Annual Chair’s Statement for the Laleham Healthcare Ltd Retirement Benefits Scheme F08944

This statement covers the period from 1 January 2022 to 31 December 2022.

The Trustee of the Laleham Healthcare Ltd Retirement Benefits Scheme (the “Scheme”) is required to produce a yearly statement (which is signed by the Chair of Trustees) to describe how these governance requirements have been met in relation to:

• the investment options in which members’ funds are invested (this means any ‘default arrangement’ and other funds members can select or have assets in, such as legacy funds);

• the requirements for processing financial transactions;
• the charges and transaction costs borne by members;
• an illustration of the cumulative effect of these costs and charges;
• a ‘value for members’ assessment; and
• Trustee knowledge and understanding.

 The Trustee is Laleham Health and Beauty Ltd.

 The Scheme was formerly held with Friends Provident and is currently managed by Aviva (“the Insurer”). It was closed to closed to new members and to further contributions before 6 April 2006. Members of the scheme benefit from:

• Guaranteed annuity rates
• Guaranteed growth rate of 3% in the with-profit fund.
• An entitlement to a scheme-specific tax-free pension commencement lump sum that is higher than the current standard amount of 25% of retirement benefits.

These apply to all pension benefits in relation to premiums paid on or before 5 April 1997. The standard pension basis is single life, guaranteed for 5 years and payable monthly in advance.

 Some members of the Scheme will hold a combination of both types of benefit.

Requirements for processing core financial transactions

The Trustee must ensure that core financial transactions are processed promptly and accurately. This includes:

• investment of contributions paid to the Scheme (where applicable);
• transfer of members’ assets into and out of the Scheme;
• transfers of members’ assets between different investment options available in the Scheme; and
• payment from the Scheme to, or in respect of, members.

 The processing of core financial transactions (such as transfers in and out of the Scheme, and payments to members) is managed by the Insurer.

The Trustee can request regular Scheme data and transaction quality information from the Insurer and is satisfied that adequate internal controls are in place to ensure that core financial transactions for the Scheme are processed accurately.

 Scheme financial transactions, such as the payment of levies and professional fees, are undertaken by the Trustee.

 Default investment option

As the Scheme was closed both to new members and further contributions prior to 6 April 2015, it does not have an active default investment arrangement.

 The Scheme is not being used as a relevant qualifying scheme for any members for the purposes of automatic enrolment. As a result, the Trustee has applied a proportionate approach to meeting the relevant governance standards.

 Investment Options and member-borne charges

All benefits under the Scheme are invested in a conventional with-profits fund.

 The deferred annuities incorporate an guaranteed annual underlying investment yield of 3%. In addition, annual reversionary bonuses are added. The reversionary bonus for 2022 was 1.50% before management charges. (4.545%). A Demutualisation Terminal Bonus was added to the Scheme following the demutualisation of Friends Provident in 2001.

 If benefits are not taken at the normal plan retirement date, the proceeds are held in a deposit account.

 With Profits:

The primary objective of with-profits funds is to provide a stable and smoothed level of investment return over the medium to long term to the member’s retirement date. This approach is designed to provide the member with some certainty of their retirement outcome. The smoothing approach aims to reduce the level of investment market volatility for the member‘s policy.

 Smoothing: In years when investment performance is high, some of the return is held back to ‘top-up’ returns when lower performance occurs. This reduces investment risk for the individual investor and provides a steadier pattern of return.

Charges and transaction costs

The Trustee is required to set out the on-going charges incurred by members over the period covered by this Statement. Ongoing charges met by members consists principally of the Insurer’s fund management costs and additional expenses (such as custodian fees) incurred by the fund manager. In addition, an administration charge may be levied on members to meet the cost of the administration service.

 The Trustee is also required to disclose transaction cost figures that are borne by members.  In the context of this statement, the transaction costs shown are those incurred when the Scheme’s fund managers buy and sell assets within investment funds, but are exclusive of any costs incurred when members invest in and switch between funds. For unit-linked investments, the transaction costs are disclosed by the pension provider.

 For with-profits funds, charges are not explicitly disclosed. They are implicit and taken into account in declared bonuses. 

* There are no explicit charges or transaction costs levied against this fund. Charges are taken into account when declaring annual bonus rates. The Trustee can confirm that the charge cap provisions applicable to automatic enrolment funds do not apply to the Scheme.

 Further details are set out in the fund’s Principles and Practices of Financial Management (PPFM) document.

Illustration of Retirement Benefits

Members receive annual Statutory Money Purchase Illustrations (SMPIs) but these are not representative of the actual benefits that will be due to Scheme members at retirement because the SMPIs are based on standard market assumptions for unit-linked policies. Illustrations cannot be readily provided for policies held in conventional with-profits policies that have in-built guarantees and where policy benefits have accrued over time under varying policy terms. 

Trustee knowledge and understanding

The Scheme's Trustee is required to maintain appropriate levels of knowledge and understanding to run the Scheme effectively.  The Trustees have measures in place to comply with the legal and regulatory requirements regarding conversance and knowledge and understanding of the Scheme. 

 The Trustee liaises with pension advisers for provide support and advice in connection with the Scheme, as required.  The pension advisers are fully qualified and authorised to advise on pension matters having passed all of the relevant professional examinations. 

During the Scheme year ended 31 December 2022, the Trustee has engaged with its pension advisers and increased its awareness and understanding of initiatives and releases from The Pensions Regulator, HMRC, and the Department for Work & Pensions, and the retirement options available under the Scheme due to the pension freedoms introduced in 2015.

The Trustee is also aware that additional regulatory measures have been introduced to combat pension scams and understands that this may delay member’s efforts to transfer or withdraw pension benefits from the Scheme as the regulations come into force. 

Value for members assessment

The Trustee is required to assess the extent to which member borne charges and transaction costs represent good value for members when considered alongside investment performance and other Scheme factors, such as guarantees and services offered by the Scheme, and whether the quality of these services meets the members' needs.

 The Trustee reviews the Scheme investments periodically. Members have been allowed to remain invested in the with-profits fund due to the steady long term growth potential and the guarantees associated with the conventional with-profits fund.

 The direct support and guidance received by members from the pension adviser is a further benefit of Scheme membership.

 On balance, the Trustee considers that the Scheme offers value for members. Valuable enhanced benefits will be lost if members transfer benefits to another scheme.

Signed for and on behalf of the Trustees by Tim O’Connor, Chair to the Trustee Board