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The Mars Associates' Savings Plan (the "Plan")
Statement of Investment Principles (the "Statement")
October 2019
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1. INTRODUCTION
1.1 This Statement sets out the principles and objectives governing decisions about investments under the Plan and has been prepared in accordance with section 35 of the Pensions Act 1995 (the “Act”) (as amended by the Pensions Act 2004), the Occupational Pension Schemes (Investment) Regulations 2005 and the Occupational Pension Schemes (Charges and Governance) Regulations 2015. This Statement was adopted at a meeting of the Board of Directors of Mars Pension Trustees Limited (the “Trustee”) (in its capacity as Trustee of the Plan) held on 1 October 2019. The Trustee will review this Statement and the Plan’s investment strategy from time to time and in any event at least every three years and without delay after any significant change in investment policy.
1.2 In accordance with the requirements of the Act, the Trustee has, before adopting this Statement, consulted Mars Wrigley Confectionery UK Limited (“Mars”) on the terms of this Statement.
1.3 The Trustee is responsible for the investment strategy of the Plan. The Trustee has obtained written advice on the investment strategy appropriate for the Plan and on the preparation of this Statement. This advice was provided by Aon Hewitt Ltd (the "Investment Advisor") who are authorised and regulated by the Financial Conduct Authority.
1.4 The day to day management of the Plan's assets has been delegated to investment managers who are appropriately authorised and regulated as required under the Financial Services and Markets Act 2000 (amended by the Financial Services Act 2012). A copy of this Statement is available to the investment managers appointed and to the members of the Plan.
2. NATURE OF THE PLAN
2.1 Benefits
The Plan provides benefits on a defined contribution basis. For some members, these are in addition either to the ARP Section benefits, the MPP Section benefits or the WPP Section benefits provided under the Mars Associates’ Retirement Plan.
2.2 Investment Objective
The primary objective of the Trustee is to offer members a choice of strategy regarding their pension monies. The Trustee makes available under the Plan funds covering a range of asset classes including equities, bonds and cash, which provide appropriate strategic choices for members' different savings objectives, risk profiles
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and time horizons. Members themselves determine the fund(s) that they invest in under the Plan. For those members of the Plan who do not exercise this choice expressly, their funds under the Plan are invested according to an "automatic" default strategy. See section 2.4 for summary information on the default strategy, including the specific objective of the default strategy.
The appendix sets out details of all the investment options available to members including the default strategy. 2.3 Choosing Investments
The Trustee has received strategic investment advice from the Investment Advisor. The investments that the Trustee offers in accordance with this advice have been selected as appropriate on the basis that the Plan should provide:
1. a reasonable range of investment options in order to satisfy different return and risk combinations. 2. an efficient fund for each investment option.
3. an efficient packaged option as the default strategy. Where:
“options” are defined as implementable asset classes with differing properties the features of which can be understood by members.
“efficient” is defined as easily investable with reasonable liquidity.
The Trustee is satisfied, on the basis of the advice it has received, that the default strategy and investment funds offered under the Plan satisfy applicable regulatory requirements for investments and meet the objectives set out in 2.2 above and 2.4 below.
Further details of the investment options, including the balance between different kinds of investments, are set out in the appendix.
The Trustee will give the members of the Plan such information about the available investment funds as it thinks reasonable to allow the member to make an informed decision and will allow switching of choice as to investment fund at such frequency and on such terms as the Trustee shall determine from time to time. 2.4 The Default Strategy
For members who do not make an active decision regarding the investment of their contributions, a default strategy has been put in place. Under the default strategy the allocation to different asset classes varies depending on the member's expected term to retirement and assumes that members will take a quarter of their fund as tax free cash at retirement from the Plan and use the rest of their fund to purchase an annuity.
The default strategy has been put in place following consideration of the Plan's membership and after taking advice. The Trustee selected the default strategy based on the belief that the members who are in the default were most likely to be those that may require an annuity at retirement and that this default strategy was consequently in the best interests of members.
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The objective of the default strategy is to provide an appropriate risk/return profile given the needs of members wishing to take a quarter of their fund as tax free cash and use the balance to purchase an annuity at retirement. 2.5 Investment Risk Measurement and Management
The Trustee recognises that there are risks associated with members investing their retirement savings. In designing the range of funds for the Plan, the Trustee has considered how best to safeguard members from these risks. The main areas of risk with this type of arrangement are as follows:
• Credit risk: this is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Trustee monitors the financial strength and security provided by the investment managers through taking advice from its Investment Advisor.
• Market risk: the Plan’s investments are subject to volatility, mainly from fluctuations in asset price, but also interest rates and currency. The Trustee has selected a wide range of funds to allow members to diversify their investments to manage these risks. Diversification is also considered when setting the default and other asset allocation strategies. Further, the Trustee closely monitors the performance of the investment options and receives formal quarterly reports from Aegon and Aon giving views on their continuing appropriateness and that of the underlying fund managers. It should also be noted that the Trustee uses currency hedging to manage currency risk through some of the investments made available to members including the default strategy. Members are made aware of the various different risks of investing through the Plan literature.
2.6 Expected return on investment and realisation
The range of investment funds is intended to provide members with an appropriate choice of potential return and security.
In setting the default strategy, the Trustee has reviewed the extent to which the return on investments (after deduction of any charges relating to those investments) is consistent with the objectives of the default strategy, as stated in 2.4 above.
Over the long-term, expectations are:
• Growth assets (including UK equities, overseas equities, multi-asset funds, commodities and property)
To achieve a real return (in excess of inflation) over the long term. Significant price volatility is to be expected;
• Monetary assets (bonds)
To achieve a rate of return which is broadly in line with the regular income and change in capital value due to movements in interest rates received from a bond of appropriate duration and quality;
• Inflation linked assets (UK index-linked bonds)
To achieve a rate of return which is broadly in line with the regular income and change in capital value due to movements in interest rates received from an inflation linked bond of appropriate duration and quality; and
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• Cash
To protect the capital value of the investment and achieve a rate of return in line with money market interest rates.
The Trustee recognises that members may need to realise their assets at short notice. The Trustee considers that members' assets are realisable at short notice.
2.7 Review
Aon Hewitt Limited and the Trustee's Investment Committee will keep the performance of the investment funds, including the default strategy, under review and will report regularly thereon to the Trustee.
3. POLICIES ON FINANCIALLY MATERIAL CONSIDERATIONS, NON-FINANCIAL MATTERS AND STEWARDSHIP
By way of background, it is important to note that (1) the Trustee has delegated responsibility for the selection, retention and realisation of investments to the investment managers (with certain guidelines and restrictions) and (2) a number of the funds (including those used to construct the default option), are passive in nature. This has a material impact on its approach to environment, social and governance ("ESG") matters and stewardship.
In summary, the Trustee's policy on ESG is to engage with the investment managers on ESG matters to ensure that they are acting in a manner that is consistent with the Trustee's views on ESG. The Trustee does not incorporate non-financial matters into the investment approach. The Trustee's policy on stewardship is to engage with the investment managers on stewardship matters (covering both the exercise of rights attaching to investments and engagement activities) to ensure that the investment managers are acting in a manner that is likely to improve long term investment performance. Further detail is set out in the Trustee’s ESG policy document.
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Appendix – Investment options made available to members
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1. INTRODUCTION
This appendix provides information on the three asset allocation strategies made available to members including the default strategy and also the self-select fund range.
2. ASSETALLOCATIONSTRATEGIES
2.1 BlackRock LifePath Retirement (the default strategy)
BlackRock LifePath Retirement works on the principle that a member electing this option will take the maximum tax free cash sum and use the rest of their account to purchase an annuity at retirement. The strategy initially invests wholly in growth assets until thirty five years before a member's selected retirement age. During this 'growth' phase, the strategy aims to provide real growth (in excess of inflation) over the long term. From thirty five years from a member's selected retirement age, lower risk investments are gradually introduced.
This structure is summarised in the chart below.
2.2 BlackRock LifePath Flexi
BlackRock LifePath Flexi works on the principle that a member electing this option will use their account to provide an income on a flexible basis.
The strategy initially invests wholly in growth assets until thirty five years before a member's selected retirement age. During this 'growth' phase, the strategy aims to provide real growth (in excess of inflation) over the long term. From thirty five years from a member's selected retirement age, lower risk investments are gradually introduced, though a material allocation to growth assets is retained.
This structure is summarised in the chart below. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 45 43 41 39 37 35 33 31 29 27 25 23 21 19 17 15 13 11 9 7 5 3 1 Years to Retirement UK Cash Pre-Retirement Fund Emerging Market Debt
Developed ex-UK Non-Govt. Bonds Developed ex-UK Govt. Bonds UK Corporate Bonds
UK Inflation Linked Gilts UK Fixed Gilts Commodities Property
Emerging Market Equities
Developed ex-UK Small Cap Equities Developed ex-UK Equities
ASP SIP 1 October 2019 Page 6 of 7 2.3 BlackRock LifePath Capital
BlackRock LifePath Capital works on the principle that a member electing this option will take their whole fund as cash.
The strategy initially invests wholly in growth assets until thirty five years before a member's selected retirement age. During this 'growth' phase, the strategy aims to provide real growth (in excess of inflation) over the long term. From thirty five years from a member's selected retirement age, lower risk investments are gradually introduced. Over the last ten years, the strategy moves to invests entirely in a cash fund. This structure is summarised in the chart below.
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2. SELFSELECTFUNDS
Fund Benchmark *
Over 15 year Gilt Index FTSE Actuaries UK Conventional Gilts Over 15 Years
Cash LIBOR LIBID GBP 1 Week
Corporate Bond All Stocks Index Markit iBoxx GBP Non Gilts
Over 5 Year UK Index Linked Gilt FTSE Actuaries UK Index-Linked Gilts Over 5 Years
UK Equity Index FTSE All Share
World (ex-UK) Equity Index FTSE Developed ex UK
Emerging Markets Equity Index MSCI Emerging Markets
Ethical Global Equity Index FTSE4Good Global Equity Index
(50:50) Global Equity Index 50% FTSE All Share Index/50% Fixed Overseas Weights (16.7% Continental
Europe, 16.7% North America, 8.3% Japan, 8.3% Pacific Basin) *The objective of each fund is to perform in line with the benchmark.
In addition, some members as at 6 April 2003 have investments under the Plan in units in a with-profits policy with Prudential. Prudential’s objective for this policy is to achieve competitive long term returns.
