Hemming Group Pension Scheme

The Trustee of the Hemming Group Pension Scheme (''the Scheme") has drawn up this Statement of Investment Principles (''the SIP") to comply with Section 35 of the Pensions Act 1995 (as amended by the Pensions Act 2004 and regulations made under it). The Statement is intended to affirm the investment principles that govern decisions about the Scheme's investments and the Trustees believe that the investment policies and their implementation are in keeping with best practice, including the principles underlying the (Myners) Code of Best Practice for pension fund investment published in 2001 (as amended).

The Scheme operates for the exclusive purpose of providing retirement benefits and death benefits to eligible participants and beneficiaries.

The Scheme is governed by its trust deed and rules, which set out in detail the benefits and specify the Trustees’ investment powers. 

The Trustees make the key strategic decisions relating to the Scheme’s investments, and to support the objectives of the Scheme’s investment strategy, it appointed Legal and General Assurance (Pensions Management) Limited (“Fiduciary Manager”) as a Fiduciary Manager, giving the Fiduciary Manager discretion over the implementation and day-to-day management of the Scheme's investments. The Fiduciary Manager delegates its investment management powers to Legal & General Investment Management Limited (“LGIM”). LGIM is part of the same group of companies as the Fiduciary Manager. The Trustees have also appointed LGIM to provide investment advisory services under an investment advisory agreement on or around the same date.  The Trustees may terminate its agreements with the Fiduciary Manager and LGIM in line with their terms. 

When making investment decisions, and when appropriate, the Trustees take proper advice from LGIM, in its role as investment advisor. LGIM is qualified by its ability in, and practical experience of, financial matters and has the appropriate knowledge and experience to provide such advice. The Trustees review LGIM’s performance and the Scheme’s risk profile on a quarterly basis. When deciding on the long-term investment strategy and in preparing this Statement, the Trustees have consulted with the Scheme’s sponsor. The ultimate power and responsibility for deciding investment policy lies solely with the Trustees.

The Trustees aim to pay members benefits in a sustainable and secure manner. The Trustees are required to invest the Scheme’s assets in the best interest of the members, and its main objectives with regard to investment policy are:

• The acquisition of suitable assets of appropriate liquidity which will generate income and capital growth to meet the cost of current and future benefits which the Scheme provides; and
• To limit the risk of assets failing to meet the liabilities, both over the long-term and on a medium-term basis.
  In addition, the following secondary objective has been adopted:
• To pay due regard to the interests of the size and incidence of the sponsor’s contribution payments. 

The Trustees have set a return target for the Scheme above the performance of gilts based liabilities, net of investment management fees.  The Trustees have considered the risks associated with a return target of this level.  The Fiduciary Manager is tasked with reducing risk to the extent possible for the specified return target.

The asset mix will vary from time to time within the discretion of the Fiduciary Manager within agreed asset allocation constraints. The Trustees have also put in place dynamic de-risking triggers so that as the funding level improves the return target will be reduced and the allocation constraints will be adjusted. Further information is provided below.

The assets are managed under a fiduciary management agreement by the Fiduciary Manager.  The Fiduciary Manager delegates provision of the fiduciary management services to LGIM.  Under the agreed fiduciary management arrangement, the Fiduciary Manager has discretion to invest the assets of the Scheme across its range of the Fiduciary Manager’s pooled funds, which have exposure to a range of underlying assets, in order to meet the strategic objectives.  In doing so, the Fiduciary Manager is tasked with maintaining the diversification, liability hedging and liquidity of the Scheme as a whole. 

The safe custody of the underlying assets to which the Scheme is exposed is delegated to professional custodians via the use of pooled vehicles. 

The Trustees monitor the Scheme’s asset allocation on a quarterly basis and reviews the Fiduciary Manager’s performance.

The Trustees’ policy is to evaluate the Fiduciary Manager by reference to its performance (over short, medium and longer-term periods), the role it plays in helping to meet the objectives of the Scheme as set out in this Statement, and the fees paid to the Fiduciary Manager.

The Trustees recognise a number of risks involved in investment of the assets of the Scheme and also understand that this does not constitute an exhaustive list of the risks the Scheme faces.

• Solvency risk and mismatching risk - The Trustees regularly review the asset allocation of the Scheme to ensure mismatching risk is considered and managed suitably. Solvency levels are monitored through ongoing triennial actuarial valuations.
• Liquidity risk - The Trustees have adopted a strategy that makes due allowance of the need for liquidity of the Scheme's assets.
• Concentration risk - The Trustees have delegated to the Fiduciary Manager the task of ensuring that the risk of an adverse influence on investment values from the poor performance of a small number of individual investments is reduced by diversification across asset classes, regions and securities.
• Sponsor risk - The Trustees review the sponsor’s covenant at each actuarial valuation or when there is an event that might lead to material changes in the Sponsor's covenant. The Trustee has considered the risk that the sponsor may be unwilling or unable to maintain the necessary level of contributions in future, as measured by a number of factors including the creditworthiness of the Sponsor and the size of the pension liability relative to the financial strength of the Sponsor.
• Leverage (derivatives) risk – In order to manage liability risk the Trustees permit the use of derivative strategies by the Fiduciary Manager, to facilitate efficient portfolio management and to contribute to risk reduction.  The Trustees delegate the management of derivative instruments to the Fiduciary Manager to ensure they are managed so as to avoid excessive risk exposure to a single counterparty and to other derivative operations.
• Fiduciary Manager risk – The Trustees monitor the Fiduciary Manager’s performance on a quarterly basis, and compares the investment returns with appropriate performance objectives.

The Trustees’ policy is that there will be sufficient investments in liquid or readily realisable assets to meet cashflow requirements in foreseeable circumstances so that the realisation of assets will not disrupt the Scheme’s overall investments where possible.  The responsibility for buying and selling investments has been delegated to the Fiduciary Manager. 

The Trustees believe that good stewardship and environmental (including climate change), social and governance ("ESG") issues may have a financially material impact on meeting the investment objective. As an investor in pooled funds, the Trustees have implicitly given the Fiduciary Manager full discretion when evaluating the impact of ESG issues on the investment objective, and in exercising rights and stewardship obligations attached to the Scheme's investments.

The Trustees expect the Fiduciary Manager, where appropriate, to make decisions based on assessments about medium to long-term financial and non-financial performance of an issuer of debt or equity, taking into account all relevant matters pertaining to that security, in order to improve their performance in the medium to long-term.  The Trustees invest through a Fiduciary Management arrangement and any exposure it has to equity and debt securities is through pooled funds managed by the Fiduciary Manager.

Similarly, the Scheme's voting rights are exercised by the Fiduciary Manager in accordance with the Fiduciary Manager’s own corporate governance policies, and taking account of current best practice including the UK Corporate Governance Code and the UK Stewardship Code.  The Trustees deem the most “significant votes” cast by the Fiduciary Manager to represent issues on which the Fiduciary Manager decided to vote against management or where the vote was part of a wider engagement with the entity to reflect the Scheme’s stewardship priorities and themes.  The Trustees expect that significant votes will cover a range of relevant matters, including (but not limited to) climate change, biodiversity, gender diversity and ethnicity, remuneration and governance. 

The Trustees review its sustainability preferences and expectations for voting and stewardship behaviour with the Fiduciary Manager every three years or in conjunction with a significant change to investment policy (when reviewing the wider content of this document).

The Trustees expect the Fiduciary Manager to demonstrate good stewardship practices, and will review how the Fiduciary Manager is performing in this area by considering its disclosures on stewardship as provided to the Trustee. 

The Trustees will review this Statement at least once every three years and without delay after any significant change in investment policy. Any change to this Statement will only be made after having obtained and considered the written advice of someone who the Trustees reasonably believe to be qualified by their ability in and practical experience of financial matters and to have the appropriate knowledge and experience of the management of pension scheme investments.

The Trustees of Hemming Group Pension Scheme

During the year ended 30 June 2023, the Scheme’s investment policies were implemented in line with the principles set out in the Scheme’s Statement of Investment Principles.
Legal and General Investment Management (LGIM) were appointed as the Trustees’ fiduciary manager on 2 December 2022. The Trustees’ policy is to delegate responsibility for the exercising of rights (including voting rights) attaching to investments to the investment manager, Legal and General Investment Management (LGIM) and to encourage the manager to exercise those rights in accordance with the Statement of Investment Principles. The Hemming Group Pension Scheme invests through pooled fund arrangements and so acknowledges that the investment manager exercises those rights in accordance with their own corporate governance policies on behalf of all investors in its funds. In doing so LGIM takes account of current best practice including the UK Corporate Governance Code and the UK Stewardship Code.

The Trustees reviewed LGIM’s approach to stewardship and are comfortable with the activity taken on the Scheme’s behalf.

The Trustees conclude that, based on these considerations, LGIM has followed the requirements of the SIP.