The Citi (UK) Pension Plan recently published its Implementation Statement, covering the Plan Year from April 6, 2024, to April 5, 2025. This document outlines how the Trustee has followed its Statement of Investment Principles (SIP) and details any reviews or changes made.
Strategic Investment Principles Revised
The Statement of Investment Principles (SIP) and accompanying investment policy implementation documents were reviewed and updated on July 29, 2024. The revisions reflect changes to the Plan’s default arrangements and self-select options implemented in October 2023, following a triennial investment strategy review. It also addresses the classification of the Global Equity Fund – Passive and Corporate Bond Fund – Active as unintended default arrangements. Furthermore, the update incorporates DWP’s guidance on Reporting on Stewardship and Other Topics, requiring trustees to take a more active role in monitoring and engaging with investment managers on stewardship. The Trustee’s policy on investment in illiquid assets, as required by regulations effective October 1, 2023, was also included. Finally, the change from daily to monthly dealing for the Partners Group Generations Fund, effective May 2024, was reflected. (Implementation Statement, covering the Plan Year from 6 April 2024 to 5 April 2025, page 1)
Illiquid Asset Exposure Integrated into Lifestyle Strategies
The Trustee’s policy is to include exposure to illiquid assets within the Plan’s lifestyle strategies, including the main default arrangement and some other default arrangements. The Default and Cash Lifestyle arrangements include an allocation to a private markets fund, which currently has exposure to private equity, infrastructure, direct physical property, and private debt. Members aged between 22 and 59, assuming a Target Access Age (TAA) of 60, have exposure to illiquid assets through this fund. Additionally, these strategies include an allocation to a diversified growth fund (DGF), providing exposure to direct physical property and private debt for members from age 40, assuming a TAA of 60. Other default options, such as the Growth Fund (10% private markets fund, 20% DGF), Pre-Retirement Fund (40% DGF), and Diversified Growth Fund (solely DGF), also have illiquid asset allocations. (Implementation Statement, covering the Plan Year from 6 April 2024 to 5 April 2025, page 5-6)
Manager Fee Negotiations and Reductions Achieved
During the Plan Year, the Trustee engaged in fee negotiations with Baillie Gifford, the underlying manager of the Global Equity Fund – Active. Following successful negotiations, Baillie Gifford offered a reduced fund management charge of 0.52% per annum, effective from July 1, 2024. This results in a total charge of 0.66% per annum payable by members, inclusive of administration fees, platform fees, and additional expenses as of March 31, 2025. Additionally, JP Morgan announced a reduction in fees for several share classes of the Global (ex-UK) Bond Fund. The Annual Management Charge (AMC) and total fee for this fund decreased from 0.37% per annum to 0.28% per annum, effective from September 2, 2024. (Implementation Statement, covering the Plan Year from 6 April 2024 to 5 April 2025, page 3)
Stewardship Priorities Set and Manager Engagement Ongoing
Following the introduction of DWP’s stewardship guidance in 2022, the Trustee agreed upon stewardship priorities, which have been communicated to its investment managers. These priorities focus on climate change, human rights, corporate transparency, and business ethics. All fund managers responded, acknowledging these priorities and confirming their alignment with their beliefs. The Trustee expects its managers to consider financially material factors, including climate change and other ESG factors, when investing the Plan’s assets and to improve their ESG practices within their respective mandates. The Trustee aims to maintain ongoing dialogue with managers to clarify expectations and encourage improvements. (Implementation Statement, covering the Plan Year from 6 April 2024 to 5 April 2025, page 4)
Climate Working Group Addresses Risks and Opportunities
The Trustee has established a Climate Working Group (CWG) with representatives from the Defined Benefit Committee and the Defined Contribution Committee, along with relevant advisers. The CWG’s purpose is to focus on the details of Climate Regulations and Statutory Guidance and the broader consideration of climate-related risks and opportunities for the Plan. The CWG met twice during the Plan Year, receiving input and guidance from the Plan’s DB and DC investment advisers and legal advisors. Topics considered included the choice of climate metrics and targets, updated climate scenario analysis, analysis of metrics calculations and their impact on climate-related risks and opportunities, fund performance against climate targets, and recommendations for managing climate-related risks. (Implementation Statement, covering the Plan Year from 6 April 2024 to 5 April 2025, page 4)
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