11 AVCs and other defined contribution assets
11.1 The Scheme holds assets in respect of AVCs paid by members to provide benefits on a defined contribution basis, i.e. where contributions are invested to accumulate a fund that can be used to provide different forms of benefit at retirement, reflecting the preferences and needs of members.
11.2 The Scheme also holds assets in respect of historical transfers that provide benefits on a defined contribution basis.
11.3 The Trustee acknowledges that individual members with such defined contribution assets have different requirements in terms of risk and return, and that these may c hange over the course of a member’s working life.
11.4 The Trustee has adopted the following approach in respect of funds invested in respect of AVCs and other defined contribution assets:
• To provide members with a range of investment options to enable them to invest in a way that meets their own needs with respect to risk and return.
• To offer members approaches that help improve the certainty of benefits they will receive as they approach retirement.
• To avoid offering an excessive range of options in order to help with member understanding and manage governance costs.
11.5 For certain members who have not made their own investment choices, the Trustee has, at times, needed to select an investment option on behalf of the members. In selecting these investments, the Trustee has typically sought to preserve the purchasing power of members ’ funds, while seeking to reduce risk relative to emerging benefits as members approach an expected retirement date. This approach necessarily strikes a balance between targeting a sufficient high investment return, while managing risk. 11.6 The Trustee uses a number of providers to manage the Scheme’s defined contribution assets , and to provide a range of fund options. The Trustee has an expectation that underlying investment approaches will produce returns consistent with their specific risk-return targets.
12 Monitoring
12.1 The Trustee employs its investment consultant to assist it in monitoring the performance of the Scheme’s investment strategy and investment managers.
12.2 The Trustee receives quarterly reports from the investment managers and meets with their representatives periodically to review their investment performance and processes.
12.3 The Trustee and its advisers will monitor the investment m anagers’ performance again st the objectives set out in the IIP .
12.4 The appropriateness of the investment m anagers’ remuneration will be assessed relative to market costs for similar strategies, the skill and resources required to manage the strategy, and the success or otherwise a manager has had in meeting its objectives.
UTC (UK) Pension Scheme | Statement of Investment Principles | 22 August 2023
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