Trustee mailings questions & answers

This page answers frequently asked questions about our recent trustee responsibilities and value for money review mailings.

These questions can be categorised into four broad areas:

1. What are the new responsibilities? / What do trustees have to do?

In April 2015 the Occupational Pension Schemes (Charges and Governance) Regulations introduced new responsibilities for trustees with the aim of protecting members of occupational pension schemes that offer money purchase benefits.

The new measures mainly relate to charges and governance and they assign new responsibilities for trustees of occupational schemes.

  • Responsibilities in relation to the charge cap measures only apply to occupational schemes offering money purchase benefits that are used by employers to meet their duties under automatic enrolment ('qualifying schemes').
  • Responsibilities in relation to the governance measures and assessing value for money have a broader scope and cover occupational schemes offering money purchase benefits, regardless of whether they are being used for automatic enrolment.

The key things trustees now need to do are:

  • Ensure that default arrangements are designed in members’ interests and keep them under regular review.
  • Assess the value of costs and charges borne by scheme members.
  • Ensure core financial transactions are processed promptly and accurately.
  • Prepare an annual governance statement within seven months of the end of the scheme year.
  • Include additional information in your Pension Regulator scheme return.

The first requirement to publish an annual governance statement is for the first scheme year end after 6 July 2015. The period that needs to be covered in the first statement is 6 April 2015 to scheme year end. Failure to produce an annual governance statement could lead to fines of between £500 and £2,000.

2. What information needs to be included in the annual governance statement?

Trustees need to update their scheme annual report and accounts to include an annual governance statement describing how governance standards apply. In particular this statement needs to include:

  • The level (or range) of charges and transaction costs in the default investment arrangement(s) and the range of costs and charges in other funds and the trustees’ assessment of the extent to which the charges represent good value.
  • How the knowledge and understanding (TKU) requirements have been met throughout the year and giving an explanation as to how the trustees have, or have access to, all the competencies necessary to run the scheme properly.
  • How the trustees have secured that core financial transactions are processed promptly and accurately.

The statement must be signed by the Chair, on behalf of the trustees.

3. Why have the trustees got to do this?

Trustees have a legal duty to act in the best interests of the scheme members and legislation requires you to carry out a value for money (VFM) assessment. Trustees now have an obligation to make reference to the value for money your scheme provides, within your annual report

Failure to meet the new requirements, in particular the inclusion of the governance statement could lead to fines of up to £2,000.

It is your responsibility as trustee to carry out a value for money assessment for your schemes.  You will probably already be aware of these responsibilities, but full information on your responsibilities is available from The Pensions Regulator’s (TPR) website.

4. When have trustees got to do this by?

The first chair’s statement must be produced as part of the first annual report and accounts relating to the scheme year ending on or after 6 July 2015. If your scheme year-end date is 31 December 2015, your first statement will cover 6 April 2015 to 31 December 2015.

If your scheme year-end is within the three months following 6 April 2015, you’re still obliged to prepare a chair’s governance statement covering this period. However, as this would result in you writing a statement covering a very short period of time, you’re required to include this short period within the statement for the following year.

All subsequent chair’s statements will have to be completed within seven  months following the end of your scheme year.

Details can be found on the TPR website:

5. Where can I get more information about the new trustee responsibilities?

Read more information on this website on trustee liabilities.

The TPR also have useful information on their website:

6. What new information needs to be included in the annual scheme return to the Pensions Regulator (TPR)?

New information for the 2015 return includes:

  • If any employers that use the scheme have passed their automatic enrolment staging date. If so, confirmation whether they have automatically enrolled any staff into the scheme to meet their automatic enrolment duties since 6 April 2015 and/or used the scheme to meet their automatic enrolment duties for staff that were existing members of the scheme (i.e. using it as a ‘qualifying scheme’).
  • If used as qualifying/AE scheme confirmation whether the scheme has been compliant with the charge cap which came into force on 6 April 2015.
  • Details of the Chair of trustees. 

There’s information on the TPR website:

7. How do I get a Chair of trustees?

The Charges and Governance regulations includes a requirement that certain schemes must appoint a chair of trustees, if they don’t already have one. In a trust scheme, the Chair could be an individual trustee or a professional trustee body. Where there is a corporate trustee, the Chair could be a member of the board of directors or trustee corporation.

Some schemes are exempt from this new requirement, in particular:

  • Schemes with fewer than 12 members where all the members are trustees (or the trustee is a company and all members are directors of that company) and either decisions are made by unanimous agreement of the trustees (or directors), or the scheme has an independent trustee (or director) in place who is registered on our independent trustee register. These schemes are known as ‘relevant small schemes’.
  • Schemes where the company is both the only employer and the sole trustee, and all members are current or former directors of the company, and include at least one third of the current directors. These schemes are known as ‘executive pension schemes’.

Where a scheme is required to appoint a chair, trustees must ensure that this obligation is met within three months from the later of:

a. the legislation coming into force;

b. the scheme being established.

The legislation also requires trustees to provide the TPR with the name of the chair, and this should be done via the scheme return. Trustees and those completing scheme returns on behalf of trustees will need to establish whether their scheme is required to provide this information, and where this is the case, pay particular attention to the instructions on the scheme return screen about how to complete the details of the chair.

8. Who is responsible for carrying out the value for money review for occupational schemes?

The trustees.

9. If a scheme is paid up, do the trustees still need to carry out a value for money review?


10. Do the new trustee requirements extended to defined benefit (DB) schemes?

No, they relate specifically to defined contribution (DC) schemes/arrangements.

11. What will happen if the trustees don’t do anything?

The trustees will be breaching the law.  If you or another person responsible for administering the scheme fail to comply with the legal requirements, the TPR may select from one or more enforcement options. These range from advice letters, warning letters, statutory compliance notices and monetary penalties, to criminal prosecution.

There’s more information on the TPR website:

12. What help can you give trustees considering whether the costs and charges borne by scheme members are good value for money?

TPR have provided guidance on this for trustees.  These can be found here:

13. Do trustees need to tell the TPR that they have done a value for money assessment?

Our understanding is that trustees don’t need to notify the TPR, however we would encourage you to have a read through the TPR regulations to satisfy yourself of what is required.   

1. Are the scheme charges capped?

Retirement Solutions Company Pension Plan - if the scheme is an automatic enrolment / qualifying scheme with us then the charges have been/will be capped at 0.75% a year from 6 April 2015 or the employer’s staging date if later. 

Crest Secure or Crest Growth plans - these plans can’t be used as an automatic enrolment or qualifying scheme and therefore the charge cap doesn’t apply.

2. Where can I get more information about the default investment?

Information on our default options can be found in our :Our Default Options – Roles and responsibilities guide and a list of the funds and strategies available to our workplace pensions can be found in our Investment Options guide.

There’s also information about our default investment options and investment governance here:

3. How does Crest Secure work?

The Crest Secure fund is similar to a with profits fund but with a lower exposure to the stock market. The fund invests in a range of different asset types including fixed interest stocks, equities and property. The aim of the investment strategy is to maximise the long term return on investments whilst meeting the fund’s guaranteed liabilities. 

A growth rate is declared each year and equivalent bonuses are added to the fund’s value. The rates declared reflect the actual performance of the underlying assets, after allowance for the expenses incurred and after a smoothing1 adjustment. The smoothing1 adjustment means the declared growth rates are more stable than the rate of return on the underlying assets.

1With smoothing a proportion of the actual investment growth earned during good years is held back and then applied to top up the return in years with poor performance. This should result in a smoothed effect on the increase of the value of the investment, as opposed to fluctuations that would normally occur in the daily price for other stocks or shares.

The declared standard growth rate for each of the last 5 scheme years are set out in the table below.

Declared standard growth rate for scheme year
2011/12 2012/13 2013/14 2014/15 2015/16
4% 5% 5% 5% 5%*

*Provisional declared standard growth rate

  • It provides guaranteed returns for the members through declared growth rates.
  • Although this is a low risk fund, the growth rates declared have consistently been higher than inflation, so they’re delivering real returns to the members.
  • Members are not charged extra if they stop contributing.
  • There are no exit charges for members accessing their pensions on retirement.  However, there may be an exit charge if an individual transfers out of the Crest Secure Plan while still in service, if the trustees decide to move the whole plan to another pension product, or if the trustees decide to wind up the scheme.

4. How does Crest Growth work?

The Crest Growth contract is a unit-linked contract where the trustees decide which fund(s) to invest in on behalf of the members. The individual accounts within the scheme are only notionally allocated to the members and it is for the trustees to determine whether the investments offer value for money as part of the trust arrangement(s). Fund performance information can be found on our website at: fundperformance 

The charges that apply to a Crest Growth scheme will depend on the specific characteristics of the scheme, but the charges can be summarised as:

1. Contribution charges:

  • Standard allocation rates of up to 102.5%, depending on the commission basis.
  • Bid/offer spread of 5%. This is the difference in price for units bought (‘offer price’) and sold (‘bid price’).

2. Ongoing fund value charges:

  • Annual management charge of 1%, which is built into the fund price for RLAM managed funds. Additional fund management charges may apply for funds managed by other fund managers.
  • Unit cancellation charge which is an additional (positive or negative) charge for the term of the contract which only applies if the standard allocation rate has been adjusted (increased or reduced).

Fund based renewal commission (FBRC) charge that applies for the term of the contract. This only applies if FBRC is payable to an adviser.

Trustees should refer to the scheme summary we enclosed with the letter we sent them in December 2015 for details about the specific charges applying to their Crest Growth Plan.

  • It has provided good investment returns with most funds delivering at or above benchmark returns over most time periods.1
  • Members are not charged extra if they stop contributing.
  • There are no exit charges for members accessing their pensions on retirement. However, there may be an exit charge if an individual transfers out of the Crest Growth Plan while still in service, if the trustees decide to move the whole plan to another pension product, or if the trustees decide to wind up the scheme.

1Returns assessed based on the Compound Annual Growth Rate (CAGR) over 3, 5, 10 and 15 years to 31 January 2016.

1. What has Royal London done about assessing value for money?

We did our own internal review of value for money being provided from our workplace pension contracts. We completed this review in early 2016. 

This review looked at both at charges applying to these contracts and the benefits provided to the members, for example investment performance and quality of customer service. We believe our occupational pension schemes are currently delivering value for money and we are not proposing to make changes.

We would remind you that it is the trustees’ responsibility to review the arrangements in place for the members and consider whether their scheme offers overall value for money.  We are not in possession of all the information necessary to consider which course of action is most appropriate for the membership taking into account all of their circumstances. It is therefore a decision for the trustees to make regarding the best course of action.

If you are not happy with the results of the value for money review it is up to you as a trustee to decide what action you should take. 

2. What changes are you making to Retirement Solutions schemes?

We have completed the review of our more modern contracts (Retirement Solutions) and are not proposing to make further changes to this as we believe it already delivers good value for money to the members. However, any schemes used for auto enrolment will have the member charges capped at 0.75% a year for the default investment and commission  charges, FAF charges and consultancy charges, if applicable, will be/will have been stopped or reduced from the employer’s staging date.  You may wish to take account of this when forming your own views.

3. What changes are you making to your legacy / Crest occupational schemes?

We’ve completed the review of legacy occupational schemes – Crest Secure Plan and Crest Growth Plan. We believe the both of these plans are delivering value for money and are not proposing to make any changes. See the answers to the ‘How does Crest Secure work’ and ‘How does Crest Growth work’ questions for information on the charges and benefits.

1. Can trustees wind up the scheme?

Yes.  Depending on how long this takes to complete, this may or may not allow trustees to avoid the new rules. We would strongly urge trustees to take financial and/or legal advice around this.

There is information on the TPR website about winding up schemes effectively:

Exit charges may apply if the scheme is wound up.

2. Can trustees transfer the scheme?

Yes.  Exit charges may apply if the scheme is transferred, including a transfer to our Retirement Solutions contract. Please note, if the existing scheme includes guaranteed minimum pension (GMP) rights it may not be possible to replicate this on transferring the scheme.