheme ’s investments to help the Trustee check that nothing has occurred that would bring into question the continuing suitability of the current investments. The Trustee meets regularly and receives regular reports from all the investment managers and the independent investment consultants. These reports include an analysis of the overall level of risk and return, along with their component parts, to ensure the risks taken and returns achieved are consistent with those expected.
The safe custody of the Scheme ’s assets is delegated to profess ional custodians (either directly or via the investment managers).
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